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Real Estate Vs. Stock market – Which asset offers more wealth?

Jun 15, 2017by Realty Decoded

Real Estate Vs. Stock market – Which asset offers more wealth?

When we talk about investors, there are real estate tycoons and stock market tycoons. No matter where you invest real estate or stocks, there is one goal for all: GROW and PRESERVE the invested capital. But before you make an investment to achieve your intended goal, you should spend enough time in doing diligence.

Do proper research prior to you make an investment as it would be later too late to make any changes. There might be something you miss considering previously that might impact on the overall investment.

What is the scenario of Real Estate in India

In India, there are several stories of properties that are bought at low prices by our ancestors and later a huge profit is gained by selling it a much higher price. People are choosing to own a second home as an investment. Thus the legend of real estate investment is alive in Indian investment sector. But to make sure that your money is invested well there are many aspects you need to consider.

Comparison: Real Estate vs. Stock Market

Real estate is suitable for people, who:

  • Take pride in ownership
  • Cannot sustain volatile markets
  • Have more knowledge of Indian realty market
  • Believe in real asset
  • Prefer long term investment

The equity market is a suitable investment option for people, who:

  • Don’t mind giving control to more knowledgeable people
  • High risk taking power
  • Can stay normal in volatile market
  • Have limited capital to invest
  • Don’t mind owning assets in just paper form

Control:

There is a complete control on your investment when you have invested in real estate. To optimize your wealth like repairs, investment, paints etc. you can make decisions according to trends while in the case of stocks, someone else has the control. In stock, you are at the mercy of the board of directors completely and the board makes the decision.

Compounding Growth:

In the case of real estate investment, if you are undergoing a home loan and have made down payment of 20%, your ownership in the property is up to this limit only and when in case the property value rises by 5%, your gain will be 25%. However, the bank owns 80% property any gain on the property will be yours. And in the case, if stock market, there is no option of compound growth.

Risk vs. Expected Returns:

Investing in any market brings risk. Whether real estate market or equity market you need to assess risk versus expected returns. You can easily analyze risk and expected returns in near future in case of equity market by simply checking historical data. When you make an investment in real estate, you will get data, comparison charts and analysis reports for location but you cannot rely upon it completely. There can be some unpredictable changes and new laws in real estate market and therefore past records are of no use. After demonetization, the impact on real estate market is one of the best examples of uncertainty in the industry.

Inflation:

A real estate market is a safe option because of the regular increment in the rental rates and house prices. Moreover, loan installments don’t increase with inflation you can enjoy this benefit as well. In equity market price also tends to rise over time, it doesn’t ensure the same security against inflation as real estate market does.

When deciding between investing in stock market or in real estate, the best for you depends on your overall financial situation and level of comfort.

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