Should I Sell My House To Buy Stocks?

Shifting from one asset class to another will depend on your immediate and long-term financial goals

When it comes to investing, it is always better to follow the wisdom of not putting all your eggs in one basket. If you have invested large sums in a property, you may be thinking about diversifying your portfolio. It brings up the question whether you should sell your house and use the proceeds to buy stocks, mutual funds, etc. To answer that, here are some important aspects to consider.

Compare returns – If we look at historical data, it can be seen that stocks and mutual funds have delivered higher returns than appreciation of real estate properties. If one of your primary goals is to achieve higher returns, you can sell your house and invest in stocks. This is especially true when your property may not be generating the desired rental income.

Lifestyle goals – When you sell your investment property, you can access a large sum of money. While investing most of it in stocks or mutual funds, you can set aside around 20% for your personal needs. This balanced approach will ensure a happier and more fulfilling life.

No worries about property tax, maintenance – When you sell your investment property, you no longer have to worry about things like finding tenants, carrying out repair and maintenance works and paying insurance, property tax, etc. Selling your house can considerably reduce the overall stress that you may be experiencing. And the money you save can be redirected to buying stocks and mutual funds.

Easy inheritance – If you want an easy inheritance for your loved ones, selling your house and investing in stocks can be advantageous. Properties have been known to attract legal disputes as there could be differences in opinions between the heirs. For example, some may be in favor of selling the property whereas others may plan to make it their home. In comparison, stocks and mutual funds can be equally divided among the heirs without any form of disputes.

Book profits – If you are lucky, the property prices in the area may be at their highest levels. In that case, selling your investment property can fetch you good profits. If the property prices are not so great right now, you can probably wait a few years before selling the property.

When not to sell your property to buy stocks?

While selling your house to invest in stocks has multiple benefits, there are some drawbacks also. For example, you will be losing an asset that is considered among the safest options available. When you sell your house, you will also have to pay capital gains tax. If you have hired a broker to sell your property, you will also have to pay the broker’s fee. Keep these factors in mind when you are planning to sell your house and invest the proceeds into stocks, mutual funds, etc.