Property or stocks?

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

Property

Pros

  • 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)

Cons

  • 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

Stocks

Pros

  • 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

Cons

  • 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.

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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.

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