Property vs Stock - Which is the better investment?

We all want our money to work hard for us, and that means investing it somewhere that is not only safe but is also likely to yield good results. For many years, it was thought that putting your money into bricks and mortar was the most reliable option, but these days, there are other routes you could take.

Putting your money into stock can now be very successful, but does it outweigh the benefits of property? Here, we take a look at what will really get you more bang for your buck.

What you decide to invest in can be governed by your personal circumstances, how much you have to invest and how soon you want to see returns. To explain more, Mark Burns, Director of Pure Investor shares his insight into property and stocks.

Property investment

Investing in property means that you are buying either a property or land, which can usually provide you with a regular rental yield.

This steady income stream can be very appealing, although it sometimes only covers the expenses involved in owning the property. Any landlord holds onto the property in the hope that when they choose to sell it, the value will have increased, and a profit can be realised.

Property has a much wider appeal to investors, as it is not dependent on how much money you have sat in the bank. If you are able to apply for a mortgage, then costs can be quite low as the rent should be able to cover the cost of your repayments.

Once you have a property, it then becomes possible to use this as leverage to buy others, therefore expanding your portfolio and increasing your potential yield.

Owning property has always seemed attractive, as investors have something tangible to show for it. No matter what happens, it will always have some value, and its success can be controlled, to some degree, by its owner in terms of how it is looked after and developed.

Property investors will always be at the mercy of the market, but it does help them to feel more in control of what is happening to their asset.

As with any investment, the value of property can go down as well as up, particularly during economic recessions, but it is still considered to be one of the lower risk ways to invest your money.

If this is the route that you choose to go down, make sure that you do your homework properly to ensure that you pick a property which is more likely to hold its value. Think about the type of property it is and the renters it will attract, the area it is located in and what the long-term demand is likely to be.

You will also need to weigh up the costs of mortgages and management companies in comparison to the money that you will receive. Can you afford to hold on to the property if it is vacant or the tenants have not paid their rent?

Stock investment

Investing into stocks effectively means that you are buying a tiny piece of a company in the hope that their value will increase as the company’s stock increases and that dividends pay out. Some investors find this an intimidating prospect, particularly as they seemingly have nothing to show for it.

You can put as much or as little money as you like into the stock market, so it can suit a range of different investors. The stock market is an unpredictable animal, which can mean that the return on investment can be lower than expected.

It is subject to market, economic and inflationary risks, and values can seem extremely volatile at times. They are affected by factors within the individual companies, their industries or wider events in the world, so it can be difficult to predict what will happen next.

Stocks can be subject to the economic cycle of a nation, as well as policies and regulations set by individual governments regarding tax, ownership and even interest rates. Investors need to think carefully about where they put their money. It might seem sensible to stick with what you know but failing to diversify your holdings can expose you to greater risk.

One small change in that area can damage the value of everything you own.

There is reliable income to be had from dividend-paying stocks, but any meaningful returns will rely on considerable investment amounts.

Understanding the stock market thoroughly is essential when it comes to choosing the right investments and managing them properly. There is work involved in watching the markets and trying to predict where they will go, so simply leaving your money to manage itself is a good way to lose it.

However, once your money is invested, you will not incur extra the extra costs that managing a property requires, and so it can be easier to limit what you need spend.

One huge benefit to investing in the stock market is how quickly you are able to release your money. Whether you see a change coming or simply need to get your hands on your money, stocks can be sold immediately, whereas a property sale can take months to be completed.

There are a huge number of stocks available across many different sectors, so it can be easy to build up a diverse portfolio, but make sure that you know what you are buying into. Panic selling can be costly, so you need to have confidence in yourself and the stocks that you are buying.

Choosing the right investment for you will depend on many different factors, so some thorough research will be needed to choose between the volatile but highly liquid stock market or the passive income of the more expensive property world.

Understanding why you want to invest, when you want to see returns and how much you want to make are all important factors in deciding where to put your money. Some options are more time intensive than others, and both require a range of different skills, so be honest with yourself about what you can bring to each investment as well as what it can bring to you.