What would be better investing real estate or stocks?

When deciding whether to invest in real estate or stock, there isn't a simple answer. Identifying the better choice depends on your personality, lifestyle preferences, comfort with risk, and more.

It also depends on timing. Very few stocks would have beat buying beachfront property in California in the 1970s using a lot of debt, then cashing in 20 years later. Virtually no real estate could have beat the returns you earned if you invested in shares of Microsoft, Apple, Amazon, or Walmart early on in the companies' histories, especially if you reinvested your dividends.

Timing is impossible to predict when making investment choices. But understanding each type of investment is key to choosing the best strategy to help your money grow and create financial security.

Real Estate vs. Stocks
When you buy shares of stock, you are buying a piece of a company. If a company has 1,000,000 shares outstanding and you own 10,000 shares, you own 1% of the company.

As the value of the company's shares grows, the value of your stock also grows. The company’s board of directors, who are elected by stockholders just like you to watch over the management, decides how much of the profit gets reinvested in expansion each year and how much gets paid out as cash dividends.1 2

It's easy for stock to become over- or under-valued. Before investing, study the company as a whole, including how much of their profit is paid out as dividends. If a company is paying more than 60% of profits as dividends, they may not have enough cash flow to cover unexpected changes in the market.

When you invest in real estate, you are buying physical land or property. Some real estate costs you money every month you hold it, such as a vacant parcel of land that you pay taxes and maintenance on while waiting to sell to a developer.

Some real estate is cash-generating, such as an apartment building, rental houses, or strip mall where you pay expenses, tenants pay rent, and you keep the difference as profit.

There are benefits and drawbacks to each type of investment.

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