The X-Company
Differences in Property Investment & Shares.
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What is the difference in investing in shares and investing in property?
The logistics
In property, money is made through two ways; capital growth and rental income. Although buying a home may take a large deposit, there’s the potential to reap a constant income from rental income if it is occupied. In property, money is made through two ways; capital growth and rental income. Although buying a home may take a large deposit, there’s the potential to reap a constant income from rental income if it is occupied.
The buying and selling of shares, bonds and exchange-traded funds are done through the ASX via a broker or online broking service. A broker does the trading for you, and you can advise them what you wish to buy or sell, or they can make recommendations to you. Typically, the broker does the trading for you, and you can advise them what you wish to buy or sell, or they can make recommendations to you, provided they disclose any interest they have in it. Moreover, if you feel as though you know the market well enough, there are online trading platforms where you can make trades yourself. Of course, the brokerage firm will charge you a “brokerage” which is either a set dollar amount or a percentage of the value of the trade. If the price of the stock increases, you will receive a “dividends” return on your investment. Like any market, there are buyers and sellers and sell orders going through brokers, whose job it is to match orders and get the best possible price for buyer and seller. The price at which you want to buy the shares is known as the bid price, and the price at which a seller wants to sell the shares is known as the offer price. Investors typically make money by buying stocks and that stock rising in price; they can then choose to either sell this stock and take the cash, or hold onto the stock if they think it will continue to rise
What are the differences?
What are the differences?
Comparing investing in property and stocks is like comparing apples and oranges, they are two completely different ways of generating wealth that both have their benefits. Depending on the situation, the stock market can suit certain people better while investment properties can suit others just as well.
Real estate generally represents a relatively stable risk level in comparison to the generally volatile nature of the stock market, producing several different advantages and disadvantages. The fact that real estate is a tangible, physical and real asset that can be controlled can be more attractive to buyers, especially those with the time to cater and tend to it. When investing in property, you are typically using other people’s money. For every $1 you have saved, the bank will lend you $4. This leverage can make investment properties a better option. If you have $100,000 cash or equity in your home, you can buy a $400,000 investment property and assuming you invest in a good property, what is going to deliver you a better return long term? A $400,000 property or $100,000 of shares?Moreover, investment properties will deliver significantly better tax benefits when compared to shares. Humans will always need shelter and the government are not going to build the properties needed for the growing population. Instead they want you to build them, and they will give you huge tax breaks to do so. Furthermore, securing a high rental income and returning positive cash flow can ensure that investors in property are not only turning in an income, but owning a property that pays for itself, allowing them to repay their mortgage and secure equity to expand their portfolio. However, real estate investment comes with much more maintenance, meaning more time and money must be spent during the process of wealth creation in comparison to the stock market. They are also much less liquid and can take time to generate wealth depending on the situation.
In comparison to real estate, investing in stocks require significantly less work on the investors behalf. That is because, practically, stocks are really just pieces of legal title that operate as claims to company profits as they are realized. You are not an employee of the company so you don’t need to participate in nearly any management decisions. This means that, technically, stocks are a much easier investment but come with much less control over wealth creation. Furthermore, stocks are much more liquid then investment properties. It is much easier to buy and sell shares than it is to list and sell property and even though you can borrow against both investments, it is easier to borrow against stocks. However, stocks are still a long term investment, and although “timing the market” can produce significant yield, wealth creation usually comes from “time in the market”
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PROS
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CONS
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Easy to diversify
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Selling stocks can trigger big taxes
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-Low transaction fees
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Some stocks move sideways for years
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-Easy to add to tax-advantaged retirement accounts
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Potential for emotion-driven investing
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-Less capital required for initial investment
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Which investment option is better?
Which investment option is better?
Obviously, there is no definitive answer, it is completely dependent on your situation.
