Stocks vs. Real Estate: A Balanced Comparison - PowerPoint PPT Presentation

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Stocks vs. Real Estate: A Balanced Comparison


Comparing and contrasting the pros and cons of investing in the stock market and real estate. Find out the different factors that can influence the desirability of each investment, along with their benefits and limitations. – PowerPoint PPT presentation

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Title: Stocks vs. Real Estate: A Balanced Comparison

Stocks vs. Real Estate
Stocks vs. Real-Estate
  • The following is a neutral and balanced
    comparison and contrast of stocks and
Income (Regular Strategies)
  • These are the traditional ways stocks and
    real-estate normally generate income
  • Stocks Capital appreciation from the increased
    value of a stock and dividend payments for stocks
    that pay dividends.
  • - Real-estate Increase in property value and
    collection of rent payments.
Regular Fees Expenses
  • These are basic fees that must be paid (of course
    some slight variations will occur depending on
    the location).
  • - Stocks Commissions for buying and selling
    stock. Management fees especially for actively
    managed portfolios and funds. Less of an expense
    for passively managed funds, mainly index funds.
  • -Real-estate Property maintenance
    expenses(whenever they may arise). Utility and
    strata fees(if applicable, they may be paid by
    tenants instead of landlords). Fees for buying
    and selling property and rent collection(if
    applicable). Depending on how much of the
    property is managed by a 3rd party.
  • Taxes will of course vary depending on the
    location and jurisdiction. These are just broad
  • -Stocks generally have higher taxes for
    short-term trading (often buying and selling a
    stock in less than one year). Long term capital
    gains and dividend taxation is normally lower by
  • -Real-estate Regular property taxes. Investment
    property taxes, speculation taxes for short term
  • There are a many contributors to losses, these
    are among the most common.
  • -Stocks Decrease in stock value, usually due to
    poor company or sector performance. As well as
    broader regional or global economic downturns.
    Changing markets, consumer behaviour,
    geo-political uncertainty/speculation.
  • Large trends can generally be foreseen with
    enough research, however it is near impossible to
    time the market to buy and sell at the perfect
    time. These events are out of the individual
    control of stock traders and investors.
  • -Fluctuations in property value usually due to
    surrounding development of the local area. The
    current state and history of the property(what
    condition the land and building are in). Property
    damage by natural wear and tear, the elements of
    nature(ex moisture, rotting, rusting), and of
    course bad tenants). Bad tenants may also
    contribute to losses when they dont pay rent.
    Losses from vacant property when no tenants can
    be found to rent. Poor work done by bad
  • If you have the ability and foresight and the
    right knowledge of people(tenants, contractors,
    property managers this will be less of an issue.
Altered, Adaptive, Advanced Income Strategies
  • These are more complex strategies meant to reduce
    losses and risk, and/or increase income.
  • -Stocks Reconfigure/adjust portfolio and
  • Use stock Options
  • Short Selling
  • These strategies can increase profits and reduce
    losses, but they are very difficult to learn and
    even more difficult to master. A lot of
    dedication is needed to utilize them successfully
    and consistently. They are also risky if not used
  • -Real-estate Specialized property selection,
    for example residential, business, industrial,
    agricultural properties.
  • Tenant selection to avoid nightmare tenants and
    acquire long-term ones that are secure and
    reliable with their payments. To a degree it
    comes down to an innate understanding of people.
    Also knowledge about demographics, and
    development trends in the surrounding areas.
  • Property or building value can be increased with
    renovations and esthetic upgrades such as a new
    coat of paint or new decor. These can be
    inexpensive ways to boost income when done right.
  • All these methods require good communication
    skills and the ability to form trustful
    relationships. They also need an understanding of
    what is physically and esthetically desirable in
    and around a property.
Miscellaneous Comparison Points
  • Some additional attributes that dont exactly fit
    into the previous categories.
  • - Stocks are more convenient and accessible. It
    is much easier and affordable to buy shares or an
    index fund than it is to hold an entire property.
    Thus they have a lower barrier of entry for
  • Stocks in general are more liquid so it is easy
    and quick to buy and sell with lower price
    disparities between buyers and sellers.
  • It is easier and to diversify across economic
    sectors by buying different stocks, and funds.
  • There is greater flexibility to sell a few shares
    or use some dividend cash payments. Rather than
    selling an entire property or using rent income.
Miscellaneous Comparison Points
  • -Real-estate is a physical tangible asset with
    real intrinsic value. Shareholders need to have a
    large holding in a company to even have a minimal
    impact on the business. Property owners have
    direct control of what they do with their
  • Since property is physical and more tangible at a
    local level it is often easier to foresee
    potential influences on property value by
    observing the surrounding location. As opposed to
    trying to predict influences on the stock market
    from around the world.
  • Historically real-estate has been a proven method
    to preserve and grow wealth even before the
    modern stock market was established. Thus it may
    be more expensive, but it holds greater trust due
    to its long proven track record.
  • Psychologically human are naturally more
    comfortable having physical and direct control
    over property. Peace of mind isnt the same with
    stock seven when an intangible stock holding has
    all the right numbers going for it.

Miscellaneous Similarities
  • Both stocks and real-estate..
  • Can be bought with leverage loaned money, a
    mortgage for real-estate and margin for stocks
    (can be risky).
  • Can be very involved and active requiring your
    time and energy be fixed. Ex property flipping,
    seeking out tenants, buyers, and sellers. Ex
    Actively managing a personal stock portfolio, day
    trading, swing trading.
  • Can be very hands off and passive requiring
    little attention and need to remain at a fixed
    location. Ex hiring a manager or having
    friends/family look after property, and issues
    with tenants, buyers, sellers, and contractors.
    Ex focusing on long term passive dividend income
    and/or having a portfolio manager manage stock

  • In many ways stocks and real-estate are equally
    different in that they share similar risks and
    rewards that take different forms. IN GENERAL
  • -Stocks allow for greater flexibility and
    diversity in terms of how much capital can be
    allocated, deposited, and withdrawn. Regular fees
    are often low and predictable. However there is
    little control over the factors that can
    influence stock prices(the best you can do is
    properly allocate capital appropriately to lower
    risk). Strategies especially the advanced ones
    are very adaptable, but are difficult to master.
  • -Real-estate generally carries more fees and they
    can come up unexpectedly. It is less suitable for
    those who cant communicate effectively with
    people. However great returns can be had if you
    understand esthetics, human behaviour, and
    property location.
  • Both real-estate and stocks allow wealth to be
    preserved and grown. Risk is also present with
    both, but in different forms. Some may find one
    suits them better. Suitability may also depend
    on current and future market conditions . If
    possible trade and invest in both, dont limit
    yourself if possible. At the very least learn
    about property and stock markets for a better
  • In the end choose wisely, know your capabilities
    and limitations, and research thoroughly before
    allocating your money.
I wish you higher returns and lower
risk. Simon from
  • Visit my website for more
    helpful and realistic trading and investing