Introduction

My semi-fundamental analysis of the two common 'growth assets': stocks and real estate. At the current inflation rates (3%), money in a savings account is depreciating. Savings accounts typically offer less than 1-2 percent interest. The best solution is to transfer the cash into 'growth assets'.

Why invest in the stock market?

The common sayings go, 'investing is risk' or 'high risk high reward'. Whatever you resonate with will be your investment strategy. Note that there is no wrong strategy as long as you are honest with yourself. Either be a defender and invest passively or offensive in search of a large reward. I am too cautious with my cash therefore I say 'investing is risk'. I know my mind tricks after experiencing the blackjack and roulette table. I don't need that crutch following me. I'm not trying to win big, I'm just trying to find a better alternative to the savings account. This is a savings account with higher interest, therefore additional risk. Let's go over the basic terminology to build an idea.

What's a stock?

Stocks are representations of a security indicating a unit of ownership in a company. Shares is synonymous, representing unit of ownership. Stock is the more general term. American stock markets tickers are: NYSE and NASDAQ.

What's the stock market?

The stock market is unpredictable as an entity. Distinct industry react differently to time. The .dot com crash in '01 only internet and telecommunication companies felt collapse. Sometimes there are residual effects from one industry crashing. However different industries are generally reacting to different variables in time usually regarding supply chain. During covid we saw all companies reacting similarly but with some more than others. Occasionally a huge variable that exists for all industry will have it's coefficient rise or fall significantly causing very green or very red days. An example of this is the '08 housing market crash which to the stock market collapsing. With this in mind, it's clear that some variables more important than others, so why not focus on the more important variables. The issue is there are variables within these variables. This is why there is so singular reliable formula predicting a companies future price. There are too many variables to factor. I use a feel for the market based on sentiments online but also some data sources such as this and this. Listen to Buffett for more golden insight.

How to invest?

Download an open an account at a brokerage like Schwab or Fidelity and download their app. Explore the software UI and google doubts.

What are the risks?

Worst thing to happen is losing a high fraction of the initial investment. Rarely does it happen except for negligence or ma sudden big news.

What are the advantages?

Compound interest. If you're reading this you know how fast compound interesting works. Einstein apparently said the following:

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Important information to know is largest movements in market occur during a short time window. We won't know the best windows for growth. Common sense tells us it's sensible to evenly distribute portions in regular time intervals.

Why invest in real estate?

Real estate is less practical for someone simply transferring a savings account to a 'growth asset'. Also note that I am not a home owner. However I did some research. Here are my findings.

What is real estate?

Real estate is physically real. Land is a commodity with a finite supply like stock, which means it's price is fluctuating overtime. Real estate also appreciates faster than inflation which means it's a valuable investment.

What is the real estate market?

Demand controls value. Real estate markets involve different industries like stocks. However these industries aren't actually industries, they are cities, states, towns, etc. Based on the demand of the city, state, or town; the higher or lower the value. For example, NYC estate is more valuable than a chunk Lincoln, Nebraska.

What are the risks?

Missing monthly payments hurts the credit score and adds to debt. Your job security is an important consideration.

What are the advantages?

Tax advantages or business incentive like leasing a bedroom or home.

Conclusion

Stocks pose less risk given they don't require recurring payments or add to our debt. It also just so happens that the stock market returns more over an annual average basis than property. Go figure.

Thanks for reading!