Invest in equities or real estate?
Both options offer different conditions of liquidity, costs and in the fiscal aspect.
Although today there is a large number of options to make investments in the stock markets, Mexicans in general are more inclined towards the real estate market.
This could be derived from several factors, such as lack of knowledge, greater perception of risk and poor long-term vision.
Although there are different opinions with respect to which investment offers higher returns, statistically the variable income has given average returns close to 10% in the last decades, while the real estate offers average returns around 4 percent. On the other hand, among the advantages offered by investing in equity instruments, there is liquidity, buying or selling an asset is practically within the reach of pressing a button or making a call, while the sale of a real estate may take a while. best of the cases several days to close the transaction.
This issue can be particularly relevant in times of financial stress or crisis, where the real estate market usually dries up, while in equities it will be easier to cover or sell positions.
Additionally, trading in the stock markets usually becomes much cheaper, since you can buy / sell shares with commissions below 1%, contrary to the commissions of up to 6% that are usually in the real estate markets.
Another important factor is the diversification that is achieved, since within the variable income an exposure is offered to diverse sectors and geographies, which in the investments in real estate will be very difficult to have due to the high capital requirements that entail .
Also, real estate most of the time require more effort and work in the sense that you have to be on the lookout for maintenance, rent charges and find new tenants. An investment in equities can be done through a fund, taking away from the investor the job of looking for and analyzing the different investment options, being able to focus on other things.
Finally, and in addition to all of the above, investing in variable income in Mexico has a tax cost of 10% on the real profits obtained (obtained yields-inflation), while the taxes on the gains obtained from the sale of property in some cases can ascend up to 35 percent.
In short, investments in equities, despite being perceived as riskier or more complicated, have numerous advantages that can help complement and diversify a portfolio, as long as you see it with the same long-term perspective as It gives a real estate investment and there is prior advice.
The author is vicepresident Client Strategy in Asset Management BBVA Bancomer.
Source: El Economista / Carlos Llamas Martínez / July 5, 2018.