The global markets have gone through a unique phase during the last year. Never has a worldwide pandemic had such a profound effect on every part of the economy. Stocks, commodities, bonds, forex, real estate, and precious metals were not immune to wild price swings. Now that the situation is partially returning to normal, many investors and traders are wondering whether shares (also known as stocks) or property are the better choice for individuals who are aiming to rebuild and restructure their portfolios.
In fact, the answer is a classic case of “it depends”. Because the choice does depend on several factors, like the amount of capital you have available, what kind of risk you’re willing to endure, and many others. Here’s a short review of the most important characteristics of each major asset category.
Cost of Entry
The differences between owning stock and owning real property are most pronounced in the area of entry cost. For example, anyone with a computer and a small amount of capital can purchase company shares as well as forex currency pairs, and other typical kinds of financial instruments that are listed on the major exchanges. Real estate on the other hand requires much larger deposits.
Ease of Use
All you need to get involved with share trading is a reliable platform, like easyMarkets, and a fundamental understanding of how to place orders. In fact, for many people, the most significant barrier to entry for the property market is knowing how to make deals. In most cases, it’s much easier to buy and sell shares than to do the same with real estate. Often, making a simple buy of property can entail long contracts and require the assistance of specialists to complete the deal. Potential real estate owners need to find a sales agent, identify specific properties, make an in-person visit in most cases, haggle over pricing, review contracts, put up a down payment, secure financing, and formally close the deal. That’s never the case with shares.
Protection Against Inflation
One thing property has on its side is its ability to act as an inflation hedge. While some corporate listings on the exchanges are relatively inflation-proof, most are not. But hard assets like property, plus precious metals and commodities are often a reliable way for investors to shield their portfolios from the ravages of inflation.
The liquidity question is an easy one to answer. People who wish to sell portfolio holdings of stock shares can usually do so in a matter of minutes, and complete the entire transaction online. Selling property is nowhere near as simple. It’s necessary to make a formal listing, use an agent, and wait for a willing buyer to appear. The process could take months.
For the most part, accumulating a portfolio of corporate issues is a very low-cost endeavor in terms of transaction fees. Properties enjoy no such advantage because there are so many people involved in the process. Agents and financial institution representatives, as well as others, all need to be compensated for their time and effort. A typical real estate sale might cost the seller a significant amount of money.