For first time investors, the plethora of investment vehicles and processes can be overwhelming. In this article, we will compare real estate investing and stock investing. We will go through the merits and demerits of each and analyze which investment is suited for what kinds of people. 

Comparing the Management of Real Estate Investment vs Stocks

Real Estate Investing means to purchase a property such as an apartment room or building and thereby gain income from its management or sale. 
Compared to investing in the stock market (which we will discuss later), real estate investing is considered stable and more geared for beginner investors. 
There are broadly two types of income gained from real estate investing and one is "Rental Income" and the other is "Income gained from selling your real estate"

●Income Gaines ＝ Income gained from rent
●Capital Gaines ＝ Income gained from buying a property at a low price and then selling it at a higher price to make a profit

Much experience and knowledge is needed to know how to gauge the real estate property market. That is why for novice investors, it is difficult to know when is the right time to sell. That is why it is recommended to go for the stable income gains gotten from renting out properties rather than "flipping" a property. 

The 5 Merits of Real Estate Investing 

●Stable income 
●Less prone to price fluctuations, maintains its asset value
●Possible to increase your funds by leveraging
●High tax saving effect 
●Does double duty as both life insurance and death insurance

The biggest merit of real estate investing is its stability. 
As long as your rental property is tenanted, you will have a steady and long term source of income. 
Moreover, you can supplement your initial funds by getting a loan, thereby leveraging your investment to get even more income gains. If you can come up with 5 to 10% of the desired property amount, you can start investing. 
In other words, you can have a large asset with a leverage of 10 to several tens of times.
Real estate investing is also good for saving on taxes. Real estate income can be summed up with other income such as salary income, so if you should be in the red on the books, you can reduce income tax and residence tax.
Also, when inheriting real estate, there is an advantage that the inheritance tax is cheaper than inheriting cash. 
If an investor dies or falls into a severely disabled state after purchasing real estate with a loan for investment purposes, the loan balance will be 0 yen. 
Therefore, many people invest in real estate in lieu of life insurance because they can not only manage the remaining real estate to earn rental income but also sell it to earn a profit on its sale. 

The 5 Demerits of Real Estate Investing 

●Looking for properties and getting financing is a very time consuming process
●Assets are not liquid and take time to sell
●Management and maintenance costs such as property tax, management costs, and repair costs are required
●There are natural/man-made disasters as well as human risks

Real estate investing takes time and effort, such as finding a property to manage, obtaining a loan, finding tenants, and making a contract. Therefore it is not geared for investors who want to invest short term. 
Moreover, real estate is not fluid like other investments and requires time to sell. Usually, it takes at least 2 to 4 months to sell a property. 
In addition to repayment of the loan, various costs such as property tax and management fee will be incurred. That is why if there are extended vacancies
it is possible that even though there is no income, there will still be loan payments and other necessary expenses will be incurred.
In addition, real estate investment has risks such as damage caused by natural disasters like earthquakes and typhoons, as well as trouble between residents and neighbors. It is necessary to take measures such as taking out insurance so that you can receive compensation in the event of a natural disaster and tightening the screening of residents. 

Real Estate Investing vs Stock Investing! Compare and Contrast！

Now let's turn our attention to stock investing. 
There are two types of income gained from stock investing: "trading profit" due to a rise in stock price and "dividend income" that is regularly paid by the companies to their shareholders. The most profit comes from "trading profits". Dividends are usually paid every 6 months, however it is dependent on the company's performance and sometimes is not paid at all if the company is doing poorly. 
Stock investing can be done easily and quickly by opening an account and depositing funds into that account. 
Each stock has a minimum purchase price, which is determined by "stock price x number of shares.
Many companies sell their stock at 100 shares per unit, so it is possible to invest from tens of thousands of yen depending on the shares. 

The 4 Merits of Stock Investing

●Assets are very liquid, easy to buy and sell and easy to monetize
●Price fluctuations are wide and so easy to make profit in a short amount of time 
●There are no management fees like with real estate investing 
●Easy to diversify

Stocks are extremely liquid assets compared to real estate, so a big advantage is that they are easy to sell. If the market is still open, you can sell your stocks immediately. In one year, it is entirely possible to sell your stock at a price 2 or 3 times greater than the price you paid for it because of how stocks are so volatile. Moreover, unlike real estate which requires management and maintenance fees, there are no running costs involved. 
Diversification is another merit of stock investing. You can buy shares of several different companies and thus avoiding risk. 
It's nice to be able to choose from many stocks and companies. 

The 4 Demerits of Stock Investing 

●High risk of loss of principal
●Necessity to keep a constant watch of the stock market due to price fluctuations
●Can’t cover profit and loss
●Low leverage potential

Due to the volatile nature of the stock market, there is a high possibility that the returns will be lower than what you initially invested.  Moreover, if a company that you invested in goes bankrupt, then the shares you hold become worthless. That is why it is important to constantly monitor stock prices and make sure that you aren't dealing with a loss. 

Also, unlike real estate, investing in stocks has the disadvantage that profits and losses cannot be totaled even if the books are in the red.
Another major disadvantage of investing in stocks is that you cannot make leveraged investments。
By conducting margin trading, you can make an investment with a leverage of up to 3.3 times, but in that case you will not be able to obtain a loan from a financial institution。
Therefore, it can be said that stock investment is an investment method with less leverage effect than real estate investment. 

Which type of investing is for you? Real Estate or Stocks? 

We have discussed the merits and demerits of real estate investing vs stock investing. And so, which type is better for you? 

Real Estate Investing is for these types of people: 

●Those who want to steadily build assets in consideration of old age
●Those who want to make leveraged investments
●Those who want to invest with as little effort as possible

Real estate investing is recommended for those who want to leverage and desire a consistent, stable investment. Real estate is not prone to huge market fluctuations and is considered a safe investment. 
In addition, real estate investment can be entrusted to a property manager after purchase, so it is an investment method for people who want to earn income with as little effort as possible.

Stock Investing is for these types of people : 

●Those who want to start investing from a small amount
●Those who want to easily trade online
●Those who want to make an investment that is easy to liquidate

Stock market investing is recommended for those who want to easily start investing from a small amount or those who want to invest in highly liquid assets. 
Stocks are an easy way to get started, but they are characterized by their high risk and the need to keep an eye on trends. 
It is important to understand the demerits of stock trading before investing. 

In Conclusion

In this article we compared real estate investing vs stock investing and discussed the merits and demerits of each.  Investing is an essential way to increase your own wealth and build your assets. It is also important to think about investing in your nest egg and putting money aside for retirement. Do your research now to figure out what kind of investments are right for you and your circumstances as well as your personality and lifestyle.