Finding the perfect investment opportunity can be a challenge with a wealth of available choices. This article highlights the advantages and disadvantages of each investment option and explains why real estate investing is the ideal choice.
Both first-timers and experienced investors wanting to diversify their assets will reap the most benefits from putting their money in real estate.
Real estate vs. Stocks
Stocks are portions of a corporation’s assets that investors can buy and sell to turn a profit. This is an ideal option for those who want a high-risk and high-reward outcome.
The value of stocks can rise and fall in an instant. Inflation rates, economic trends, company performance, and economic policies have an immediate effect on the price of stocks. Investors have little to no control over the value of their stock, which can plummet to zero.
No piece of real estate can ever be valued at zero dollars. The home, building, or dwelling itself has an inherent value, as does the land the structure is built on. Real estate is a relatively low-risk investment with the potential to yield high returns over time. Investors also have more control over an investment property’s value and how much it can appreciate over the years.
Real estate vs. Bonds
Bonds are fixed-income loans to large institutions like corporations and governments in order to fund operations or finance projects. Investors make money off bonds through interest payments or by selling them to a secondary market when interest rates drop, which increases the value of bonds (see full explanation here). Bonds are a more stable option than stocks but they do not offer a high return on investment.
As a tangible asset, real estate can rival the safety that bonds offer. The many ways in which investment properties can be utilized makes for a more flexible investment and a greater possibility of higher returns.
Inflation can affect the growth of bonds negatively because it does not increase its value. Real estate, on the other hand, can be used as a hedge against inflation.
Real estate vs. Certificates of Deposits (CDs)
A certificate of deposit is a low-return, low-risk investment. It functions like a savings account with investors being issued a savings certificate that has a fixed maturity date and interest rate. This is a good option for those who are looking for a passive investment where there is little to no risks involved.
Real estate can also be a passive and low-risk investment when used correctly. Moreover, unlike CDs, real estate typically appreciates in value.
Real estate vs. Real Estate Investment Trust (REITs)
The main difference between real estate and REITs is ownership. With REITs, an investor does not own the physical property; rather, they own a share of company that manages commercial properties. REITs offers low returns as well because of the reduced risk.
On the other hand, owning real estate allows investors control over their profits, in addition to giving them the opportunity to build equity and leverage funds for other investment projects while having a physical asset.