Real Estate or Stocks: Which Investment You Can You Live Off Of? - Make Money Online

Header AD

Real Estate or Stocks: Which Investment You Can You Live Off Of?

It’s a difficult time to be young. Not only do you get a label you didn’t ask for (‘millennial’) but you’re also constantly reminded that you’ll be dealing with student debts, sky-high rents, and lacklustre career options for the foreseeable future. No wonder 64% of us think we’ll never be millionaires.

Fortunately, we’ve got one thing going for us that no one can take away - time.

The fact that you’re young means you can probably set aside a tiny amount each month and see it grow into a mammoth pile over the next few decades. You don’t need to be a stock picking expert, a real estate guru, or a fancy entrepreneur. You just need to be disciplined and patient to watch your money grow. But this begs the question - where should you put your money?

Which investment is ideal for someone with limited resources and a lot of time? The two most common answers to that question are real estate and dividend stocks. In a lot of ways these two investments are rather similar. They both pay you regular income, either in the form of dividends or rent. They also tend to appreciate over time, provided you pick the right properties and stocks.

Over time, both real estate and dividend stocks will help you create a rock-solid portfolio that pays you a monthly income. Here’s a closer look at both these options:

Real Estate
It’s hard to avoid the allure of income-generating property. Families will always need a place to live, businesses will always need offices, and students will always need a place to crash after a night out drinking.

The advantage with real estate is that the income is stable. Monthly rent is fixed and tends to go up with inflation. Meanwhile, the house value will most likely appreciate. The trouble is you need a lot of capital to get involved.

Most young buyers struggle to save up enough for a down payment on their own home, let alone an investment property.  However, Real estate investment trusts (REITs) and Real estate operating companies (REOCs) make this asset a lot more accessible.

Dividend Stocks
The other option, of course, is dividend stocks. Big, mature companies tend to pay out a handsome dividend to shareholders. These companies also have the ability to keep expanding operations, making more money over time and paying a larger sum to shareholders with growing dividends.

Stocks listed on the Dividend Aristocrats Index, for instance, have increased dividends every year for twenty-five years or more.

Picking high-quality stocks that can sustain their dividends and keep growing is the biggest challenge here. Stocks tend to be volatile and you need an appetite for risk if you’re going to invest in them. But if you’re willing to do the research, pick the right stocks, and hold on tight, you’ll be rewarded with a phenomenal return and high regular income.

Which is Better?
While, they’re similar, most investors will prefer either real estate or dividend stocks based on their experience, perception of risk, and long-held investment philosophy. If you take a look at historic data, however, there is a clear winner - the S&P 500 index.

Here’s why. An analysis of data from the past twenty years reveals that the two asset classes that provided the best return were small-mid cap stocks (average annual return 9.46%) and REITs (9.13%). In other words, smaller companies offered an annual average return slightly ahead of professionally managed real estate. The S&P 500 contains a number of stocks of all sizes, but it also contains 28 different REITs. THis simple index offers you the best of both worlds.

Of course, you can still try to manage property on your own or pick our small stocks from the market, but the key is adequate research and adequate diversification. A portfolio split between  these two asset classes is the easiest way to maximize your long-term returns.

The yield from REITs or dividend stocks should be more than enough to live off of in retirement.
Real Estate or Stocks: Which Investment You Can You Live Off Of? Real Estate or Stocks: Which Investment You Can You Live Off Of? Reviewed by Jhon on 4:29 AM Rating: 5