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Why investors prefer stocks over real estate?

Time and again, the investors’ community gets drawn into an argument about which investment is better – stocks i.e. investing in equity markets or real estate? Experienced investors know that picking between the two is like choosing between VVS Laxman and Rahul Dravid. Both forms of investments have their own sets of benefits and drawbacks.

Obviously, there are also unique aspects to stocks and real estate investments. Introduction and expansion of technology in real estate market is also attracting investors. Similarly, High Frequency Trading backed by technology and scalping trading supported by data science have simplified investing in stock market.

Despite this, investors (whether experienced or amateur) tend to lean more towards stocks. Here’s why:

1.    Less expensive: The property rates in a metro like Mumbai are always soaring. Unless you’re one of the uber rich businessmen, purchasing a property in a decent part of a city can be quite an expensive affair. Moreover, even if the property is unoccupied, you have to pay taxes, utility charges, maintenance charges, insurance and more. On the other hand, trading in stocks is becoming easier and cheaper by the day. Holding a stock in an idle portfolio would incur an annual maintenance charge at the most.

2.    Higher Liquidity: The need for instant cash can arise anytime without any warning. When you hold stocks, you can sell them off at a moment’s notice in case of emergency or the stock becomes unattractive. Compared to stocks, selling off a property is a longer and potentially expensive process.

3.    More Options: With every passing day, new modes of investing and trading are cropping up. These investment mediums are aimed at providing investors with more stock options and also an increased ease of investing. You can diversify your portfolio by adding different investments. When it comes to real estate, space crunch and sky-high prices make it difficult to get your pick of property.

4.    Invest how & when you want: While investing in real estate, you have to spend a lump sum amount. The lump sum payment of the down payment itself is often astronomical. In the stock market, you have the opportunity to plan your own investment with Systematic Investment Plans. In this way, there is no need for you to time the market or to invest a lump sum amount in one go. Additionally, you can take advantage of small market movements with high-frequency trading or make quick, small profits with scalping trading.

5.    Increased use of technology: As mentioned above, incorporation of technology has given way to new modes of trading like high-frequency trading and scalping trading.

•    High-frequency trading is a mechanism wherein an automated trading platform uses algorithms to analyse markets. High-frequency Trading allows investors to spot emerging trends and transact large number of orders at high speeds in fractions of seconds.

•    Scalping Trading is a trading strategy specializing in making profits from small price changes. Since one large loss could nullify all the small profits, traders need to have a strict exit strategy. Data science and analytic tools play a major role in scalping trading.

More and more individuals have started understanding the value of investing as a stepping stone towards financial independence and equity market is surely leading in avenue.