馃攳
Real estate vs stocks Market in 2022 - Where the rich people invest their money? - YouTube
Channel: Proactive Thinker
[35]
Throughout history, gold and real estate have
been two most reliable investments.
[41]
Landlords were always the elites of the society
and owning a piece of real estate was like
[45]
a dream for most people, even today, prices
have risen so much that owning a home seems
[52]
unreal.
[53]
However, in the last few centuries, the financial
system has developed so much that it presents
[59]
an alternative way to grow wealth.
[61]
Warren Buffett is a living proof that with
smart long term investments in the stock market,
[67]
you can do pretty good.
[69]
Here in this video, we will explore which
one is a better investment?
[74]
Is real estate is still a great investment
as it was in the past?
[78]
Or the stock market is a better alternative
in the 21st century?
[82]
Real Estate vs. Stock Market
[86]
There is a lot of debate around it.
[88]
Real estate investors claim that real estate
is the best investment ever, but stock market
[94]
guys claim the opposite.
[96]
Both of them are right to a certain degree,
the truth is somewhere in the middle.
[101]
But to find out where exactly, we have to
take an in-depth look into each of them.
[107]
Let's start with the fact that real estate
is expensive, no matter where you are.
[112]
People often work an entire life just to own
one property, that was the case with your
[118]
parents probably.
[119]
To make a single real estate investment, you
need a lot of savings.
[124]
On the other hand, you can start investing
in the stock market with as little as 5 dollars.
[130]
Of course, it depends on the stock, but most
companies, even great companies such as apple,
[135]
are traded at around 300 bucks per share,
you can become an investor in one of the largest
[142]
companies in the world with just a few hundred
dollars.
[145]
But the cost doesn't stop there, it's no longer
like the old days where you have to pay a
[151]
broker, with apps like Robinhood, you can
purchase stocks for absolutely free.
[157]
But when it comes to real estate, the transaction
fee is quite expensive.
[161]
That doesn't necessarily mean the stock market
is better.
[165]
Risks that come with the stock market are
much higher.
[169]
It's difficult to analyze the market and individual
stocks in particular.
[173]
We might be at the peak of expansion period
where the entire market is overvalued, and
[178]
your investment will probably fall by 20,
30, or 40 percent if you don't cash out right
[186]
before the market crashes.
[188]
If anything history taught us that, nothing
is too big to fail.
[192]
For instance, Apple is a huge company, so
was Nokia once upon a time.
[199]
In fact, Apple was already once on the brink
of bankruptcy.
[203]
Stock prices change every day for different
reasons.
[207]
That can trigger an emotional response and
push you to exist the market at a loss, which
[212]
is what happens quite often, even with professional
investors.
[216]
But with real estate, it isn't like that.
[219]
As long as it's in the city, the land beneath
it will always be valuable.
[224]
And even during crises, they often restore
their value pretty quickly, since everyone
[230]
needs a roof over their heads.
[232]
Real estate covers one of our most important
needs.
[237]
When you buy a property, you can sleep well
and be confident that you are not going to
[241]
wake up the next morning with the news that
your property lost half of its value.
[247]
What also makes real estate attractive is
that it provides passive income.
[252]
With rent prices going up, you don't even
need to work, its one of the few investments
[257]
that can provide you with a strong, stable
income that has a dividend yield of 7, 8 or
[264]
even 10 percent.
[266]
Whereas, it's extremely rare for any company
to pay a dividend yield of 5 percent or more.
[273]
Some companies pay, of course, but they are
risky stocks where you might lose much more
[278]
by the drop of the price than you can possibly
make out of dividends.
[284]
But it also works the other way around.
[286]
Real estate doesn't appreciate as much as
the stock market.
[289]
In 2019, on average, home prices appreciated
by 3.8 percent while the S&P 500 was up to
[298]
28 percent, which is almost 10 times more.
[303]
In the past decade, Amazon had a total rate
of return of 1209 percent, or Netflix had
[310]
three times that number at 3767 percent.
[314]
You will never find such returns in the real
estate world because, in the stock market,
[320]
companies constantly innovate to stay ahead
of everyone else.
[324]
In 25 years, amazon grew from nothing to over
a trillion-dollar company.
[330]
However, the business world is ruthless, today
you are at the top, tomorrow your competitors
[336]
will take you down.
[337]
It isn't like real estate that sits in the
corner and keep getting your monthly passive
[342]
income.
[343]
When it comes to taxes, there are two approaches.
[346]
The stock price can go to a thousand percent,
but you are only getting wealthier on paper.
[352]
If you want to materialize that wealth, you
need to sell that stock where you have to
[356]
pay a capital gain tax, which is 20 percent
for long term investments and can go as high
[363]
as 37 percent for short-term trades.
