Money kept in the bank should be used for short-term saving or immediate spending. Long-term savings that sit in bank accounts generally decline in value. Economic inflation reduces the spending power of hard-earned dollars that sit in savings accounts for long periods of time. “The buying power of $1 saved today [will be] equivalent [to] about 60 cents after 20 years." To avoid losing purchasing power, it is common to invest long-term savings in a stable market. Despite the commonly perceived risky nature of investments, they will not result in a certain loss of value like savings accounts. Investments are not a lottery, fiscal gains are much more attainable and strategy-based. Regardless of the market in which money is ventured, it is possible to predict the fluctuation of value of the investment. The construction of the new Apple Park in Cupertino, for example, is a strong indicator for the rise of Silicon Valley property values. Despite the pre-existing high prices of homes in Cupertino, the new Apple headquarters will bring even more people to Silicon Valley and allow for the even greater increase of property values in the area. This notion was confirmed earlier this year, when Apple opened the new headquarters to employees. Since the construction began in 2013, the average value of a home in Cupertino surged from 1.38M to about 1.86M in May of 2017. The returns of investment for those who bought homes in Silicon Valley during or before 2013 are still increasing and investors are exponentially gaining profit from these properties.
Participating in the real estate market serves as more than just investments, since property is regarded as a more useful asset than stocks. If a home loses value, the investor is left with property to use, whereas a decline in the value of a stock leaves the investor empty-handed and with less money in his or pocket. The demand for real estate grows with the expansion of the economy and the job market. Economic prosperity drives the increase of rent rates and demand for homes. Real estate also tends to generate a more stable return of investment. The market is generally more predictable and property values fluctuate at a mostly gradual rate. Aside from market crashes (2009 for instance), the real estate market tends to be more predictable than stocks. It is, however, a longer and more complicated investing process than other markets. The extensive approach to investing in this market is a key risk-reducer. The investors will generally have time to track the change in value of the property throughout the process and have enough time to forfeit their intent to invest in a certain property if they notice a gradual decline in its value. In stocks, on the other hand, investments can be made almost instantaneously, but the market is much less predictable so the risk is greater.
While real estate ventures require much more capital than stocks, the investing process allows for a lower risk factor and the overall gradual fluctuation of property values makes this market more predictable than the stock market. Even if a property stake loses its value and selling it will not be financially beneficial, the investor ends up with a home, which is much safer to fall back on than a declining stock.
Keren Blaunstein is a campus correspondent for The Daily Campus. She can be reached via email at email@example.com.