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  • Throughout history, gold and real estate have been two most reliable investments.

  • Landlords were always the elites of the society and owning a piece of real estate was like

  • a dream for most people, even today, prices have risen so much that owning a home seems

  • unreal.

  • However, in the last few centuries, the financial system has developed so much that it presents

  • an alternative way to grow wealth.

  • Warren Buffett is a living proof that with smart long term investments in the stock market,

  • you can do pretty good.

  • Here in this video, we will explore which one is a better investment?

  • Is real estate is still a great investment as it was in the past?

  • Or the stock market is a better alternative in the 21st century?

  • Real Estate vs. Stock Market

  • There is a lot of debate around it.

  • Real estate investors claim that real estate is the best investment ever, but stock market

  • guys claim the opposite.

  • Both of them are right to a certain degree, the truth is somewhere in the middle.

  • But to find out where exactly, we have to take an in-depth look into each of them.

  • Let's start with the fact that real estate is expensive, no matter where you are.

  • People often work an entire life just to own one property, that was the case with your

  • parents probably.

  • To make a single real estate investment, you need a lot of savings.

  • On the other hand, you can start investing in the stock market with as little as 5 dollars.

  • Of course, it depends on the stock, but most companies, even great companies such as apple,

  • are traded at around 300 bucks per share, you can become an investor in one of the largest

  • companies in the world with just a few hundred dollars.

  • But the cost doesn't stop there, it's no longer like the old days where you have to pay a

  • broker, with apps like Robinhood, you can purchase stocks for absolutely free.

  • But when it comes to real estate, the transaction fee is quite expensive.

  • That doesn't necessarily mean the stock market is better.

  • Risks that come with the stock market are much higher.

  • It's difficult to analyze the market and individual stocks in particular.

  • We might be at the peak of expansion period where the entire market is overvalued, and

  • your investment will probably fall by 20, 30, or 40 percent if you don't cash out right

  • before the market crashes.

  • If anything history taught us that, nothing is too big to fail.

  • For instance, Apple is a huge company, so was Nokia once upon a time.

  • In fact, Apple was already once on the brink of bankruptcy.

  • Stock prices change every day for different reasons.

  • That can trigger an emotional response and push you to exist the market at a loss, which

  • is what happens quite often, even with professional investors.

  • But with real estate, it isn't like that.

  • As long as it's in the city, the land beneath it will always be valuable.

  • And even during crises, they often restore their value pretty quickly, since everyone

  • needs a roof over their heads.

  • Real estate covers one of our most important needs.

  • When you buy a property, you can sleep well and be confident that you are not going to

  • wake up the next morning with the news that your property lost half of its value.

  • What also makes real estate attractive is that it provides passive income.

  • With rent prices going up, you don't even need to work, its one of the few investments

  • that can provide you with a strong, stable income that has a dividend yield of 7, 8 or

  • even 10 percent.

  • Whereas, it's extremely rare for any company to pay a dividend yield of 5 percent or more.

  • Some companies pay, of course, but they are risky stocks where you might lose much more

  • by the drop of the price than you can possibly make out of dividends.

  • But it also works the other way around.

  • Real estate doesn't appreciate as much as the stock market.

  • In 2019, on average, home prices appreciated by 3.8 percent while the S&P 500 was up to

  • 28 percent, which is almost 10 times more.

  • In the past decade, Amazon had a total rate of return of 1209 percent, or Netflix had

  • three times that number at 3767 percent.

  • You will never find such returns in the real estate world because, in the stock market,

  • companies constantly innovate to stay ahead of everyone else.

  • In 25 years, amazon grew from nothing to over a trillion-dollar company.

  • However, the business world is ruthless, today you are at the top, tomorrow your competitors

  • will take you down.

  • It isn't like real estate that sits in the corner and keep getting your monthly passive

  • income.

  • When it comes to taxes, there are two approaches.

  • The stock price can go to a thousand percent, but you are only getting wealthier on paper.

  • If you want to materialize that wealth, you need to sell that stock where you have to

  • pay a capital gain tax, which is 20 percent for long term investments and can go as high

  • as 37 percent for short-term trades.

  • With real estate, there are multiple ways to avoid taxes and use that cash to grow your

  • wealth.

