Real estate vs. Stock market

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YourMD

YourMD

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I've just started looking into real estate and stock market investing. I'll admit I don't know much about either but have been reading up on these topics for about a month. Which route would you recommend for a beginner? I also would like to invest my own money using online trading sites like options house. Is this the best way to stay hands on? Thanks!!
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If you don't know much about either, I'd recommend mutual funds with low fees with a company like Vanguard.

To make money in hands-on real estate, I'd highly recommend being knowledgable of the field.
 
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Great read. Thanks guys!
 
I just don't think real estate is diversified enough.

With real estate, you are putting a lot of money into a single piece of property in a very specific location. What happens if the neighborhood takes a backwards slide? If someone gets murdered next door? If the area goes out of vogue? If a specific state increases property taxes? If you're investing in real estate to have renters, payment may be variable. Finding a good tenet may be variable. Your property may sit empty for a period of time. You have to pay for upkeep, which amounts to a rather high expense ratio. Same thing with property taxes.
 
Investing in stocks, through index funds, is definitely the place to start. No reason not to add real estate later if you want. Lots of great benefits to both.
 
freaker said:
I just don't think real estate is diversified enough.

With real estate, you are putting a lot of money into a single piece of property in a very specific location. What happens if the neighborhood takes a backwards slide? If someone gets murdered next door? If the area goes out of vogue? If a specific state increases property taxes? If you're investing in real estate to have renters, payment may be variable. Finding a good tenet may be variable. Your property may sit empty for a period of time. You have to pay for upkeep, which amounts to a rather high expense ratio. Same thing with property taxes.
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This is true, which is why it is important that one researches the property before hand. It would mean taking an active role in the investment process. However, a mutual fund is better for those who don't want an active role and put the investment into another person's hands.
 
i'm a 4th year and am starting to think about budgeting since i'll finally have my first real income. in the past, i've irresponsibly just gotten my loan for the semester and saw it as a huge chunk to slowly spend until my next loan disbursement.

i've also saved some of my summer jobs from college in money market (around 8k at 1%) and played the stock market. last year, i started off at around 7.5k and am currently at 10.6k after a hot year on the market (beating the s&p at the clip of about 43% ytd)

what are some ideal ways to split your residency check for saving? is there much to save there, or do you just pay interest on loan?
 
hayek said:
What index fund do you recommend?
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First decide on goals, then on asset allocation and savings rate, then choose individual investments like index funds. Skipping straight to step 3 makes it very difficult, but if you have done steps 1 and 2, then Step 3 is cake.

One of my favorite index funds is the Admiral Shares of the Vanguard Total Stock Market Index Fund. You get to own every US company for just 5 basis points (0.05%) per year. There are dozens of other good, low-cost, index funds for the various asset classes you might wish to have in your portfolio.
 
I would take a few months and read to get a better sense of investing. Here's several of my favorites and would read them in this order:

1. The Boglehead's Guide to Retirement
2. William Bernstein (physician) - The Four Pillars of Investment
3. Rick Ferri - Asset Allocation
4. Larry Swedroe - The Right Financial Plan

Spend a few months really absorbing the messages in these books and you'll be off to a great start. You'll also get a lot more out of White Coat's blog after reading these books.
 
YourMD said:
I've just started looking into real estate and stock market investing. I'll admit I don't know much about either but have been reading up on these topics for about a month. Which route would you recommend for a beginner? I also would like to invest my own money using online trading sites like options house. Is this the best way to stay hands on? Thanks!!
Click to expand...


Hello YourMD,
Because you are a medical professional and presumed high income earner, owning Real Estate can be a great investment choice not only for realizing capital gains and rental income, but for tax advantages as well.
Here are a few reasons that I own a few rentals as part of my total investment portfolio:
- Depending on where you buy, you can in short time realize notable appreciation in value on your real estate holdings. Some markets last year in 2013 (especially those in recovery) have experienced appreciation of 7% or more. Also despite the gains (and losses) experienced in real estate value, look into the long term statistics of real estate ownership to see that there is ultimately an upward trend.
-Ideally you can experience positive monthly rent cash flow.
-You can often benefit from the tax the advantages of owning investment properties by setting up a depreciation schedule, by writing off annual interest paid, points incurred to acquire financing, capital improvements to your property. Ideally by writing off these expenses, this would save you money and let you keep more of your income by reducing your overall tax obligation.
-You can wait to sell your real estate at a time when your tax obligations are hopefully lower someday in the future. Perhaps later in life you can do a 1031 Exchange to sell your Real Estate and consolidate the equity you have gained over the years into one property.

Pick some potential real estate investments, find a knowledgeable person in the field, get some mortgage financing estimates and then consult your CPA to crunch the numbers to see if this is a good option for you.

*As far as managing your own investment properties go, it’s not for everyone. If you want to own real estate without having to deal with the hassles of being a landlord, consider getting a property management company to do the work for you.
Good luck!
 
Thank you very much for this insightful post. I'll give your ideas some consideration.
 
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