Investing can be intimidating–especially if you aren’t a seasoned investor. When it comes to real estate vs. stocks, which one is right for you?
There are some who swear by the “slow and steady” results of stock investing.
Still, others are sold on the profits they’ve received via real estate investing.
In this article, we’ll talk about some things you need to know when it comes to investing in stocks vs. real estate.
After that, we’ll help you decide which is best for you.
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Should I Invest In Stocks Or In Real Estate
As a highly risk-averse single mom, I know how scary investing can be.
There’s nothing like working your tail off to amass a bit of financial stability, and then having an investment rep that looks like their hands have never touched dirt tell you to sock thousands into “this” or “that” investment.
Which, by the way, may gain you infinite wealth or may cause you to lose everything.
In reality, all investing choices aren’t quite that extreme when it comes to the risk level.
There are plenty of investment opportunities both in cost and in benefit that will allow to take some risk and likely walk away with benefit too.
Let’s talk a bit about the pros and cons of both stock investing and real estate investing so you can decide for yourself which is best for you.
Pros And Cons Of Real Estate Investing
One of the biggest issues with investing in real estate lies in real estate market unpredictability.
As a real estate agent, I can tell you that any market is good for agents.
I can find clients to sell and buy homes for in any market.
However, as a real estate investor, market fluctuations can spell disaster.
Some markets may be hot one day and fall completely off the map a few years later.
And if you’re investing directly as a rental owner, you’re dealing with people.
Market downturns may mean unpaid rent. And booting non-paying tenants is not only difficult legally, they might destroy the rental as well.
However, many property owners have great luck owning rental properties.
With strict rules as to who you rent to, the ability to choose the right properties, and smart property management skills, you could get rich.
Another downside to real estate investing is that it costs a lot of money out-of-pocket to purchase investment real estate.
You’re typically looking at needing 20% to 30% down plus closing costs for the purchase.
Add needed renovation monies on to that list and the bill starts to get lofty.
However, newer real estate investment opportunities can change that.
For instance, crowdfunding companies help investors to own a piece of a real estate investment for as little as $500, and even less.
With newer investment opportunities such as crowdfunding, real estate can be a great investment for people who don’t want to bother with the complexities of traditional real estate investing.
Next, let’s talk about the pros and cons of investing in stocks.
Pros And Cons Of Stock Investing
Investing in stocks can be a good option as well–even if you don’t know much about them.
Stock investing can be a great way to grow money over the long term.
And stocks often don’t have the steep market fluctuations that housing can experience.
In addition, many investment companies are selling fractional shares of stocks these days.
That means you can buy a piece of a share of stock for as little as $5, and sometimes less.
Fractional share stock investing makes it easy for pretty much anyone to become an investor.
You can invest the amount of money you want to invest without having to risk huge amounts of money.
A Word In Favor Of Diversification
So, which should you choose: Real estate investing or stock investing?
My personal opinion is that it’s always a good idea to diversify your investments.
Pick up some real estate holdings, whether that means buying a rental property or getting shares in a crowdfunded real estate company.
And buy some fractional shares of stock in a way that aligns with your budget.
Unsure of which stocks to choose? Start with blue chip stocks from major companies you know and trust.
Companies like McDonalds and Coca Cola have a decades-long history of producing steady profits.
Look at products you use in your own home in order to get ideas for which companies to buy stock shares in.
Last but not least, work to learn tips on investment diversification. The more you know about how to minimize your risk and maximize your gain, the better off your wallet will be.
And education really is key when it comes to successful investing, no matter how you choose to invest.
How To Find Money To Invest
So you’ve decided that you’re ready to invest. Maybe you’ve chosen real estate investing.
Or maybe you’ve decided to invest in stocks.
If you’ve read this article carefully, you’re going to diversify and invest in a little of both.
Now it’s time to work on your budget so you can find money to sock into investing.
Here are some tips to use to find more money to put toward your investing goals.
1. Check Your Budget For Unnecessary Expenses
Most all of us have some waste in our budgets. Scour your spending habits and see where you can cut back.
Some ideas for cutting back include:
- Cutting down on restaurant meals
- Working to reduce electricity and water usage
- Reduce those random big box store trips
- Start taking a bag lunch to work
Take a good, honest look at your budget and see where you can eliminate some unnecessary expenses.
Or, at the very least, reduce them. For instance, do some shopping around for insurance to see if you can find better rates.
2. Sell Stuff You No Longer Need Or Use
Most everyone has at least a few items in their storage area that are sitting around gathering dust.
Clothes, accessories, recreational items that are no longer used abound in most homes.
Gather up your unused and unwanted wares, sell them on a site like Craigslist, and use the money to invest.
The more stuff you sell, the more money you’ll have to invest.
Struggling with what to sell and what to keep? Use the one-year rule.
If you haven’t used something in a year, sell it.
3. Pick Up A Side Hustle
Another way to find some extra money is to pick up a side hustle.
There are so many easy side hustles you can start today.
Some ideas include:
- Data entry
- House cleaning
- Lawn work
- Pet care
- taking surveys
- tutoring online
And more. In order to find a good side hustle for you, make a list of your skills and interests, and find side hustles that coordinate with that list.
Another option is to pick up a second job at a restaurant to retail store.
And, depending on the type of job you have, you might be able to pick up some additional hours at work.
4. Treat Your Investing Like A Bill
Most all successful investors will tell that you automating the money you invest is powerful.
Treat your investing like a bill. Set a fixed amount and “pay” it faithfully every month, just like you would with any other bill.
In addition, set up an automatic transfer to your investment account so that you don’t have to worry about forgetting to “pay” the bill.
Many successful investors subscribe to this “set it and forget it” mentality when it comes to investing.
Don’t Forget To Research And Monitor Regularly
And lastly, be sure to check on both your real estate and your stock investments quarterly.
Monitor performance. If you see a declining trend that you can’t rationalize for two quarters in a row, reconsider if the investment warrants your continued contributions.
Fluctuations are normal in any type of investment, but continued downturns might not be.
Especially if there’s no rational reason for the downturn, such as a national or global bear market, or a real estate value downswing.
Read popular books on investing as well.
The Little Book Of Common Sense Investing is good for learning about stock market investing.
If you’re interested in real estate investing, consider Gary Keller’s The Millionaire Real Estate Investor.
Note that it’s always a smart idea to be cautious when taking any type of advice, whether on investing or anything else.
So when you’re reading books or blog articles on investing, do as we say at our house: “Eat the meat and spit out the bones.”
Do a lot of research and learn for yourself what is sound advice when it comes to your risk tolerance level and your investment goals.
Investing can be scary, especially when you’re working to decide which investments to choose.
With a little self-education and a lot of patience, you can develop a profitable investing plan for yourself.
What do you like to invest in? Have you ever purchased shares in a crowdfunded real estate investment?
Or bought fractional shares of stock? Feel free to “share” your experiences in the comments section.