  • For instance, instead of paying for the entire property upfront, you can deduct the portion

  • of your mortgages attributable to interest payments on your tax returns.

  • You can recover the cost of income-producing rental property through depreciation.

  • Depreciation expense often results in a net loss on investment property even if the property

  • actually produces positive cash flow.

  • This loss, as well as expenses, such as utilities and insurance deducted from ordinary income.

  • Even if you end up selling the house, you can avoid paying capital gain tax if you purchase

  • another property.

  • Tax benefits are quite decent in real estate.

  • But of course, its not all sunshine and rainbows.

  • Unlike stocks where you can read the financial statements of the company, do some research

  • about the company and decide whether it worth your money or not, real estate requires much

  • more work.

  • To find one properly rental property, you might need weeks if not months.

  • That's just part of it.

  • Once you start renting it out, you will come across whole different types of challenges,

  • such as finding decent tenants who can keep paying the rent and would take care of the

  • house.

  • The house constantly needs some maintenance, something always breaks and needs to be replaced.

  • All that is going to occur additional cost and expenses.

  • That also means it might be difficult for you to move to a different city or a country

  • because your property might need you there all the time.

  • However, investing in the stock market doesn't have all those headaches.

  • You can be wherever you want.

  • You can simply follow the news and the performance of your portfolio from the comfort of your

  • smartphone.

  • 2.

  • Stock market - Endless Opportunities

  • What I like about the stock market is that it can teach you more about the business world

  • than your 4-year bachelor degree would ever do.

  • Every time you analyze a company before throwing your green dollars into it, you have to read

  • its financial statements, understand its cashflow, study its past to have better clarity about

  • its future decisions, get to know better its products and their sales.

  • On top of that you have to understand deeply how the economic machine works, the role of

  • banks in the economic cycles and so on.

  • So if you ever want to start a business, that knowledge will be the backbone of your startup.

  • But the stock market isn't just about buying

  • and selling stocks.

  • The financial system is so complex that there are more ways to make money in the stock market

  • than most people know, such as shorting where you sell a stock when it's high and buy it

  • back when it's low, sounds complicated?

  • Well, I have explained that in one of the previous videos.

  • And then you have futures, options, you can earn money by predicting the future price

  • of the crude oil.

  • We can't discuss all of that in this video, but you get the picture, if you master the

  • stock market, the door of opportunities will be opened in front of you.

  • Even if you don't have the time to do all of that, you can keep your savings in an index

  • fund and be confident that in the long run, you can expect a 10 percent return.

  • 3.

  • Leverage

  • When you buy a stock, its just a digital document on the screen of your smartphone.

  • You almost have no control over it since your single stock isn't going to give you much

  • influence when the company has another 5 billion stocks.

  • Whereas real estate gives you complete control over your investment, you can touch it, feel,

  • and control it.

  • Besides the passive income it can provide, as we have discussed earlier, you can use

  • leverage.

  • Let's say you have 25K dollars, putting $25,000 into securities buys $25,000 in value.

  • Conversely, the same investment in real estate could buy $125,000 in property with a mortgage

  • and tax-deductible interest.

  • 4.

  • Where should you invest?

  • So, where should you invest?

  • The answer is - it depends!

  • If you are keen on passive income, then real estate is your choice; however, if you want

  • to aim for higher returns, the stock market is undoubtedly is a better option, especially

  • if you are an amateur investor with little money to start.

  • But, you should also take into account is what you find interesting.

  • If you find it too boring analyzing companies and going through endless paperwork, then

  • maybe it's just not for you.

  • Factors such as the place you live also play a role.

  • Maybe in your city or even a country, things are different.

  • So you have to draw your own conclusion based on your circumstances.

  • That's it for this video.

  • If you want to support our channel, check out our Patreon, other than that, just give

  • this video a thumbs up and subscribe if you are new around here.

  • Thanks for watching and until next time.

Throughout history, gold and real estate have been two most reliable investments.

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不動産対株式市場 - どこに金持ちが自分のお金を投資する? (Real estate vs stocks Market - Where the rich people invest their money?)

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    Summer に公開 2021 年 01 月 14 日
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