Everyone has their own unique plan for financial independence. Some people focus on building wealth, others entrust their future to personal finance professionals. And then there are those who learn how to invest. Sooner or later, an age-old question arises – should I invest in property or shares? Each investment style has its pros and cons, so let’s take a closer look at advantages and disadvantages that they offer.
Minimum Risk, Maximum Payoff?
The undeniable benefit of investing in real estate is the fact that this particular strategy is relatable and easy to understand. You do not need to rely on complex math algorithms or track stock exchanges day by day in order to make a profit. Investing in property tends to be more stable than any other financial strategy and it presents lower risks of losing your savings. There is something reassuring in having control over your investments, as the real estate market does not depend heavily on the changes in global economy or stock exchange fluctuation. There are also several different ways to turn property investment into a profitable source of passive income. You can rent your property to individual tenants, you may also transform it into an office building and rent out individual offices to companies. And if you feel like it, you can even renovate the property and sell it at a significant profit.
The Issue of Cost vs. Liquidity
The real estate market has its drawbacks that need to be taken into account if you want to allocate your funds wisely, the most important being lack of liquidity. Property purchases or sales cannot be finalised quickly as they often require extensive preparations. Real estate investment is also connected with high initial cost, as well as maintenance, tax and management fees.
The Question of Accessibility
On the other hand, investing in shares offers high profit in a relatively short period of time. You do not need to have a significant initial capital in order to start trading on foreign exchanges or buying individual stocks, which are quite easy to purchase either through a broker, financial planner or online. Additionally, company stocks or foreign currencies are convenient to sell whenever you want and wherever you are. Stock exchange thrives in growing economy, therefore investing in stocks is the best way to stay ahead of inflation.
No risk, no gain
Before you invest in individual stocks you need to do a proper research. There is no denying that the better the shape of the company you invested in, the bigger your earnings. Preparations for successful stock trading can take up a significant portion of your free time. It is recommended to determine how profitable the investment may turn out to be, which requires going through financial statements of the companies, their annual reports and development plans. If you take the wrong bet, you might risk losing your entire savings when the company and the markets go down. Stock markets are the reflection of political and economic stability – they can either rise or fall sharply in a very short period of time, therefore you need to be always on alert in order to react at the right moment.
There is no right or wrong answer to the question of choosing the best investment products, but only a diversified portfolio will bring you maximum benefits. Whatever you decide, depending on initial financial capability and risk appetite, do make sure to study the topic.