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Stocks vs Real Estate: Which Investment Should You Make?

Posted: November 27, 2018 at 6:07 pm   /   by   /   comments (0)

When it comes to your investment portfolio, there’s only one winner in the battle of stocks vs real estate… isn’t there? Find out the answer in this guide.

A recent study found that only half of Americans own stocks and only about 63% own real estate.

When it comes to your investment portfolio, you may be outweighing the benefits of stocks vs real estate. You may not feel confident in which one is best for your lifestyle or financial situation. Or, you may be trying to figure out how you can integrate both.

Let’s get into what you need to know.

Pros of Investing in Stocks

More than a century of research on the stock market shows that, despite crashes, and overturns, the process of reinvesting dividends and staying the long course in the stock market has been one of the most significant indicators of wealth.

Active or Passive Options

Participating in the stock market can be as active or passive as you want it to be. Unlike owning a business, you don’t need to manage any major financial decisions. You simply need to research whether the company is right for you.

Furthermore, when you invest in high-quality stocks, you’ll enjoy a profit increase and cash dividends on a regular basis. By reinvesting those dividends, you can generate even more income.


There are infinite stock options, and you can build a very diverse portfolio in whatever way you best see fit. Furthermore, you can start your strategy with just a few dollars.

Unlike real estate, you don’t have to put up substantially more money or take out a loan to get started.

Cash Borrowing Options

Finally, it’s easier to borrow against your stocks than real estate especially if you’ve been approved for margin borrowing.

Cons of Investing in Stocks

The stock market fluctuates on a constant basis. This can attribute to extreme anxiety and distress for investors. Checking the daily trends can be frustrating- even if you’re committed to a long-term strategy.

Fluctuation Stress

Nobody can time the market, though many people think they can. Unfortunately, this distorted thought can lead people to rash decisions.

Studies show that even some of the smartest people are impacted by cognitive biases when it comes to their investment strategy.

Better For Long-Term

For a short-term strategy, the stock market may not be your best bet. After all, a $30 stock can plummet down to $10 or soar up to $60. If you need your money within the next few years, throwing it into the stock market could be detrimental.

Aging Concerns

Finally, if you’re close to retirement age, it’s too volatile to have all your money in the stock market. At this point, you’d want to consider less risky avenues like money market accounts, CDs, or bonds.

Pros of Investing in Real Estate

Real estate represents a tangible investment. It’s a sense of security. Furthermore, many people equate home ownership with a sense of pride and success.

More Control

With real estate, you can be very hands-on in the decision-making process. Unlike stocks, you can show up to the property, run background checks, and manage the land. You can hire the people you want to take care of the estate if needed.

Build Fast Wealth

Real estate also has the power to grow exponential wealth very quickly. If you invest, in say, commercial property or hotels (discover more on that here), you can make a lucrative income stream. If you master the art of ‘flipping homes,’ you can turn huge profits.

Passive & Active Options

Furthermore, real estate also represents a two-fold process. If you purchase your own home, you build equity. The equity becomes part of your net worth and part of your long-term financial plan.

If you purchase a home or business and rent to tenants, you can enjoy either an active or passive income stream. With the active flow, you’ll be managing the property and taking care of repairs yourself. With the more passive method, you can hire a property management company to take care of the work.

Tax Benefits

There are also several tax benefits that include write-offs for:

  • mortgage interest rates
  • depreciation
  • property taxes
  • deferral of capital gains
  • associated travel costs
  • upkeep and repairs

Cons of Investing in Real Estate

Real estate does require hands-on work. You may have to deal with frustrating tenants or surprise costs for repairs along the way. Even if you hire a property manager, you should expect the occasional midnight crisis.

Financial Costs

Real estate can cost a lot of money to get started and to maintain. You have to consider the downpayment in addition to property taxes, utility bills, maintenance and repairs, and other miscellaneous costs. If you don’t have tenants, you risk financial struggles.

Unknown Future Variables

In addition to the costs associated with real estate, property values can also fluctuate over time.

When you own a property, you typically can’t just decide to sell it in a day. It takes time, research, and patience. If a financial disaster strikes (i.e., a recession happens or you lose your job, you’re still stuck with the real estate).

Diversification Concerns

If you put all your money into real estate, you risk limiting your diversification options.

After all, with stocks, you can buy mutual funds, index funds, or even target-date funds that promote diversification. You can’t do that with real estate.

Stocks Vs Real Estate: Final Thoughts

Only you can decide with method works best for you and your family. When selecting between stocks vs real estate, it’s important to consider the pros and cons of each.

Furthermore, many people successfully manage to do both! You just need to understand your risk tolerance and short and long-term goals.

Are you interested in learning how to grow your wealth? Check out our dynamic strategies and courses today!

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