[367]
With real estate, there are multiple ways
to avoid taxes and use that cash to grow your
[373]
wealth.
[374]
For instance, instead of paying for the entire
property upfront, you can deduct the portion
[378]
of your mortgages attributable to interest
payments on your tax returns.
[383]
You can recover the cost of income-producing
rental property through depreciation.
[389]
Depreciation expense often results in a net
loss on investment property even if the property
[396]
actually produces positive cash flow.
[399]
This loss, as well as expenses, such as utilities
and insurance deducted from ordinary income.
[405]
Even if you end up selling the house, you
can avoid paying capital gain tax if you purchase
[410]
another property.
[412]
Tax benefits are quite decent in real estate.
[415]
But of course, its not all sunshine and rainbows.
[418]
Unlike stocks where you can read the financial
statements of the company, do some research
[423]
about the company and decide whether it worth
your money or not, real estate requires much
[429]
more work.
[430]
To find one properly rental property, you
might need weeks if not months.
[435]
That's just part of it.
[437]
Once you start renting it out, you will come
across whole different types of challenges,
[442]
such as finding decent tenants who can keep
paying the rent and would take care of the
[447]
house.
[448]
The house constantly needs some maintenance,
something always breaks and needs to be replaced.
[454]
All that is going to occur additional cost
and expenses.
[458]
That also means it might be difficult for
you to move to a different city or a country
[463]
because your property might need you there
all the time.
[467]
However, investing in the stock market doesn't
have all those headaches.
[471]
You can be wherever you want.
[473]
You can simply follow the news and the performance
of your portfolio from the comfort of your
[478]
smartphone.
[479]
2.
[480]
Stock market - Endless Opportunities
[483]
What I like about the stock market is that
it can teach you more about the business world
[487]
than your 4-year bachelor degree would ever
do.
[491]
Every time you analyze a company before throwing
your green dollars into it, you have to read
[496]
its financial statements, understand its cashflow,
study its past to have better clarity about
[502]
its future decisions, get to know better its
products and their sales.
[506]
On top of that you have to understand deeply
how the economic machine works, the role of
[511]
banks in the economic cycles and so on.
[514]
So if you ever want to start a business, that
knowledge will be the backbone of your startup.
[520]
But the stock market isn't just about buying
[522]
and selling stocks.
[523]
The financial system is so complex that there
are more ways to make money in the stock market
[529]
than most people know, such as shorting where
you sell a stock when it's high and buy it
[534]
back when it's low, sounds complicated?
[537]
Well, I have explained that in one of the
previous videos.
[540]
And then you have futures, options, you can
earn money by predicting the future price
[547]
of the crude oil.
[548]
We can't discuss all of that in this video,
but you get the picture, if you master the
[554]
stock market, the door of opportunities will
be opened in front of you.
[559]
Even if you don't have the time to do all
of that, you can keep your savings in an index
[564]
fund and be confident that in the long run,
you can expect a 10 percent return.
[572]
3.
[573]
Leverage
[575]
When you buy a stock, its just a digital document
on the screen of your smartphone.
[579]
You almost have no control over it since your
single stock isn't going to give you much
[584]
influence when the company has another 5 billion
stocks.
[590]
Whereas real estate gives you complete control
over your investment, you can touch it, feel,
[595]
and control it.
[597]
Besides the passive income it can provide,
as we have discussed earlier, you can use
[601]
leverage.
[603]
Let's say you have 25K dollars, putting $25,000
into securities buys $25,000 in value.
[612]
Conversely, the same investment in real estate
could buy $125,000 in property with a mortgage
[621]
and tax-deductible interest.
[622]
4.
[623]
Where should you invest?
[624]
So, where should you invest?
[625]
The answer is - it depends!
[627]
If you are keen on passive income, then real
estate is your choice; however, if you want
[633]
to aim for higher returns, the stock market
is undoubtedly is a better option, especially
[639]
if you are an amateur investor with little
money to start.
[643]
But, you should also take into account is
what you find interesting.
[647]
If you find it too boring analyzing companies
and going through endless paperwork, then
[652]
maybe it's just not for you.
[655]
Factors such as the place you live also play
a role.
[658]
Maybe in your city or even a country, things
are different.
[662]
So you have to draw your own conclusion based
on your circumstances.
[667]
That's it for this video.
[669]
If you want to support our channel, check
out our Patreon, other than that, just give
[674]
this video a thumbs up and subscribe if you
are new around here.
[678]
Thanks for watching and until next time.
Most Recent Videos:
You can go back to the homepage right here: Homepage