Stock Investment vs Property

Questions like this, "which investment is more profitable, property or stocks?" it's like comparing chocolate or vanilla, or Aston Martin or Bentley. Indeed there is no answer that is really right for questions like that because it all depends on the desires, satisfaction and style of each.

Many stocks have not moved within ten years, but sometimes the profits from property investment cannot beat the returns on leading stocks, such as Astra, Sampoerna, Gudang Garam and others, especially if the dividends earned are reinvested. The answer to all of this is, making a choice is not that easy.

1. Property.

Investing in property means you buy real land or buildings. Some properties require monthly maintenance funds, for example land or buildings that have not been rented or are about to be sold but have not been sold.

While other properties actually make money, such as apartments, houses and shophouses that are rented out. The tenants will pay you every month, the money you set aside partly for maintenance costs, partly for profits.

2. Stocks

When you buy stock, it means you own a small part of a company. The company can operate in various fields, it can be food manufacturers, motorized vehicles, commodities and so on, the most important thing is that you will get a share of the profits for each share you own.

If a company has 1 million shares, and you own 10,000 shares, then you have a 1% share ownership in that company. The Indonesian Stock Exchange (IDX) makes it look not as simple as this.

The company's board of directors, who are elected by shareholders like you, are tasked with overseeing and running the company's operations. They also decide how much of the profit portion will be used as an investment and the portion that will be distributed to shareholders, aka dividends.

Advantages and Disadvantages of Investing in Property and Stocks

Pros of Investing in Property

Investment in property is mostly done by all levels of society, because many people grow together with various knowledge about land, houses and others. Everyone must have often heard advice from their parents about the obligation to own a house. As a result, many people choose this investment instrument over other instruments.

Buying a property means you are getting something real. You can feel it, live in it, point to the spot saying "That's mine." For some, it is psychologically important.

Fraudulent actions are more difficult to do in the property business when compared to stocks, especially if you have a lot of information about the industry. You can directly take care of your property, starting from maintenance while choosing the tenant. In contrast to shares, which must be handed over to the management of the company's directors.

Going into debt to buy property tends to be safer than buying shares that only rely on margin profits.

Disadvantages of Investing in Property

When compared to stocks, property requires more supervision. You have to be prepared to receive calls in the middle of the night if anything should happen, from leaking water or gas pipes, falling fences and so on. Even if you have hired a

supervisor to look after your property, occasionally you still have to go directly to the field.

If it is not occupied or rented out, you have to set aside quite a lot of money for maintenance costs. In addition, there are still taxes, insurance, cleaning and security money.

The increase in property prices is prevented by inflation, even though it seems to be increasing from year to year but actually the 'real' value is not that high because it is hampered by inflation every year. For example, you buy a house of Rp. 300 million, use it yourself for Rp. 60 million, and borrow the remaining Rp. 240 million from the bank. If a year later inflation occurs 3% because the government prints more money, it means that the value of the rupiah has decreased even though the price of your house has become IDR 309 million. The 'true' value of your property doesn't change, only the number needed to buy it goes up. Because you only invest IDR 60 million and get a profit of IDR 9 million, roughly the profit is around 15% per year. If you deduct 3% inflation, then only 12% profit, not deducting monthly maintenance costs. The yield portion is still far below stock investment.

Advantages of Investing in Stocks

Facts and research prove that despite frequent ups and downs, buying stocks, reinvesting dividends and holding them for long periods of time is already the most effective money machine. Nothing can beat the ownership of shares in a company, even if the portion is not large.

Unlike a small business that you have to build and manage yourself, with share ownership in a company you don't need to get involved directly, except to do research on which company suits your tastes. There are professional hands that take care of your company. You will get some of the company's profits without having to work every day.

High-quality stocks not only record profit growth each year, but add dividends as well. Thus, every year you will get higher and higher cash in line with the growth of the company. If you continue to invest the dividends you get each year, then this investment will become a money machine without you having to do anything.

It's easier to diversify in stocks than in property. Through mutual funds, you can invest as little as IDR 1 million per month in companies that are still growing. Broker fees are also cheaper than ordinary shares. Unlike property that requires funds and costs are quite high.

Stock investment is more liquid than property. In trading time, you can sell and buy shares multiple times in just a matter of seconds. In contrast to properties that take days or even months to find sellers who are interested, or even years and there are no interested ones.

Disadvantages of Investing in Stocks

Even though it has been stated that in the long term investing in stocks is far more profitable than other investments, there are still many investors who often get carried away by emotions, are undisciplined and only chase quick profits. One example: during the 2007-2009 crisis, when all stock markets in the world crashed, many well-known financial advisors asked their investors to immediately release their shares, even though this was actually the right moment to buy shares at a low price.

In the short term, stock prices fluctuate greatly. For example, if you have shares worth Rp. 4,000 at the moment, within a few days the shares could go down to Rp. 1,000 or even go up to Rp. 8,000. If you know very well the condition of the company whose shares you hold, then you don't have to worry at all. You even have the opportunity to buy more portion of the shares when the price is low, or release some when it feels too expensive.

Picking the wrong company coupled with flat market conditions, in a few years your stock price doesn't seem to grow at all. You can overcome this by reinvesting the dividends given by the company, thus holding more shares and the opportunity to get higher profits is wide open when the shares suddenly soar.