Real estate or stocks? How to secure your financial future!

Real estate or stocks? How to secure your financial future!

The purchase of home ownership in Germany is strongly influenced by emotions. Loud IT Boltwise Around two out of three people in Germany strive to own their own property. This is also reflected in the increased demand for property purchases, which rose by 47 percent in major German cities in the second quarter of 2024. A similar trend can also be observed in the surrounding area and in smaller cities.

Real estate is often viewed as part of retirement planning. They offer security in the form of tangible assets and are less susceptible to inflation. The return that real estate offers can be achieved through appreciation and rental income. However, there are risks, such as loss of value due to market changes or unexpected maintenance costs.

Stocks as an alternative form of investment

Compared to real estate, stocks are a more rational option for investors. Stocks generate high returns through dividends and price gains, but have higher volatility. Both forms of investment offer protection against inflation, as both real estate and stocks are tangible assets. How my investment property As explained, stocks with dividends can be viewed as comparable to investment properties, as both offer ongoing income and potential appreciation.

In real estate, the current return can be found in the form of rental income, while stocks provide investors with dividends. However, real estate offers an additional type of return that comes from depreciation (depreciation), which leads to tax savings. These depreciations usually make up the smallest portion of the total return.

Investment opportunities and market characteristics

The decision between investing in real estate or stocks should be made based on your individual financial situation and long-term investment goals. Experts recommend diversifying your portfolio in order to benefit from the different conditions of the two types of market. This is particularly relevant because both real estate purchases and equity investments involve cluster risks.

While investors can invest in stocks relatively quickly and with less capital, buying real estate usually requires equity capital, especially to cover additional purchase costs, which range between 5 and 16 percent of the purchase price. Transaction costs are also higher for real estate and the process can take up to three months. In contrast, ETF savings plans are available starting from EUR 50 per month.

In the long term, real estate has an advantage over stocks, which have an average return of 8.01% p.a., due to their stable performance in times of crisis. Historical returns on real estate were between 10 and 25% before the interest rate turnaround, especially when 100% debt capital was taken out. In addition, property buyers have long-term security of ownership through the land register entry and can actively influence the development of value.

All of these factors underline the importance of a well-considered investment strategy that takes into account both real estate and stocks in order to optimally respond to different market conditions.