Southern CA Real Estate vs. Stock Market Investments

Investors commonly evaluate the difference between investing in real estate versus the stock market and whether one is better than the other. The reality is, it’s simply not a straight forward comparison because in both types of investments, the risks and returns can really vary greatly. It’s like comparing apples to oranges. With each breed of apple and each growing season, the results can be different. The same goes for oranges. So, to understand the difference between Southern CA real estate vs. stock market investments, let’s take a closer look at each.

Southern CA Real Estate Investments

There are many different aspects to real estate investments:

  1. Tangible Asset – Real estate is a physical investment. It is quite unique in that respect. You are buying land and physical structures upon them.
  2. Active Investment – You don’t simply purchase real estate and hold it. It’s more of an active investment with ongoing costs, maintenance responsibilities, and decisions to make. Of course, you can obtain assistance with managing those tasks.
  3. Improvements – Unlike other types of investments, there is the opportunity to change the quality and value of your real estate investment. You can make improvements through repairs and renovations.
  4. Income Potential – Real estate can also generate recurring income (i.e. rental properties). The amount of income is tied to the quality of the real estate investment and its location.
  5. Location Specific – Real estate is very location-specific. Values and trends can vary from town to town, or neighborhood to neighborhood.
  6. Market Influence – Like other types of investment, the overall market and economy can impact the value of real estate.
  7. Predictability – Although the real estate market may rise and fall and go through other cycles, it is generally predictable overall. When held long enough, SoCal real estate investments historically follow an upward trend.

Stock Market Investments

When you invest in the stock market, you are investing in companies. Those companies can be in a wide range of industries, and have very different valuations, structures, profit margins, etc. Although shareholders may have some level of “voting” power at times, such as how to reinvest profits, the stock market is mostly a passive investment. You do not control or influence day-to-day operations and decision-making. You rely on publicly shared information to make predictions and investment decisions. Prices can rise or fall based on any number of factors, so it’s much more of a gamble.

Comparing Southern CA Real Estate vs. Stock Market Investments

How can you compare real estate vs. stock market investments when they are so different? Ultimately, both real estate and the stock market can offer great returns, if you make the right decisions. For example, investors who purchased when the real estate market was at its lowest point reaped great rewards when it bounced back to historical highs. Likewise, investors who chose stocks such as Microsoft and Wal-Mart at the right time enjoyed substantial earnings. The potential is available in both real estate and the stock market.

The decision on what to invest in ultimately comes down to your preferences. Do you prefer a passive investment or an active one? Would you like decision-making power and control over its potential value? Do you want recurring income opportunity?

When considering Southern CA real estate vs. stock market investments, you can actually do both! Why limit yourself to one or the other? Participating in both allows you to benefit from what they both have to offer and to diversify your investment portfolio. So although you should understand their key differences, your investment decisions do not need to be mutually exclusive.