In a recent survey by Bankrate, when asked about the best way to invest money that they would not need for ten or more years, more millennial respondents leaned toward real estate investments than stock market investments. While 36% of the respondents said that real estate was the best long-term investment, only 16% preferred stocks.
The response is controversial among financial planners, but there are different ways to understand the issue, depending on the preferences of the individual investor. Let’s take a look at the relative advantages and disadvantages of both of these investment approaches.
Stocks Versus Real Estate Investments
When it comes to stocks and real estate investments, there are no guaranteed returns. Even though a robust mutual fund might have a history of 7-8% annual returns, there have been entire decades in American history when stocks have had negative returns. Also, even though houses can appreciate, sometimes they do not. Homes have more maintenance costs than stocks; they can thus be more expensive and time-consuming to buy and sell. However, there is the consideration that even if a house loses value, at least the owner has somewhere to live.
Should Millennials Prioritize Home Ownership or Stock Investing?
In a perfect world, all millennials would invest in both real estate and stocks. The equity power of homeownership can be a great builder of wealth and credit, and the cash flow gleaned from tenants and roommates can be a boon to one’s monthly income. Similarly, the dividends and equity growth of stocks can increase wealth without the owner having to lift a finger.
By diversifying into both real estate and stocks, a millennial investor will not be overly dependent on the performance of one single industry. In ideal scenarios, both asset types will appreciate impressively for the duration that the investor holds them.
Any potential home investors can consider saving time and money by using Propy‘s Transaction Management Platform. High security and lower closing costs can improve the case for real estate as a primary investment. Good luck with your finances.