Buying a house versus investing in the stock market

TL; DR:

  • Investing in real estate and the stock market are two sources of passive income
  • Investing in the stock market can potentially generate better returns over time
  • Both come with their own set of risks that all investors should consider.

Unpopular opinion: Investing in the stock market is better than invest in real estate long-term. Simply put, an investment in real estate only returns three to four percent per year historically; on the contrary, investments in the stock market show annual returns of around 10%. It can be an impressive return on investment (ROI).

And, when you invest with Q.ai’s AI-powered technology, you’re well positioned to maximize your returns and minimize your risks.

So would you invest in a house or a stock? Why? Let’s find out the answers to some of the most frequently asked questions about buying a home versus investing in the stock market.

Download Q.ai for iOS for more investment content and access to over a dozen AI-powered investment strategies. Start with just $100 and never pay any fees or commissions.

What are the best ways to earn passive income?

There are a multitude of ways to earn passive income, including investing in real estate and investing in the stock market, whether you choose to put your money in stocks, exchange-traded funds (ETFs), bonds, or other assets.

Investing in both real estate and the stock market can help your money earn more over time. If you have questions such as “is it better to invest in real estate or an index fund” or “is it better to invest in rental properties or dividend stocks”, the answer is nuanced. .

First, you need to find out what is the best way to generate passive income in real estate. One of the most lucrative ways to make money in real estate is to buy rental properties and, well, rental pay them to others who pay the bills for you. When you rent them out, the tenants basically help pay off your mortgage and ideally you can earn passive income on top of that.

For example, if your mortgage is $1,000 per month, you could be asking for $1,500 in rent per month. That means you can pay your monthly mortgage bill and pocket the extra $500. While a lot of that money can be used to cover utilities (if you don’t charge extra for them) and manage repairs, the goal is to enjoy at least a little to save money. money every month.

Additionally, as your home increases in value over time (due to a variety of factors ranging from home repairs to possible gentrification of the neighborhood), you may be able to sell the property for even more, if you choose well to resell it finally. Many people choose to buy a property, keep it, and then resell it when the market recovers, even without ever renting it out.

But owning rental properties requires a certain level of fieldwork, so it’s not totally passive. For example, you still need to search for properties, make repairs and renovations, hire property managers, screen tenants, answer tenant questions and concerns, and more.

However, when investing in the stock market with index funds, dividend stocks, ETFs, bonds and other assets, you can be more free with much lower upfront costs. (This is especially true when investing in technology like Q.ai, which automatically allocates your funds for you. All you have to do is select your investment strategy and sit back while the artificial intelligence calculates the numbers.)

Additionally, you can also choose to invest in real estate by investing in real estate trusts and securities. For example, a real estate investment trust (REIT) is a company or trust that uses investors’ funds to buy, rent and sell properties, and 90% of profits are paid out to shareholders in the form of dividends. Real estate mutual funds and real estate ETFs typically invest in REITs to provide broad market diversification.

Other securities like Real Estate Investment Groups (REIGs) and Real Estate Limited Partnerships (RELPs) are also options.

Should I invest $500,000 in real estate or stocks?

If you have $500,000 to invest, you are already in a good position. According to wealth management platform Personal Capital (via Business Intern). Meanwhile, the average user in their 60s has invested over $210,900. Still, it’s well under $500,000.

In fact, only 14% of American families are directly invested in stocks, according to the Pew Research Center. That said, just over half (52%) have investments in the stock market, most of which are retirement accounts like 401(k).

With half a million dollars, you have more potential for serious returns, but investing in anything – investment properties and the stock market – also carries greater risks.

Because real estate generates annual returns of around three to four percent, you can get what you pay for. However, given the 10% average annual return of the S&P 500, depositing $500,000 in an investment account can ultimately skyrocket into the millions by the time you reach retirement, even if you never add another penny. .

Real estate is often identified as good or bad investment based on a range of factors such as rental prices, property taxes, neighborhood vibes, local job market, school accessibility, future development plans or lack thereof, natural disasters like flood zones, and more. But putting your money in ETFs and mutual funds can help you diversify your portfolio to mitigate the risk involved.

You may also be wondering, can I get a loan to buy real estate? And, yes, you may be eligible to apply for loans to cover the cost of your mortgage. But you’ll have to pay off your home loans over time, and interest can accrue as you do.

Of course, some lenders will let you use personal loans to buy stocks – and people do – although it’s not as common as using loans to buy homes and other real estate. This is largely because the down payment you need for a property tends to be much more than you need to start investing – which can be as little as a few dollars, compared to an average of 12 %, according to the National Association of Realtors.

Although you can easily cover the cost of your down payment with half a million dollars, it might be more prudent to allocate that money to a diversified portfolio.

Should I buy a house or invest in stocks?

It’s ultimately up to you to decide. But here is the bottom line:

  • Buying a home requires some upfront work and costs when it comes to house hunting, selecting tenants and hiring property managers. Being a landlord is also a job in itself, as you have to take care of repairs and renovations and handle tenant questions and concerns.
  • Buying stocks and other assets (intangible assets, unlike real estate) takes a lot less work when you harness the power of AI through technology like Q.ai. It’s a one-click investment, and you can even consider real estate-focused securities.
  • Diversifying with physical real estate is much more difficult than diversifying into the stock market, in general. And a well-diversified portfolio tends to perform much better over time than a portfolio confined to one sector or asset type.

Worried about buying and selling your stocks at the right time? Q.ai uses AI to automatically adjust your portfolio when the market goes up or down, so you don’t have to actively manage your investments.

Additionally, Q.ai offers a downside protection feature on certain investment strategies called signature kits. This feature helps identify risks such as market volatility, recession, inflation, and changes in interest rates. And, in doing so, it moves your money to protect it. So you don’t have to spend your time thinking about these things when you should be thinking about your personal investment goals.

Download Q.ai for iOS for more investment content and access to over a dozen AI-powered investment strategies. Start with just $100 and never pay any fees or commissions.

Helen D. Jessen