Making sound investment decisions can be quite challenging, especially when you don't know what to invest in and how to do it. But, the interesting fact is that a majority of people out there think of only two things when it comes to investing- real estate and stocks.

So, which one is the better option between these two investments? The truth is that there isn't a specific answer to that question because the final investment decision usually comes down to the investor personality and preference.

Both of them have their unique advantages and disadvantages, and it takes a deep understanding of your preferred investment option to make a profit. To help you make an informed decision on real estate vs. stocks, we look at each one of them and highlight the pros and cons. Read on to find out everything that you need to know.

Real Estate
When you decide to invest in real estate, it means that you are buying a physical property or land. However, some real estate assets cost you a significant amount of money every month you hold it.

For instance, think of a parcel of land that you buy with the idea that you will sell it one day at a profit, but you have to establish a fund that will cater for land taxes and maintenance. Real estate has always been the traditional form of investment that many people out there still prefer.

Pros of Investing in Real Estate
There are many benefits of investing in real estate. First, real estate is always perceived as a more comfortable investment option for lower and middle classes because most of them grew up exposed to it.

It is like most of these people heard their parents talk about the importance of being a homeowner and even a landlord. Real estate isn't susceptible to inflation, and it has always been perceived as the surest way of protecting your money against loss in the event of unprecedented inflation in the economy.

Furthermore, it is much more difficult to be defrauded in real estate, and you also get to enjoy a wide range of tax benefits.

Cons of Investing in Real Estate
Just like any other investment, real estate has several drawbacks. The most significant disadvantage is that your investment is illiquid. This means that when you invest in land or property, you can't sell it right away.

You have to hold the asset for many years before you realize its profit potential. In addition to that, property prices tend to fluctuate, and sometimes, the prices depreciate or stay flat.

It is also quite hard to diversify if you choose to invest in real estate since you're putting all your money in a single property. Lack of diversification increases the risk of suffering huge losses should things go the wrong way.

Investing in Stocks
Investing in stocks is quite different when compared to investing in real estate. When you buy shares of stock, you are basically purchasing a certain fraction of a company. When the company makes a profit, you are also entitled to a cut of it for every share that you own.

However, during hard times, your cash dividends and returns may diminish as the profit generated by the company drops. To be successful in stocks, you need to have a deep understanding of the pros and cons of stocks.

Pros of Investing in Stocks
One of the top benefits of investing in stocks is that they are highly liquid and easy to sell. They are also flexible and can easily be transferred into a retirement account. Although stocks are susceptible to inflation, they are far much better than real estate during the first few years.

High-quality stocks usually increase both their profits and cash dividends every year. This means that every year that you hold the stock, you get a bigger check compared to what you got the previous year.

It is also much easier to diversify when you choose to invest in stocks. Lastly, borrowing against your stocks is far much easier than borrowing against real estate.

Cons of Investing in Stocks
One of the biggest disadvantages of investing in stocks is that stocks can be highly volatile, especially when the company or economy is facing challenges. Therefore, you are at a greater risk of running into losses.

Also, some financial experts say that stocks are emotional investments, and your decisions in the market can be irrational. Bankruptcy is also a key concern for stock investors since your entire investment can be dissolved in a second.