Real Estate vs Stocks: Which is the Smarter Investment? [infographic]


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

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

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The Case for Stock Markets

Stock market investments can be remarkably easy. 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 points out, stocks are much more liquid than, say, a house, and they cost much less money to buy. “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 buying 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 buying 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 — in most cases, a combination of real estate and stock market investments is the best bet for the average investor. Owning both stocks and real estate gives you flexibility and diversity in your portfolio. Managing these assets wisely can earn you handsome rewards over several decades.

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