Real Estate vs Stocks: Which is the Smarter Investment?

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    For many people, building long-term wealth often boils down to a questions of real estate vs. stock markets.

    Overview of Real Estate Online Brokers & Stocks Online Brokers

    FeaturesReal Estate Online BrokersStocks Online Brokers
    💰 Account Minimum$0$0
    💸 Commission FeesVaries by property or service$0-$10 per trade
    💼 Investment OptionsResidential and commercial properties, REITs, real estate fundsStocks, bonds, ETFs, mutual funds, options, futures, forex
    🤖 Robo-AdvisorNoSome offer robo-advisor services
    📊 Research and AnalysisBasic property analysis tools and data, some offer research reports and market dataAdvanced research tools, analysis, market data, and news
    📱 Mobile AppYesYes
    🏦 Retirement AccountsSome offer self-directed IRAs and solo 401(k)sTraditional and Roth IRAs, 401(k)s, and other retirement accounts
    🎓 IRA AccountsYesYes
    📈 Trading PlatformN/AAdvanced trading platforms with customizable features
    📞 Customer ServicePhone and email support, some offer live chatPhone, email, and live chat support
    📚 Educational ResourcesBasic education resources and articlesComprehensive educational resources, webinars, courses, and tools
    🌕 Fractional SharesSome offer fractional ownership in propertiesYes
    🌱 Socially ResponsibleSome offer socially responsible investing optionsSome offer socially responsible investing options
    🌎 International InvestingSome offer international real estate investment opportunitiesYes, with access to international stock exchanges
    💳 Cash ManagementN/ACash management services available
    🔍 Margin TradingN/AMargin trading available
    ⚙️ Options TradingN/AOptions trading available
    ₿ Cryptocurrency TradingSome offer real estate-backed cryptocurrencySome offer cryptocurrency trading
    🛡️ Account SecuritySSL encryption, 2-factor authentication, FDIC or SIPC insuranceSSL encryption, 2-factor authentication, FDIC or SIPC insurance
    💹 LeverageN/ALeverage available
    ⚖ RegulationRegulated by SEC and FINRA in the US, FCA in the UK, ASIC in AU, and EU regulations in EU countriesRegulated by SEC and FINRA in the US, FCA in the UK, ASIC in AU, and EU regulations in EU countries

    Both have shown historical positive returns, and both have been two of the most reliable vehicles for middle class financial growth in the United States for 100-plus years.

    But is one better than the other?

    That depends.

    To illustrate why, we’ve put together this infographic below:

    Real Estate vs Stocks Infographic

    Embed this infographic on your site:

    The Case for Stock Markets

    Stock market investments can be straightforward for investors of any skill level. Just about anyone can choose their preferred stock broker and begin setting aside money each month for investments.

    This can be as passive a process as putting $100 every month into a Vanguard ETF, for example, and letting that portfolio appreciate.

    Historically, stocks have shown returns of about 7 percent annually after factoring for inflation. The biggest challenge for many investors today is simply having the discipline to save a set amount each month to put toward their investments.

    Further, as Sam Dogen at FinancialSamurai.com points out, stocks are much more liquid than, say, a house, and they cost much less money to trade. “If you don’t like a stock or need immediate cash, you can easily sell your stock holdings,” he writes. “If you need to cash out of real estate, you could potentially take out a home equity line of credit, but it’s costly and takes at least a month.”

    The Case for Real Estate

    Real estate comes with its own benefits, though.

    First is the control it offers you. As a shareholder, you cannot meaningfully contribute to the value of a stock; you just have to ride its ups and downs. With real estate, you can do remodeling and renovation works, which can dramatically add to the property’s market value.

    Further, you can rent out the property you own. That takes more active management than a stock portfolio, sure, but it’s certainly nice to get a monthly check from your investment in addition to however much the actual value of it appreciates.

    There are less obvious benefits to trading real estate, as well. As Joshua Kennon at The Balance notes, real estate is something tangible — something that you can see, touch, walk around inside of — and that has psychological value for many people.

    “Real estate is often a more comfortable investment for the lower and middle classes because they grew up exposed to it (just as the upper classes often learned about stocks, bonds, and other securities during their childhood and teenage years),” he writes. “It’s likely most people heard their parents talking about the importance of ‘owning a home.’ The result is that they are more open to trading land than many other investments.”

    It’s up to each investor to decide which is more important to them — the ease of stock investments vs. the tangible control over the value you have with real estate.

    Just remember they’re not mutually exclusive — a combination of real estate and stock market investments provides diversification to investors. Owning both stocks and real estate gives you flexibility and diversity in your portfolio. Managing these assets wisely over the long-term could help you to weather the changing market cycles.


    Header Image by: ©yongheng1996/123RF Stock Photo

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    StockHax strives to provide unbiased and reliable information on cryptocurrency, finance, trading, and stocks. However, we cannot provide financial advice and urge users to do their own research and due diligence.

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