[REIC 051] Stocks or Real Estate – Which is More Rewarding ? (Ideas You Can Use)
Date: 9th August 2018
Over the years there has been a sustained debate about which of two well known investments, deliver superior benefits over the other.
The arguments presented have come from both the learned (i.e. formally trained experts or professionals) and the unlearned.
In my case however, I choose not to take sides. Instead I adopt an objective perspective.
So, in this week’s edition of my newsletter, I highlight some of the pros and cons, of these two most actively pursued investments, of all time – namely STOCKS and REAL ESTATE – and I’ll leave you, being the discerning reader I know you are, to draw your own conclusions based on the facts presented.
Let’s start by reviewing the definition of these two popular types of investment.
1. STOCKS
Sometimes referred to as equities or securities. Provides the investor with legal possession or ownership of an organization. In other words, buying stocks amounts to buying a piece of a corporation, for instance, which automatically makes you a stakeholder in the company.
TYPES OF STOCKS
A. COMMON STOCKS
These are the shares that most of us buy through the brokers.
It’s the most common.
How much you spend on a company’s shares, determines how much your profit or loss will be, at the end of the company’s financial year. This is usually paid as dividend to your broker or account.
Like I said earlier, by virtue of your status as a stakeholder, you can determine (along with fellow shareholders) your board of directors i.e. you can influence the hiring or firing based on none performance, conflict of interest etc.
B. PREFERRED STOCKS
These kind of shares have preferential advantages, over common stocks. They are regarded as high class stocks.
Dividends that accrue are paid to investors in these preferred stocks, ahead of the common stock investors. And if in any event something goes wrong – such as bankruptcy of the company – the preferred stock investors will receive returns recouped from sales, or other efforts made by the trustee in charge of the obligation, before any other investors.
2. REAL ESTATE
It’s an investment type that comes in form of physical property such as lands, buildings, and all other physical resources.
Real Estate also happens to be one of the oldest types of investment known to man.
TYPES OF REAL ESTATE
A. Residential Real Estate
These are buildings people live in such as flats, terraces, duplexes, bungalows, town houses etc.
In some cases they are privately owned or rented. For the rented properties, the length of tenant’s stay depends on the agreement with the property owner.
B. Commercial Real Estate
These are income-generating properties primarily used for business purposes. Examples include offices, shopping malls etc.
Below, I offer a comparison of advantages and disadvantages for you to reflect on
| STOCKS |
Advantages |
Disadvantages |
| 1 |
Stocks are liquid,compared to real estate investments,moreso,during,the market at the exchange, you can sell your shares easily. |
Fluctuations experienced by stocks,could be regretful and unimaginable.For instance,400,000 naira stock may reduce to 100,000 naira or less or more.As seen above,the 400,000 naira invested,is significantly below the purchase price,which is usually unlike real estate.At this point, you can purchase more shares, if you realise that its cheap, or sell,if too expensive. |
| 2 |
Stocks enables company owners,to acquire huge funds,to facilitate growth and expansion. |
Its the contrary with stocks,because, your dividend or earnings per share (EPS),is dependent, on the financial performance, of the company,which is majorly,in your absence.Thus,leaving you with no choice, to accept whatever outcome,the board of directors(BOD) or management tells you,after the financial year. |
| 3 |
Stocks gives room for individuals,who have no business ideas,to participate,instead of,squandering the financial resources at there disposal. |
It’s improbable to get a mortgage for stock financing. Banks could deny any customer, that approaches them for such assistance,because,the possibility of returning the money, is not certain, due to abrupt fall in price of stock. |
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| REAL ESTATE |
Advantages |
Disadvantages |
| 1 |
Real estate rarely experience such loss below the purchase price.Though,it fluctuates too,despite, the magnitude of fall in price or crash,your purchase price could remain intact,with significant amount of appreciation,though,may be minimal. |
Real estate,is illiquid,which could remain in the market for a long duration,before getting a buyer. |
| 2 |
It’s generally known, as a tangible investment. As an investor,you can see it,and monitor its progress,etc,at your own pace.You are in control physically. |
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| 3 |
Banks will definitely finance,a good real estate project,because, of its reliability and appreciable returns. |
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Conclusion
Like I mentioned at the start of this piece, the purpose is not to take sides in the debate that has raged over the years about which investment type is superior.
Instead, my purpose for writing this piece is to enlighten the reader/practicing or aspiring investor – and also perhaps elicit a response from him/her to share (in the comments or by sending me an email) his/her perspective on the subject.
Having said the above, and in as much as I also invest in shares and treasury bills, personally, I’d say that the quote below is one that resonates greatly with me, because it accurately describes my experience.
“Now, one thing I tell everyone is learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values and the least risk.” – Armstrong Williams
Click here to contact me if you need help making use of the ideas I’ve shared in this latest issue of my Real Estate Investment Chronicles (REIC) newsletter.
Visit my blog – click here – to read more useful articles to educate yourself at www.lanrekarim.com/blog
To get Personalized Real Estate Investment Coaching from me, including practical tips and insights to help you safely navigate your way to success, while avoiding common mistakes click here to request details.
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SIGNATURE
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Lanre Karim – Nigeria’s Real Estate Investment Advocate (REIA) ™ – is the author of the Real Estate Investment Chronicles (REIC) ™: a thought-leading online publication that features tried and tested Real Estate Investment strategies– and solutions – for everyday persons.
Over a decade of hard won experience backed by extensive client testimonies and sales based referrals by satisfied clients, make Lanre Karim’s LREO (Larry Real Estate Organization) a preferred provider – in partnership with Pwanhomes Ltd – of cheap, affordable and dry landed properties, at Ibeju-Lekki, Eleko, and Ahoyaya area of Lagos, Nigeria.
Our demonstrated passion for delivering pocket-friendly, customer focused solutions in “C of O” processing, Estate Development and Management, gives us a unique competitive advantage that’s making an increasing number of smart thinking, results focused clients prefer to invest with us.
At Larry Real Estate Organization our business purpose is not just to sell real estate properties, but also to provide customer focused REAL ESTATE INVESTMENT decision making solutions.
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This is done through the experience based expert information and education we offer – with no strings attached – to get you from being a novice or beginner, to a well informed and discerning enthusiast/buyer.
History has shown that the resulting transformation in the thinking of persons exposed to the above, equips them to invest wisely in landed property, for profit. Many of our clients (based within/outside Nigeria) are today proud owners of serviced plots of land at Paradise Gardens, Oakwood Gardens, and Phase 1 & 2 etc.
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