InvestorQ : What is the better investment option for salaried people - the stock market or real estate?
Gauravi Patel made post

What is the better investment option for salaried people - the stock market or real estate?

Purvesh answered.
2 years ago

To be fair, your investment decisions should be made basis your financial profile, risk profile, and taking into account your short-term and long-term goals. It would be foolhardy to generalize investment decisions without having these inputs. However, since you have asked, I’ll answer it by taking a broad view.

Real-estate investment is a long-term commitment. It not only requires up-front capital but also requires a lot of time and patience in choosing the right real estate option for you. You can invest in land, commercial property, residential property, etc. However, it is a great avenue to generate passive income and can also generate considerable returns in the long term provided the value increases meaningfully. However, investments are subject to risks and there may be times you lose money as well. Investment in real estate is a time consuming and financial draining exercise, and opt for it only if:

a) If you have considerable income that can be locked for a long time without it affecting your lifestyle
b) You have time to wait for prices to begin rising 
c) You have sufficient liquidity and will not require to liquidate this asset during emergencies.

Now, coming to stocks, they have their own advantages and disadvantages. The one advantage stocks have is that you don’t need to know stock markets in and out to participate in the equity markets. There are various passive options like investing in mutual funds, index funds, ETFs, NPS, etc which will give you the desired exposure to stocks without having to go through the time-consuming action of choosing individual stocks. And these avenues are helmed by people with significant knowledge and experience in these markets.

Stocks are a lot more liquid than real-estate. It can take you months to years even to sell a house if you are unwilling to slash the price. Stocks, however, can be redeemed instantly, and money will be credited to your account instantly. And there is no requirement for huge upfront capital to make significant gains in stocks. 

However, I would like to reiterate that it all comes down to your investment objective. If you want to own a house, then investing in real estate makes more sense If you want to invest purely for the sake of wealth creation, then stocks are a better option over the long run.