9 Benefits of Investing in the Stock Market vs Property Investing
The 9 Things That Make Stock Investing Great for Aspiring Investors
Hello everyone and welcome back to my Investing series. In today’s blog, I’ll tell you why I think investing in stocks and shares is great for beginners. During the last two years, I’ve spent a lot of time on researching the UK’s investing scene and I’m writing this series to share my experience with all of you.
DISCLAIMER: Please keep in mind that everything written here is based on my personal experience and research. Despite how much time and effort I’ve dedicated to this, I’m not a financial expert nor am I a professional financial advisor. As always, I’d like to urge you to do your own research and consult with certified professionals before making any significant decisions.
Why Stock Market?
As soon as I realised the importance of ISA investing, I’ve been urging people to get started as young as possible. Compound interest needs time to grow. The younger you start, the more time you’ll be giving it. When you’re 40 or 50, for example, you’ll have significantly less time to grow your accounts and then enjoy the benefits.
Even though I’m a big fan of property investing myself, I know that it’s not for everyone. If you want to invest in properties, you’ll need at least to either have some sort of starting capital or get help from someone (buy-to-let properties require a 25% deposit for example), which tends to turn people off. On top of that, property investing comes with the added hassle of tenant management and refurbishment. Stocks and shares, on the other hand, don’t have such a downside – you can invest as little as you want and work your way to the top from there! My aim with this blog is to explain the main differences between funds investing and properties and show you the benefits of stocks and shares.
This being said, mastering stock investing is not easy – if you truly want to succeed with it, you’ll need to put in a lot of time, effort and dedication!
The Benefits of Investing in the Stock Market #1 – Smaller Sums
One of the best things about investing in shares is their accessibility. Shares are much easier to get into, especially for people who don’t have a large capital built up. This makes shares very attractive and lucrative for just about anyone looking to get into the investing game. Not sure if the whole investing thing is for you? No problem – just dip your toes in the shares investing market and see if you like it!
With properties you need to have a decent sum of money on hand to start. That’s also why so many people suggest that young aspiring investors start with stocks & shares!
The Benefits of Investing in the Stock Market #2 – Home run
Investing in the stock market is by no means guaranteed to bring you huge sums of money super quickly. As a matter of fact, this very rarely happens, even for experienced investors. But it can happen! We’ve all seen how quickly some companies can grow (Google and Amazon being the prime examples). In these cases, many investors have become immensely rich.
Property, on the other hand, can never grow at such a rate (and to this degree). Yes, the property investing market is also fluid, and yes, prices can go up by quite a bit, but you’ll never see returns in the likes of 1000% per year. That’s simply unheard of.
The Benefits of Investing in the Stock Market #3 – Truly passive
Investing in index funds, for example, is completely hassle-free. On the other hand, properties will require a bit of work. And, well, if you’re after the good deals, it’ll take a lot more than that. Believe me – I know! However, you can outsource a lot of this to an agent for a cost.
Whatever you do with your properties, however, they’ll never reach the state of nearly complete automation like stocks and shares.
The Benefits of Investing in the Stock Market #4 – Diversification
When you invest in properties you probably cannot afford to buy hundreds of them. You will generally spend some time on researching the area, looking into the more lucrative deals, and eventually settle your sights on one or two of the properties. When you do buy them, it’s often focused on the same area. This can bring quite a few risks to the table (and is also why I’d suggest that you try and spread your properties around!).
When you invest in stocks and funds, on the other hand, you can (for the most part) invest in virtually any company, no matter where it is located physically.
The Benefits of Investing in the Stock Market #5 – Monitor your exact market value
With any stock or fund, you can quickly and easily log into your online account and see the exact market value of your investment. With properties, it’s a tad more complicated (and that’s an understatement!). Sure, you could get someone to evaluate your property, but this will generally only come into play once you’ve got someone who is prepared to pay for it and you only find this out when you get into selling! Not to mention all of the fees surrounding the process.
The Benefits of Investing in Stocks and Shares #6 – Liquidity
Another fantastic advantage of stocks & shares is that you retain much better control over your funds. If you need your money, you can get it quickly. If you need to buy, you can do it immediately. If you need to sell, you can sell almost instantly.
Property, on the other hand, is illiquid – it makes such maneuvers impossible.
The Benefits of Investing in the Stock Market #7 – Tax-free returns
Another bonus of this type of investing is the tax incentives. Shares and funds can be invested with zero taxes on the returns by using your ISAs. This will ensure that you pay no taxes on dividends, capital gains and interest.
With properties, you’ll need to deal with a whole lot of taxes. At the moment, property investors have to deal with taxes based on revenue instead of profit on property investing. This means that unless you’re using a company structure, you’re going to have a much harder time with your taxes, making it an especially rough start for new investors.
The Benefits of Investing in the Stock Market #8 – Short-selling Stocks
For the more experienced investors, the stock market presents the very lucrative, yet somewhat dangerous option of short-selling their investments. A lot of people have reported great success using this method, but if you’re just starting with investing, maybe you’ll want to leave it for later. You will need a certain amount of experience to be able to gauge the indices well enough in order to make it work. The property investing market (while still being very profitable in the long run) has nothing of the sort.
The Benefits of Investing in the Stock Market #9 – Government incentives
All of this being said, I still think that property investing is very much worth your time as well! Yes, it can take a lot more “maintenance”, and there can be some management hassles involved, but for me, it has been an excellent source of (mostly) passive income for many years now. And that’s the beauty of investing – you can go with whichever type you like and still make a decent profit (if you play your cards well, that is!). If you are interested in property investing and are wondering how to get started with it, I’ve got just the thing for you – my article on stepping on the property ladder.
If you’ve found this interesting and you’d like to learn more about investing in stocks and shares or just the stock market in general, I highly recommend doing research on the side. Please keep in mind that the stock market is quite complex and fully understanding it can take quite a bit of time – it took me two years of research to get to where I am today (and I still can’t say that I’m a “pro”!). Below, I’ve listed a couple of books that I found really helpful in my studies. Check the resources at the end of the blog
Furthermore, if you’re really serious about getting into the investing game and you are afraid to do it by yourself, I’d also recommend that you look for some professional financial advice. Yes, financial advisors can cost you a pretty penny but a skilled advisor will help you avoid a ton of mistakes and help you navigate the market much easier, especially when you’re just starting out!
I just happen to know a very experienced financial advisor that can help you with your finances. Her name is Gemma Herbert, and I’ve had the pleasure of working with her on multiple occasions. I’ve also met Rebecca Harbrow – about a year ago – and can vouch for her expertise as well. If you happen to lack the time to research everything all by yourself, or if you’d just like a bit of guidance on your financial journey, you shouldn’t hesitate to give them a call!
Get in touch with Luke – email@example.com
Get in touch with Gemma – Gemma.Herbert@sjpp.co.uk
Get in touch with Rebecca Harbrow – firstname.lastname@example.org
But remember – no matter which path you choose to take, you shouldn’t delay! The sooner you get started with your investments, the sooner you’ll get to enjoy the benefits!
And what about you – have you tried investing in stocks and shares before? Do you think that I’ve captured the spirit of stocks and shares investing here or did I miss something? Please share your thoughts, ideas and experiences in the comments below – I always love hearing from you!
Until next time – Stay Green and Motivated!