If you are thinking of good investment areas the first thing that would come to your mind is real estate investment or investing in the stock market. However, both are two different ball games and so how to you know why one is best? You need to examine the pros and cons and the general environment surrounding each of these investment form before you decide which is more suitable for you as an investment.
Real Estate Investment :
Real estate gives you many benefits. In the years to come, your real estate will rise in value. You can use the built up equity for a home equity loan. Home equity loans can serve several financing needs such as medical expenses, home improvement expenses, educational expenses and so on. You can also sell off the home, making a high profit. You can rent out the home in a real estate and receive a passive rental income which can be of great help to your finances.
You also have certain tax benefits and deductions on real estate transactions. This is some quite welcoming as most of us want to free ourselves in some way or another from tax burdens. Depreciation deducted over a over 27.5 years reduces a lot of tax and if you wish to sell off one property and use the proceeds to buy another, you can use a 1031 properties exchanges and free yourself from paying taxes on the transaction.
Stock market investment :
The stock market otherwise known as Wall Street investments is something quite attractive. People take up to such investments because of the quick appreciation in the value of investments and the dividends that it pays off. However, it is a pretty volatile market; in the sense the stocks you invest in today have a chance of going down tomorrow and then going up again. These are aspect of the trade that an investor must be ready to digest before making investment.
Income Stocks - Income Stocks form of stock investment pays dividends and you can see your capital investment appreciate in the years to come. Companies offering income stocks are pretty stable ones. However, you need to be aware that the dividends paid out can be different each year - which means it can be high or low and dividends will be defiantly taxed.
Growth Stocks - Growth Stocks stocks do not pay much dividend because these are issued by companies who have just started out. They will be pooling their profits back into their business for further expansions. However, in the long run the investor gains as the return will be good once the company is up and going.
Value stock - Value stock form of stock, you will be spending a smaller amount towards investment. It is based on the company's assets and so the company's growth is not going to affect it. As the company stabilizes and grows, this stock in turn rises in value.
Speculative stocks - Speculative stocks is a bit of risky business because your investments can go up and bring you good profits, or it can go bad and as the name suggests everything is up for speculation in such stock investments. The stock in which you invest will be companies that have just started out or even unknown companies.
Preferred Stock - Preferred Stock is a particular stock type that is issued by companies and those who buy them have the advantage of getting preferences in dividend payments and company's earnings. The dividend payment here is fixed.
Summary :
Thus, is stock investment you have lots of options, unlike in a real estate investment, wherein what you invest in is just plain property be it commercial or residential, a town house or a condo. The returns you see from your investment into real estate are not like the dividends and the profits you see on sale of good stock. You can quickly transfer stock and buy it in small or large lots depending on what you like. In real estate your real estate transaction closing costs and other costs are expensive and transfer of property during a sale is not so easy. However, one aspect to the real estate market is that buying real estate has a history of stability and security around it. You can wait for a period of five to fifteen years and sell off the property for a sizable profit. If you know the market well you can sell of the property in a two or three years time and make good cash on it.
Ultimately, which is a better investment - Wall Street or Main Street? The answer to this largely depends on how well you understand their respective market environment and how well you are prepared for them, as this is paramount to ensuring success in the investment be it stocks or real estate. |
