Real Estate vs Stocks: Where Should You Invest in 2020?

If you want to save money and gain financial stability in the future, start investing today.

Investment is all about buying things that are not supposed to be consumed today but will generate profits in the future. If you are someone who wants to gain financial independence in the future, you should invest in assets. It requires patience and time but the gains will be worth the wait (if you invest strategically of course).

There are many types of investment opportunities in Pakistan but two types of investments that are widely popular and easy to start are real estate and stocks.

People are always in a fix whether to choose real estate or stocks. Some prefer real estate because of the high degree of control associated with property whereas some prefer stocks because of low capital requirements.

Today, we are going to discuss the nature, pros, and cons of each type of investment. The article will act as a guide for people who are confused about which investment to choose.

Why Should You Invest in Real Estate?

Pakistanis spend about $5.2 Billion on construction in a year that is equal to 2% of Pakistan’s GDP.

  • Real estate is an excellent way to invest your hard-earned money. If you are looking for a long term investment, you should definitely go for real estate. You can purchase a piece of land, house, flat, shop, whatever suits your budget.
  • Real estate investment allows you to hold a tangible asset. Your property physically exists, hence, it is relatively easier for you to analyze your asset and make decisions accordingly.
  • Real estate gives you a high degree of control, something we all want while investing. When you purchase property, you get full ownership of the asset. This means that nobody can take your assets from you. Even if you are purchasing an asset through a partnership, you still get to have a very clear and well-defined share, something that you can quantify.
  • Real estate is very popular among the masses. In America alone, there are around 28.1 million residential real estate investors. Also, 1 in 8 American adults considers themselves to be residential real estate investors or own residential investment property.
  • Real estate is a diverse asset. For instance, if you have a house or a flat, you can rent out the spare space. This will help you generate some extra cash every month. Real estate not only gives you future benefits but it is also an excellent source of passive income.
  • Land is one of the few assets that appreciate over time. This means that the chances of financial loss is low in real estate. So, if you are looking for a safe and secure investment, go for real estate.
  • In many regions, people who invest in real estate get tax exemptions. In many countries and states, people do not have to pay taxes on investment gains from properties.

Looking to invest in real estate? Check out Graana.com’s handpicked real estate megaprojects you can be part of.

Things to Consider before Investing in Real Estate

  • Real estate can be time-consuming. You may require more than a year to reap the financial benefits from your investment. If you are looking for instant returns, real estate may not be an option for you.
  • Real estate requires a hefty amount of capital. If you are someone who does not have enough money stacked aside or you do not want to take loans, then real estate may not be the right option. You may need at least PKR 1 million to purchase a property which is more than what required for investment in stocks.
  • Always be careful before investing in real estate. Make sure that the property is approved from respective development authority and the owner is free from any conflicts. There have been multiple cases of property fraud. So, to stay away from property scams, do your research beforehand.
  • There are certain fixed costs associated with real estate such as insurance, maintenance costs, renovation costs, etc. these costs may build up and cause you financial distress in the long run.

Why Invest in Stocks?

“Among non-investors, 53% say they don’t have the money to invest and 21% say they don’t trust stockbrokers or financial advisors.” – Lexington Law.

This statement is not always true. For investments, you do not need millions. You can start investment from a mere PKR 5,000 only.

There are 60 major stock exchanges in the world with a total value of $69 trillion

Another excellent way to secure your money is through stocks. Stock trading has a great scope in the investment market. There are 60 major stock exchanges in the world with a total value of $69 trillion (in 2016). When you buy a stock, you indirectly own a share in that specific company or business. Whenever the company will make a profit, you will be rewarded in the form of dividends.

Dividends on Stocks

Stocks are liquid assets which means that you can convert them into cash within a short duration of time. If you are looking for an investment that yields profits in a short duration of time, stocks are perfect for you.

Unlike real estate, you do not have to pay heavy taxes on stocks. Also, you do not have to pay maintenance costs and insurance fees.

Why Investing in Stocks is Risky

To deal with stocks, you need to have good financial knowledge and analytical skills. It is extremely important to have knowledge about stocks, how the market operates, how to calculate ROI and vice versa.

Most of the times you have to rely on external sources such as financial advisors and brokers to deal with stocks. These people charge you hefty amounts for their consultation services.

When you are dealing with stocks, the degree of control becomes lower. If the company in which you invested is going out of business, you cannot do much about it. In short, you will have to sell your stocks to mitigate risk.

Stock prices fluctuate drastically, leading to uncertainty. Unlike real estate, it is nearly impossible to predict the stock market perfectly.

With all this important information, where would you invest?

Disclaimer

None of the information published in this article should be construed as investment advice. We strongly advise our readers to always do their due diligence before investing in any project. It is the reader’s responsibility to know the laws regarding investments in their region.


    • Graana.com actually. Totally clueless article, the contents of the table and the explanation in text tell totally opposite stories.

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