Stock vs Real Estate Investment Differences
- Stock refers to share in the ownership of the company which represents a claim on the assets and earnings of the company.
- Real estate refers to property made up of land and buildings on it including the natural resources and associated components such as water and minerals. This can further include residential, industrial and commercial real estate.
Stock vs Real Estate Infographics
Here we provide you with the top 5 differences between Stock vs Real Estate Investment
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Stock vs Real Estate Key Differences
Here are the key differences between stock vs real estate investment –
- A stock represents a share in the earnings of a company whereas real estate is a property over a piece of land which has been purchased for either personal use or further monetary gains.
- A stock does not cost much and depends on the investment objective of the buyer. The prices of stocks are volatile and the fundamentals and financial performance of a company also have a direct impact on the price of the stock. A real estate is normally a one-time investment and depends on factors such as Investment ability of the buyer, the size of the real property, location, ROE from the property etc.
- A stock is generally a short-term objective depending on the portfolio requirement. However, real estate is a very long-term objective and can spread over decades.
- Stocks are highly liquid and can be sold relatively easily but real estate is comparatively less liquid and can require a lot of time since multiple factors are involved such as legal hurdles, appropriate price etc.
- Stocks will generate dividend depending on the financial performance of the company which may or may not be on a regular basis. Real estate does not generate dividend but if the real estate is leased out, it shall generate sufficient amount of rent on a periodical basis.
- Bank loan facility is generally not available for the stock transaction but the purchase of real estate generally requires the aid of a bank loan.
- The price of a stock can change at every millisecond and every penny can make a difference since these can be purchased in bulk. However, prices of real estate change on a gradual basis and is directly influenced by various macroeconomic factors. The variations in the price of real estate define the condition of the economy. If prices are rising on a gradual basis, it is an indication of the progressive economy and vice-versa.
- A stock makes the holder an owner in terms of getting voting rights on various matters but cannot take decisions involving senior management. However, owners of real estate are responsible for all decisions which have a direct impact on the existence of the property.
- Stocks can be bought back by the company if the need arises, however, real estate cannot be brought back once sold.
Stock vs Real Estate Head to Head Differences
Now, let’s have a look at the head to head differences between stock vs real estate investment
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| Basis of Comparison between stock and real estate investment | Stock | Real Estate |
| Meaning | Share in the earnings of a company | Property on a piece of land utilized for further expansion |
| Ownership | Stockholders are owners on paper but technically cannot own the company. | One can be complete owner of the property |
| Liquidity | Highly liquid | Less liquid in comparison and can take time depending on a case to case basis. |
| Maintenance | No maintenance charges have to be paid | Regular maintenance has to be executed for ensuring the property is in a good condition. |
| Risk Level | Generally volatile | Relatively stable |
Stock vs Real Estate – Note
One should assess that the performance of the overall stock market and the real estate market gives an indication of how the country is economically performing. If the stock market is rising, it is an indication that all the sectors are performing well and hence overall performance is improving.
On the other hand, the general price rise of real estate needs to be assessed. Generally, it indicates growing prosperity but factors such as real estate provider need to be studied. The real estate provider must have spent a very heavy amount in constructing/purchasing the property and stocks and real estate may want to clear their debts. The base of the 2008 Global Financial crisis was due to inflating prices of real estate and ultimately non-payment of dues led to the crash.
Stock vs Real Estate – Final Thoughts
Both stocks vs real estate are used as an investment avenue by investors. Though real estate can be used as a twin objective for personal residence and by allowing the value of real estate to increase, stocks are generally used for parking excess income and allowing it to grow depending on the objectives and risk appetite of the investors.
Hence, stock or real estate will continue to exist but the selection and the quantity of the same will depend on the investor/pool of investors.
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