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Stocks or real estate which is better? |
wat is the historical average rate of return on stocks and investment in real estate? Companies come and go every year; new products hit the shelves all the time; last year's hot stock is this year's under-performer. Look at it this way. Businesses regardless of what they sell will always come and go,but everybody and I do mean EVERYBODY will always need a place to live. Like everything in investments, diversification is the key to growth and some safety. However, it does seem well chosen real estate does outperform any market indicies. Read Robert Kiyosaki regularly every Tuesday on Yahoo FInance. He is the author of Rich Dad Poor Dad and very knowledgeable. Real estate. Their are so many avenues in real estate. Right now its all about luxurious high rise apartments and luxurious vacation homes. I think the stock market with a historical return of around 8%, has outperfromed real estate. The problem with real estate is residential is still currently overvalued, and real estate is hard to buy and sell (big realtor commissions). The best way to own real estate is through a REIT (real estate investment trust). These are companies that own real estate, but trade like a stock. They also usually pay good dividends, around 5%. Here is a portfolio of my favorite REITs: Personally, I have made much more in real estate than in stocks or funds, I have one property that is now worth 15 times more than what I paid for it....and the income has paid the mortgage, the taxes, the repairs and some profits....over twenty years. GREAT answer just to this question of real estate vs stocks on this real estate blog ( jan 14th. posting) at: Real estate requires lot of money to invest and can take time to grow depending upon the market demand. The problem with investing in real estate is that unless you have 6 figures in cash laying around, you cannot purchase a property without assuming a huge loan (debt). It is usually unwise to go into debt for an "investment", unless you have absolutely guaranteed yourself a quick profit or find someone willing to sign a lease that covers your loan (unlikely in both cases). The market runs in cycles, and while you might purchase a property in an up market, what happens when the market takes a dive? If your renters leave, and you have to hugely discount the property to fill the vacancy, that means money out of your pocket to cover the mortgage, and if you lose your job or can't afford it, your investment is foreclosed. Poof. |
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