Stock Market or Real Estate?
Time to time I get to encounter this question whether in a speaking engagement, forums or when I’m with friends: “Which brings in a higher return, investing in stock market or real estate?” Though I do both of this two investment vehicle, truthfully and to make it short and simple, there is no way to know with certainty which option will bring in a higher return. It will really depend on your stock choices and the current condition of the real estate market.
It is undeniable that in the Philippines both of these investment vehicles are performing well. We have reached an all-time high in the Philippine Stock Market and more new developments are happening in the Real Estate Market, both are in the perfect timing to invest in now.
If we go and consult to different investment specialists, everyone will have a different opinion on the best investment to go after. For both of these investment vehicles can address your short term, mid-term and long term goals. Most will in favor the stock market because of its higher yield. But real estate investing is also another winner, for a lot of people have experienced a high returns investing in long-term rentals, and buying and flipping properties.
So just to guide you, here are three things to consider before investing.
MONEY
This is the first and most important thing to consider. Though you can engage on both using other people’s money which is a different topic altogether, we will just focus on you, personally investing in both vehicles.
In Stock Market, you can start investing for as low as two thousand to five thousand pesos. We now have online stock brokerage to help us do that and for you to personally choose what stocks to buy. Also, it is optional for you to invest every month and to how much you want to invest. It will really depend on to what strategy you want to apply in stock market investing.
In Real Estate, commonly it will require a higher amount of money to start investing but a good thought about that, a higher investment is equivalent to a higher return. But there are also those that only requires minimal amount to start with such as project selling or buying acquired assets from financing institution. They will just ask you to pay down payment which is most of the time twenty percent of the total price. Often this down payment is divided to certain number of months for you to pay and the remaining amount will be in amortization. What you will do next is either put it on rental to subsidize or cover the amortization or to rent it out much higher than the amortization so for you to have additional income every month. Also, you can resell or flip it on a much higher value than what you have acquired for.
KNOWLEDGE
This is the key factor before engaging to whatever investment vehicle you want to start or focus on. You don’t have to learn everything right away because it might lead you to analysis-paralysis but at least have the most information you get before engaging. Learn from books, attend seminars, or ask friends who are into these investments.
In Stock Market, if you do the trading personally, it will really require you to study more. Though your online stock brokerage will give you some suggestion on what stock to buy, further research on the company must also be done. Also if your approach is thru technical analysis or market timings, this will really demand more information that you can get.
In Real Estate, it will always be about location. Start studying about the location of your property or the property you will buy; you are in for a good start. By that you can get the feel if that property is good for rental or for flip/resell. Try to learn basic accounting, buying low and selling high, and some real estate laws that you can use for your advantage.
TIME
This will depend on what strategy you are doing on both investment. It may and may not require much of your time.
In Stock Market, if you are doing technical analysis, this will require much of your time because you must be active during the trading hours. While if you do fundamental analysis or pesos cost averaging, you can do it in your extra time and checking it in a weekly or monthly basis and it doesn’t need to be during trading hours.
In Real Estate, mostly it will not require much of your time. Like for rental, you only get busy if you personally supervise on repairs and when you are paying for your yearly property tax or when getting the rental payment every month. Also for flipping or reselling your property, you only get busy during renovations or repairs, and when doing the marketing and assisting the transfer of ownership to your new buyer.
Final Thoughts
You can actually do both of these investment vehicles, it is what we call diversification. Also, if you don’t have the time and knowledge you can actually ask or hire a stock broker or a real estate broker to do that for you. About money, it will really be on you.