Investment seems to be a big word with risky decisions and complicated understanding. But if you have the knowledge about these, investments gets much easier. Whenever we hear the word investment, only two things come to ones mind, real estate and equity. Equity is the value of shares given by a company. Real estate investment is when you put your money on a property, may it be an apartment of a land, like investing in the new residential projects in Ahmedabad. Both real estate and equity have their own positive and negative aspects. Each investment is unique in its own way. You have to know the negative and positive aspects of each of the investment before you invest. Let us take a look at these:
Real estate is tangible. Many investors invest in real estate as they can touch and feel it, so they find it more real. Real estate investment is long term and gives consistent returns. Real estate investment is of 2 types, commercial and residential. Most of the people look out for property that can be rented, while the others refurbish them and sell for a higher profit in the market. The down payment is only 205 of the total amount, this works as a plus point for the investors. You may owe more than the actual worth on the property if this leverage is used incorrectly. Real estate has some positive and negative aspects to it.
- The real estate properties receive a tax deduction for the wear and tear or loss of utility of the property, annually. Over the time this deduction is called depreciation. Depreciation is one of the major positive points of this investment.
- You need not pay capital gains taxes when you sell the property, as long as you invest in similar property types.
- Lastly, tax deduction. Based on the properties they own, the individuals can deduct the cost of property taxes.
- The real estate investment is illiquid. You cannot sell it right away. In many cases so realize its true profit value, you may have to hold on to the property for years.
- Real estate has a tendency to fluctuate. The long term prices may increase or they go down or stay flat.
- If you borrow a lot of money to invest in the property, you may be in trouble while paying it back with the property being worth less money.
Stocks are more volatile. In the long run the stocks give better returns than real estate. You receive ownership in a company with a stock. You will profit excessively during good times. The net worth is better than real estate if you take long term approach and balance well in many areas. You can use margin as leverage to increase the amount of your shares by financing in stocks. Let us look at the advantages and disadvantages of the stocks.
- Stocks are very liquid. They are easy and quick to sell.
- Stocks ace be reallocated into a retirement account, tax free, till you withdraw money. Stocks are flexible.
- Stocks are volatile, so they do better many times than real estate in a year.
- Stocks being volatile can act as a disadvantage too, especially when the company is going through hardships.
- Stocks is a decision that many take emotionally, for a family member or for a friend. Such decisions can be very irrational and can prove to be a great loss.
- If this investment gets dissolved, bankruptcy can be the outcome.
Stocks have better advantages in the long term, where as real estate is better when it comes to stability and tax advantages. The new residential projects in Ahmedabad can be a more stable an investment than equity. In the end investment is a personal decisions, with all the advantages and disadvantages in front of you, the decision lies in your hands.