There are advantages and disadvantages to both, but for me I choose physical.
I choose physical because it essentially allows you more control over the product. I can do whatever I wanted with it. Share it, lend it, make back up copies of it, sell it, destroy it, give it to your descendants. Whatever, as long as it is not illegal, it is okay.
With services like Steam however, it is designed so that the companies, especially Valve itself, has more control over you and your stuff. They decide what you can do with your stuff. Heck, they could even take your games away from you without your permission or ban you from using your games. Essentially, you don't own things there. Of course, surrendering control to them means you get convenience in return and many people are okay with that.
In the end, it is up to you.