Stock Market vs Real Estate - How Will Your 50L Grow In Volatile vs Stable Asset Class

You currently have 50L in your account. You are probably wondering how to use it and where to grow it now. We've all heard that real estate and stocks are excellent investments. But, should you invest 50L in real estate or the stock market for better returns? Real estate vs stocks? That is the question so many of us want to be answered to grow our wealth.

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Stock Market vs Real Estate - How Will Your 50L Grow In Volatile vs Stable Asset Class

When you mention investing and wealth creation, what is the first thing that comes to mind for most people? Do they immediately respond to the stock market? Most likely. After all, over the last century, the stock market has been one of the most important generators of long-term wealth, with compounded returns averaging 10% per year. If you know what you’re doing, stocks can be a good investment. However, one disadvantage of the stock market is its volatility and unpredictability. When retail investors lost money during the pandemic’s arrival in 2020, the financial markets’ volatility was highlighted. Not to forget recently, the Russia-Ukraine war sent the Indian stock markets into a tailspin and caused investors’ wealth to plummet by more than Rs 10 lakh crore. Yikes!

That is not a place you want to be investing your 50L.

Do not miss High Time To Add Stability To Your Investment Portfolio In The Age Of Frequent Equity Market Crashes.

Real estate is a less volatile investment when faced with uncertainty and volatility. When the economy was still struggling to recover from the Covid-19 outbreak, real estate investing was also less risky. It was a strategy employed by investors in search of more secure and wealth-building assets in the market. Real estate returns are also much more predictable. You have a lot more control over how the story concludes. Real estate also has a low correlation with other major asset classes, which means that when stocks fall, the value of real estate often rises. Real estate is used by the wealthy to diversify their portfolios because it can help offset any major economic downturns. During a recession, stocks may cease paying dividends. However, in most cases, a rental will continue to rent, even in times of economic uncertainty.

Stock market vs real estate: Why should you invest 50 lac in real estate?

There are numerous other factors to consider that make real estate an excellent investment option for many people.

  • Protection Against Inflation: Warren Buffet stated, “it’s not a secret that stocks do poorly in an inflationary environment.” Inflation is occurring at a steady rate, eroding the purchasing power of your money. Inflation typically ranges from 2% to 5%, lowering the purchasing power of cash savings and fixed-income investments. Investing for inflation entails purchasing assets that outperform the inflation rate. Real estate, particularly rental property, is an excellent choice for this. According to MIT Economics, retail and apartment properties are complete inflation hedges. Real estate values rarely fall, and property and rental values typically rise with inflation (depending on where you invest), increasing your returns. Furthermore, if you buy the property with a mortgage before inflation rises, your interest rates will stay the same while your rental revenue gets increased.
  • Property Appreciation: Long-term, there is an increase in demand for real estate. Real estate has an inherent demand, whether it produces a product like coffee or houses and apartment or retail space, so it will always be a good investment. You need land no matter what kind of business you run.
  • You Can Increase the Value of Your Investment: Unless you are a decision-making executive in the company, you have no control over factors that can increase the value of your stocks. You are the boss when it comes to real estate. You can actively contribute to increasing the value of your property to make it more appealing and increase its market value. It benefits both property flippers and would-be landlords. You can buy an undervalued property in poor condition, fix it up, and then rent or sell it for a profit. The best you can do with stocks and shares is to speculate and make an educated guess about whether the value of a share gets expected to rise or fall.
  • Tax Breaks: When it comes to income, taxes are unavoidable. But did you know that there are numerous tax advantages to investing in real estate? If you are a property investor, you may be able to take advantage of some tax breaks, such as the depreciation deduction. Stock investors do not have the same tax advantages and face a higher tax burden when it comes time to sell their stock.
  • Predictable Passive Income: Owning rental property provides you with an immediate and predictable source of income in the form of monthly rental fees. Cash flow is the amount of money left over after deducting your operational expenses from the rent you collect. Investing in residential properties that generate rental income all year is your best bet. For rental properties, most investors aim for a return of 8-12 percent. CRE allows you to earn rental returns ranging from 8% to 10% per year.
  • Lower Volatility Rate: Real estate investments have historically been an excellent inflation hedge, protecting against a drop in the purchasing power of the dollar. While real estate prices in some areas may fall over years or decades, most investors who see this trend will be able to sell their property before losing money. Stock prices can change dramatically in a short period. You can buy more shares if you believe they get undervalued. You can also sell them if they get overvalued. These highs and lows will get smoothed out if you hold well-priced equities for a long time. The volatility of the stock market, on the other hand, can work against you if you want to make money quickly.
  • Leverage: Borrowing money to invest in the highly volatile stock market may not seem like the best idea, but you can borrow large sums of money to finance your real estate investment. Borrowing money to buy a house rather than paying cash is referred to as “leverage.” This is one of the reasons why many investors are drawn to real estate. Banks, credit unions, and private money lenders can all help you get started. 

