Stocks VS Real Estate: Which Should You Invest In?

5 min read

stocks vs real estate


If you Googled the “the best type of investment” you will probably notice that there is a clear divide between stocks and real estate. You have tycoons making hundreds of millions of dollars in stocks, and you also have tycoons making hundreds of millions of dollars in real estate. So when it comes to Stocks vs Real Estate, which one comes on top?

Everybody has a preference. Both of these investment classes have their own advantages and disadvantages. I’m going to start off by saying that I personally prefer real estate over stocks. I will explain why in a minute.

Both are excellent ways to build wealth, and beat keeping your money in a bank without it working for you! They are both tried and tested ways of wealth building, and we will explore both in detail. Stocks vs Real Estate, he is what you should consider.

Why Real Estate is better than Stocks

real estate is better than stocks

1. It’s a physical investment

There is something about investing in real estate and being able to physically touch it! I have invested in both real estate and stocks, but having a physical and tangible item like a house has an incredible psychological benefit and sense of pride!

Stocks are virtual. You buy shares in a company, but you can’t touch it. You can look at a number on the screen, but there’s no physical connection. Sure, this might seem like and negligible thing, but the fact that you can walk to a house and touch it gives it a much greater sense of satisfaction. Personally, this is the biggest advantage when it comes to Stocks vs Real Estate.

2. It’s much less volatile

Have you ever woken up one day to hear that the Dow Jones has dropped 20%? I’ve heard that multiple times! Now, have you ever woken up to hear that real estate has dropped 20% in one day? Probably not!

Real estate is a much more stable investment. It isn’t subject to bad days and good days. It typically remains constant over years. When your investment is a stable as real estate, you are not constantly looking at a screen wondering if today the market will crash.

Having little volatility means far less stress. During the March 2020 markets crash, real estate continue to perform excellently. Those investing in real estate didn’t feel anything, Whereas those holding stocks might have lost millions and billions of dollars in the blink of an eye.

3. It has tax benefits

When you own real estate, you can deduct Insurance costs, maintenance costs, and even interest that you would occur from your taxes. This means that if you have rental properties, you get to keep more of your hard earned income.

Whereas, when you make a profit from Trading stocks, all that income is taxable. Bummer! A big consideration when it comes to stocks vs real estate.

So many Financial gurus and millionaires praise real estate in how it saves them money and shelters their income from taxes. For instance, you could sell your primary house and pay $0 in taxes up to $250,000 for a single person or $500,000 for married couples. Where else can you make that much money tax free? Beats me 🙂

4. You can leverage with other people’s money

One of my personal favorites when it comes to real estate is Leverage. When you leverage, you’re basically using someone else’s money to purchase real estate.

What I mean by this is, when you get a mortgage, you are only putting 20% as a down payment. The rest of the money you use to buy that real estate it’s somebody else’s money. If it’s a rental property, your tenants can pay your monthly mortgage payment, insurance, and even taxes and still leave you with cash in your pockets.

If you earn a 15% cash on cash return, then within 5 years you will have doubled your equity. Stocks on the other hand might average 5 to 8% return, much less then what real estate can do.

5. Store of wealth

when you invest in real estate, you are likely protected against events that happened in the world. If an entire country suddenly blew up tomorrow, your rental property will still be there. Whereas, when it comes to the stock market, There might be a devastating effect.

Unlike storing your money in a bank, having a rental property means that your money is safe and a sheltered from inflation. As inflation Rises, so does the value of the rental property. Real estate appreciates over time and this is an excellent store of wealth.

Lastly, real estate can be generational. Once you pass, you know that all that real estate you have invested in can be passed down to your children. They can reap the benefits off the hard work your money has done for you and them. It’s an incredible feeling to know that you will be leaving a legacy.

Why Stocks are better than Real Estate

stocks are better than real estate

1. It’s very liquid

This one takes the cake! If you’re holding on to stocks and need cash ASAP, you can simply just sell it. It’s usually instant and you will have instant access to cash.

I’m like real estate where you have to list your property, show it, get under contract, have inspection, then closed, it takes a much longer time to get cash out of it. A very clear win for stocks.

2. Cheaper transaction costs

With the rise of brokerages like Robinhood, trading stocks is typically completely free. All it costs is the money you put into it. The real estate market on the other hand has very steep transaction costs. You have commission that you pay your real estate agents and ridiculously high closing costs. There is very little you can do when it comes to real estate costs.

3. Potential for much higher returns

If you’re a skilled stock market Trader, you could potentially walk away with extremely high returns! There are stories of people making 100 to 1000% in returns in under 24 hours!

Now of course these are the exception. It’s very rare for it to happen, but it does. Real estate on the other hand is very slow when it comes to you rates of return. Real estate typically appreciates 2 to 4% a year, whereas the stock market scan average 5 to 10% a year. So there is a potentially much higher return if you invested in stocks.

4. Much greater variety

the funny thing about investing in the stock market is the variety of what you can invest in. Not only can you invest in companies you interact with constantly and love, but you can invest in obscure companies that you believe have a future.

There are literally thousands of different companies that do totally different things on the stock market. The stock market gives you access to all these different companies and can broaden your Investment Portfolio. Since investing in real estate is essentially one type of investment, the variety that the stock market has gives you the ability to diversify much more easily. This might be beneficial and protect you against market volatility.

5. It can be completely hands off

With the Advent of Robo investing platforms like Betterment, you can have your stock market investments run on autopilot. You’re never going to be called in the middle of the night when the roof starts leaking, or when the toilet is clogged.

It only takes a few seconds to purchase a stock, and you can automate your stock brokerage app to automatically deposit more money. In the long-term, there is definitely much less of a headache! You could be in the bathroom, all relaxed at the beach while investing in the stock market. What’s a real estate, since it’s a physical entity, you sometimes need to physically be present.

This gives you much more time to do whatever else you want without it taking away your attention and free time. Definitely a plus!

So which should I invest in?

Stocks vs Real Estate, where then should you invest your hard-earned money? That all depends on personal preferences. Now that I’ve listed the advantages of investing in either of these investment classes, it’s up to you then to determine your risk tolerance and preferences.

Like I mentioned at the beginning of this article, I wholeheartedly prefer and primarily focus on real estate. I also invest a bit in the stock market using services like Robinhood and Betterment, but it’s definitely not my primary focus. Everybody’s preferences are different oh, so it’s really up to you.

So when it comes to Stocks vs Real Estate, i’ll pick Real Estate 🙂

Keep track of your finances

Whatever investment class you decide to go with, be it real estate, or stocks, or both, it’s important to keep track of your Investments and your net worth. It’s also important to you set goals that she wants to obtain, so you stay focused!

I personally use Personal Capital to keep track of my finances and analyze my portfolio. Remember, what gets measured improves! So if you want to improve your portfolio, Investments, net worth, or any of your finances, then definitely check out this free tool!

Personal Capital also has the best Retirement Planning Calculator out there, and it uses your real data to give you estimates and suggestions! Can’t recommend it enough!

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