Despite differences of opinion as to how best to invest capital, one thing all financial advisers agree on is: only invested money has the potential to earn more money.
Today, the average investor’s dilemma involves determining the best place for his capital. Is it cash, the stock market, the bond market, commodities such as gold or real estate?
Which is the better option and why? Perhaps the answer to this question has more to do with the investor than the investment.
There is a significant learning curve to investing in the stock market, bonds, commodities or land. Most experts agree that the intricacies of the financial markets are more difficult to learn than those that concern property investments.
While the individual fortunate enough to have grown up mentored by Warren Buffett would no doubt invest in stocks, many investors ultimately find it easier to learn the principles and strategies associated with investing in land. Land is a tangible entity and the amount of available land in the world is finite.
While all investments are somewhat of a gamble, most non-Wall Street professionals tend to find land investments to be safer, on average, than stocks and bonds.
Whether investing in land or the stock market, the key to success is essentially the same: to realize a profit, one must invest in the right opportunity. In today’s globalized economy, the stock market in one country is impacted by several factors such as government decisions, trade imbalances and unforeseen events that occur around the world.
The appreciation of land in one’s local community, while not entirely immune from such influences, is far more likely to remain stable, less volatile than and less correlated to global stock market gyrations.
Those putting money into land must also consider their investment goals, as they likely will affect the type of land investments they make. For example, an individual who is debt free and whose retirement is secure might choose to invest in raw land.
This person may regard such an investment as a long-term investment play that will likely result in a positive return on investment that is realized by his children and grandchildren. Such an investment may take decades to show a profit, but can also serve as a hedge against inflation.
Other people seeking to augment their current financial state might focus on properties that yield positive cash flow, such as commercial or residential rental units. Hence, ultimately, these decisions depend on the individual’s appetite towards risk, investment horizon, financial situation or needs and wealth diversification across various assets.