Aged old debate should we invest in real estate or stock

July 30, 2018


When you want to make any form of investment in Malaysia, it is good to ensure you take time to decide the best investment to undertake. The best form of investment is one that will give you good returns without involving great risks and stress. There are two major forms of investments that you can make in Malaysia — real estate or stocks. The major question that many people ask themselves is which between the two is better than the other. Just like any other form of investments, both stock and real estate have strengths and shortcomings. It is good to know them, so that you can make an informed decision. In order to help you make better decision, it is good to look at each form of investment and what each of them entails. 


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Real estate 

When you enter into Malaysia property market, there are a myriad of options for you to opt for, be it low cost flat; serviced residence; condominiums; townhouses; linked houses; commercial shops and offices; and of course even physical land. To dive further into the property market, you will need to decide yourself whether you want to consider investing in under construction or fully developed property.

Stocks 

This is a form of investment in Malaysia in which you purchase stocks. This means that you are purchasing a piece of a company. Regardless of the products or services that the company is involved in, you will benefit from part of the profit of the company for each and every share that you own. 

Why invest in real estate

One of the reasons why you should invest in real estate than stocks is that it is a more comfortable form of investment, as it does not involve a lot of complex transactions as it might happen with stocks. Also, with the rise of internet, one can complete their research using some of the most reputable property listing website such as PropertyGuru.

The other great thing about getting involved in real estate in Malaysia is that you put your money in a tangible investment. This means that you have peace of mind because you can see where you have invested your money. This is unlike when you invest in stocks because you cannot see what you have bought. 

Investing in realestate is also less risky than when it comes to stocks. You are less likely to be defrauded as it might happen when you invest in stocks. This is because you will be able to see what you are buying unlike stocks that are not tangible, meaning you cannot know if you are being scammed or not. When you are buying land or any other property, it is possible for you to carry out background checks and ensure that you are buying something genuine. When you decide to buy stocks, you have to ensure that you are buying from a reputable company with trustworthy auditors and management. It is easy to structure debt when you want to invest in real estate than it happens when you want to buy stocks. 

Shortcomings on real estate investment 

When you compare stocks to real estate in Malaysia, it involves a lot of work. This is because you will be involved directly in managing the properties and even if you hire professional to do the management, you still need to be involved. You will have to deal with calls of your tenants complaining of leakages or other problems with your properties. This does not happen when you invest in stocks because it is the company that manages your stocks, so you are not involved in any way, making it hassle and stress free. 

Real estate investment might cost you money if your property is not occupied. This is because you will still be required to pay utilities, taxes, maintenance and others. This means that if your property remains unoccupied for a long time, you have to get money from other sources to keep your property intact and safe. When you invest in stocks, you feel safe because you get no such calls because your money is put in shares, so no tenants or clients are involved.  Of course, thelist of risks can go on and on.

Why you should consider investing in stocks 

Studies have shown that investingin stocks has long-term benefits. When you buy the stocks and reinvest in dividends and holding them for a long time you will gain more money in the long end. Stocks are very advantageous because you will also be purchasing a part of another business that you have not invested in creating it. You will benefit from a business that you do not spend any money or time running it. There are professional managers running the company for your own benefit. This is unlike the real estate where you have to get involved in the day to day management.  

There is also diversification when it comes to investing in stocks unlike in real estate. There are many companies in Malaysia that allow you to purchase dozens of stocks at a flat monthly fee for less money. This is unlike in the real estate market where you have to invest in large sum of money. Therefore, even if you do not have a lot of money, you can still invest in stocks and gain some profits. When it comes to real estate, you will need to have large amount of money and if you do not you have to incur large debts in terms of loans or mortgages. 

In terms of liquidity, you better got for stocks compared to real estate. Stocks are more liquid that the real estate. Just within a few regular market hours, it is possible for you to sell your stock shares and attain high profits. This can happen just within some very few seconds. This is unlike in real estate whereby you have to list your property or land. This might take a long period of time before you can get a buyer willing to pay the price that you desire for your property. If you have a rental property, it might also take you long time before you can get a worthy tenant. 
It is easier to get borrow money when you want to invest in stocks than in real estate. If you have received approval from your broker, all you have to do is to fill a form and get the amount that you want against your account. In case there is no money what happens is that a debt is usually created against the stocks that you purchase. All you will have to do is to pay interest which is usually very low. 

Cons of investing in stocks 

One of the greatest shortcomings of investing in stocks is that they can fluctuate greatly within a very short time. The return you get is determined by the performance of the company in Singaporean market. This is unlike the real estate where the price of properties or land does not deprecate. You are assured that when you buy a property at a certain price, it will appreciate within a short time. This means that when you want to resell it you get good returns for your investments.

Conclusion 

As you can see, each of the above form of investment has its own benefits and shortcomings. It is good that you consider all of them, so that you make an informed choice. You need to make sure that you have enough money before you decide to put it in either stocks or real estate. It is also important that you seek professional advice from investment experts in Malaysia, to guide you on the best investment to put your hard earned money. 



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1 comments

  1. IMO, debating which is the best investment is not really a sound advice; different portfolio have different strength/weakness/pros/cons. The bottom line is to understanding where you put the money into it and know the reason why. The advice that I'm holding on to is to have a diversified portfolio for security. :D

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