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
|Features||Real Estate Online Brokers||Stocks Online Brokers|
|💰 Account Minimum||$0||$0|
|💸 Commission Fees||Varies by property or service||$0-$10 per trade|
|💼 Investment Options||Residential and commercial properties, REITs, real estate funds||Stocks, bonds, ETFs, mutual funds, options, futures, forex|
|🤖 Robo-Advisor||No||Some offer robo-advisor services|
|📊 Research and Analysis||Basic property analysis tools and data, some offer research reports and market data||Advanced research tools, analysis, market data, and news|
|📱 Mobile App||Yes||Yes|
|🏦 Retirement Accounts||Some offer self-directed IRAs and solo 401(k)s||Traditional and Roth IRAs, 401(k)s, and other retirement accounts|
|🎓 IRA Accounts||Yes||Yes|
|📈 Trading Platform||N/A||Advanced trading platforms with customizable features|
|📞 Customer Service||Phone and email support, some offer live chat||Phone, email, and live chat support|
|📚 Educational Resources||Basic education resources and articles||Comprehensive educational resources, webinars, courses, and tools|
|🌕 Fractional Shares||Some offer fractional ownership in properties||Yes|
|🌱 Socially Responsible||Some offer socially responsible investing options||Some offer socially responsible investing options|
|🌎 International Investing||Some offer international real estate investment opportunities||Yes, with access to international stock exchanges|
|💳 Cash Management||N/A||Cash management services available|
|🔍 Margin Trading||N/A||Margin trading available|
|⚙️ Options Trading||N/A||Options trading available|
|₿ Cryptocurrency Trading||Some offer real estate-backed cryptocurrency||Some offer cryptocurrency trading|
|🛡️ Account Security||SSL encryption, 2-factor authentication, FDIC or SIPC insurance||SSL encryption, 2-factor authentication, FDIC or SIPC insurance|
|💹 Leverage||N/A||Leverage available|
|⚖ Regulation||Regulated by SEC and FINRA in the US, FCA in the UK, ASIC in AU, and EU regulations in EU countries||Regulated 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?
To illustrate why, we’ve put together this infographic below:
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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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