Investing is one of the most important decisions we can make in our lives. Whether it’s for our retirement, a rainy day fund or to build our wealth, the choices we make can have a significant impact on our financial future. But with so many investment options available, it can be overwhelming to choose the right one. In this blog, we’ll explore the differences between passively investing in self-storage versus stocks, and help you make an informed decision about which option is best for your investment goals.
Passive Self-Storage Investing
Passive self-storage investing involves investing in self-storage facilities through a fund or syndication, without actively managing the property.
Here are some pros and cons of passive self-storage investing:
Pros
- Diversification: Investing in a self-storage through a fund or syndication, allows you to diversify your investment portfolio. Rather than putting all your money into one property, you can invest in multiple properties across different regions or countries.
- Steady income: Self-storage facilities generate a steady income stream, making them an attractive investment for those seeking regular cash flow. Unlike other real estate types, self-storage is less volatile and less dependent on market cycles, making it a more stable investment.
- Low maintenance: One of the significant advantages of passive self-storage investing is that it requires no active management. The REIT or fund will handle all the property management tasks, including leasing, maintenance, and repairs.
- High demand: The demand for self-storage facilities has grown consistently in recent years. With people downsizing their homes and more businesses using self-storage for inventory and equipment, the need for self-storage facilities will continue growing.
Cons
- Limited control: With passive self-storage investing, you have little control over the property’s management. You rely on a sponsor or fund manager to make all the decisions, including when to buy and sell properties.
- Limited liquidity: Self-storage fund investments can be illiquid, making it difficult to sell your investment if you need to raise capital quickly. The average holding period for passive self-storage investments ranges between 3-5 years based on the operator you are dealing with.
Stocks
Stocks are a popular investment option that involves buying shares in publicly-traded companies. Here are some pros and cons of investing in stocks:
Here are some pros and cons of Stocks :
Pros
- Potential high returns: Stocks have a higher potential for returns than most other investment options. If you invest in the right company, you could see significant returns on your investment.
- Liquidity: Stocks are highly liquid, meaning you can buy and sell shares quickly and easily. This makes it easier to adjust your investment portfolio as needed.
- Control: Investing in stocks gives you control over your investment. You can choose which companies to invest in, how many shares to buy, and when to sell.
Cons
- Market volatility: The stock market is highly volatile, with prices fluctuating daily based on market conditions. This volatility can make it challenging to predict how your investment will perform.
- Lack of diversification: Investing in individual stocks can be risky if you do not diversify your portfolio. If you put all your money into one company, and that company fails, you could lose your investment.
- Fees: Investing in stocks comes with costs, including brokerage fees, commissions, and taxes. These fees can eat into your returns, reducing your overall profit.
- Emotional investing: Investing in stocks can be emotional, with investors often making decisions based on fear or greed. This can lead to poor investment decisions that could negatively impact your returns.
Conclusion
Both passive self-storage investing and stocks have their strengths and weaknesses. Passive self-storage investing offers diversification, steady income, and low maintenance, while stocks offer high potential returns, liquidity, and control. However, passive self-storage investing comes with limited power, fees, and market risks, while stocks come with market volatility, lack of diversification, costs, and emotional investing. Ultimately, your investment option will depend on your investment goals, risk tolerance, and personal preferences.
Want to learn more about self-storage investment funds and how they could benefit your portfolio? Schedule an investor introductory session.