The goal of investing is to achieve long-term returns. Find out which asset has the highest potential to value money.
To begin with, let’s imagine a model situation. Milena, a 30-year-old woman, has two options for valuing her money saved so far. He can either buy a small apartment or invest in stocks. It has an amount of one million crowns. With this money he can buy several properties or shares.
In both types of investments, Milena will pursue one basic goal. This will overcome inflation. It fluctuates over time. It is now at about three percent, and is forecast to fall to two percent by the end of the year.
Development of asset value
The second definition is the growth of the value of assets over time. In both cases, the value can be assumed to increase. At the same time, it is possible to write with a clear conscience that the value may even decrease. From this point of view, holding real estate is no more advantageous than it is with securities.
Liquidity of assets
Another indicator used for better decisions is the liquidity of assets. From this point of view, shares are more liquid than real estate. If Milena invests a million crowns in one apartment, it will take her longer to sell it successfully. In contrast, stocks are liquid in near real time. The advantage of capital investments is their sale in parts.
Real estate or stocks?
Real estate has a higher risk of buying hares in a sack. An apartment or house, or another type of reality, cannot be moved from place to place. If you have a tenant in reality, it can be a good source of income, but only until he leaves the property or stops paying rent. Once the property is orphaned, you will not make any profit. On the other hand, the costs of its maintenance, including the annual property taxes paid, remain.
If you hold shares, you can benefit from dividends. If the company does not pay the dividend, you will not lose it in any way. It is not a condition, as in the case of real estate, to pay taxes or other costs of holding securities.
Investments are also related to whether you make them once or regularly. In the case of real estate, it is a one-time investment. For stocks, it can be the same or different. If Milena does not try to time the market, she can spread the purchase of shares over time and buy shares for a period of one year, for example. By doing so, it gains an advantage in the form of averaging the price. It should not happen to her that she enters the market at the most inopportune moment when prices are at their peaks.
When buying an apartment, it is more likely that the price of the property will fall in a short time. Even if the value of the property is reduced by a few percent, the loss can reach tens of thousands of crowns.
A word in conclusion
The verdict is clear. From the point of view of investment, shares appear to be more advantageous. Buy a property only if you are sure that the rental income will flow from it for a certain period of time. If you do not have this security, you should put the money aside and wait for the situation to change.