There are two very very polarizing camps when it comes to this question of property-versus-stocks, and I’ve seen it personally.
- Property people swear by real estate only and dislike the market fluctuations of stocks
- Stocks people love stocks (think of people like Warren Buffett or Bogle)
So, which is better?
Lets talk about pros and cons
- physical: easy to understand and rent out
- leverage: banks are willing to loan you to finance real estate (based on your income) up to 80%
- tends to appreciate in time (especially good locations)
- tends to be good store of value (especially in good locations and countries/cities)
- high start up costs: 20% of a $1M property is $200K…and if banks not willing to loan, are you gonna pay in cash?
- local (versus buying a REIT that has buildings across multiple countries)
- illiquid: you cant decide to sell your property today and have that money in your bank account – it may take weeks or months (as well as fees from broker, lawyer, etc)
- risk of defaulting or nasty tenants trashing the place or not paying rent
- easy to enter: you can start buying in fractions (even as low as $100)
- more “passive” – no managing tenants, fixing leaks etc
- regulated, so tends to be fairly stable
- you can leverage this too (but i dont recommend, scary stuff)
- more opportunities, such as options, trading, stop loss functions etc
- market fluctuations can cause price to swing up and down
Cryptocurrency and blockchain is a type of growth/tech stocks, so there’s lots of risk and volatility but potential at the same time.
The third kind: hybrid
You dont have to pick EITHER real estate or stocks – you can do both. It really depends on your preference. I understand both’s pros and cons and I currently am more into cryptocurrency for quick capital appreciations as well as dividend stocks for cashflow. That’s me, at 40 years of age today.
I will consider porting to a more long term and low fees approach of
- pure index (passive)
- index + bonds (passive)
- index + dividend stocks (passive with a little work for dividend stocks)
- index + dividend stocks + bonds (passive with a little work for dividend stocks)
The only thing about property management is that it tends to link with more work and expenses such as
- property manager if I want it to be more passive
- property agents / brokers
- bank interest fees and mortgage loans
If I want to go “off-grid”, a pure stock approach would be easier for me. But if want to play with leverage and grow net wealth actively, then real estate will be the way. Who knows, I may do both.
Dont let this topic of property-versus-stocks stop you from taking action. The real answer and issue is taking consistent action on it. Choose something that works for you, and go for it.
I’m the founder and writer here at NigelChua.com; as well as serial entrepreneur, therapy business entrepreneur, digital entrepreneur, investor and also happy husband, father and Christian.
Started and sold off a business for 7-figures; built another 7-figure one and growing it further, plus building/investing into other businesses and investments as well as advisory works.
Nowadays I share and teach entrepreneurship, financial independence, retiring early as well as building and living a life you love.
Where To Next?
- Subscribe to my newsletter – no spam and just my best stuff. Unsubscribe anytime.
- Go to Homepage of nigelchua.com
- If you like videos, head to All Videos – all the latest (and all) videos are uploaded there.
- Visit the Blog to read the latest articles and videos.
- Head over my Resources page to the products and services I use to improve business, relationships, health and more.
- I recommend everyone to learn to start an online business for so many reasons: low cost, valuable skill (marketing), potential for passive income, it works 24/7 for you and no income ceiling. There's a free membership at this platform which I'd been part of since 2015 and it's where I learnt how to earn my first $100 online. See you on the inside.