Now, how should I invest 50 lakhs for regular income?

  • Rental property: Rental property investments increase your income. Additionally, it also helps you build equity. You will eventually be the sole owner of the property. Another benefit of owning rental property? People will always have a need for a place to live. As a result, your investment is financially secure. 
  • Commercial Real Estate (CRE) Investments: Commercial real estate investment is an appealing option. This is due to the fact that irrespective of market volatility, commercial real estate investing yields a steady source of cash flow and asset appreciation. It gets preferred by investors skilled in asset management who do not seek quick financial gain. Commercial real estate, once owned, can be a hugely profitable and consistent source of revenue for the foreseeable future. Commercial-grade property ownership includes office spaces, warehouses, and factories. However, due to the large sums of money required, CRE has remained the arena of HNIs and Ultra HNIs. As a result, middle-income investors have only two options: volatile equities or low-interest fixed deposits.
  • Real estate crowdfunding: Real Estate Crowdfunding can help you earn consistent passive income from the real estate market without requiring a large initial investment. It allows investors to make a lot of money without having to do any work. As a result, investors may be able to generate passive income more easily and affordably. On average, the Realty Developer provides reasonable guaranteed returns of 12 percent on monies invested. As a result, real estate crowdfunding provides a consistent source of passive income. Because the average duration of real estate crowdfunding is 8 to 10 years, consistent income flows can get reinvested in compounding assets for a two-fold profit.

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  • Fractional ownership of CRE: Fractional ownership splits the cost of a commercial property into many portions, allowing retail investors to buy a stake in it. Retail investors can now participate in a fast-growing industry that was previously inaccessible to them by dividing the property cost into smaller units of Rs 10-20 lakh each. Because of the significant profits, it provides, fractional ownership is a popular investment option in India. The combination of rental income and capital appreciation makes it an excellent choice for millennials and their fast-paced lifestyle.
  • Co-living homes: One could argue that renting out natural property is also an option; however, joining a co-working space provides a more dynamic financial potential. While the industry is still ironing out the kinks, such as seasonal occupancy and high operational costs, the potential in this market is clear. When a person rents out their home to a co-living operator, they are guaranteed a high rental income yield consistently, which conventional leasing out may not achieve. A co-living operator may place two to three tenants in one housing unit, increasing the homeowner’s rental income. Co-living options are popular among millennials from 18 to 35 and are either students or migrant working professionals. 

Assetmonk is a trustworthy real estate investment platform with a minimum ticket size of INR 10 lakhs. It is a WealthTech Platform that offers asset-backed commercial real estate investment opportunities in Hyderabad, Chennai, and Bangalore and IRRs ranging from 14 to 21%.

How Will Your 50L Grow In Stock Market vs Real Estate Class FAQ'S:

The most stable form of investment in a volatile market is real estate. Real estate is less risky and has a low correlation to the stock market. It also protects you from inflation.

Yes, you can make money in a volatile market by investing in real estate. Real estate, in comparison to stocks, is less volatile.

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