Real Estate vs. Stocks: Why Choose One Over the Other?

Daniel Penzing
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Choosing Real Estate over Investing in Stocks

Stability: Real estate investments provide cash flow and can be a hedge against inflation.

However, you do have to pour your money into them every once in a while.

Return on Investment (ROI): Real estate is a market where you can buy low and sell high.

It is the most reliable way to generate income from your money in principle. The ROI of real estate also varies according to the location in which you invest and the current state of the city. There was once a time when one could make a really good return on investment in the real estate business, but not any more.

Real Estate prices are at an all – time high and this is forcing the companies to depend more on the long term and good performance. Against this expensive rate, for companies to pay for the maintenance and other charges, long term lease agreements are created with the tenants.

Real Estate is a diversified market. You can invest in property, construct it, rent it, and sell it over again at any time. It is not a risk free investment, but it is still a good investment. Some serious risks can be foreseen like the tenants not paying or unauthorized feeding of the animals by the neighbor etc.

Any rental income and capital appreciation is taxed at 20%. In the stock market, you can expect a 4-15% return on your investment. Now you know that there is a big difference between the returns of the two asset classes.

Your investment capital in the stock market will also be taxed on an annual basis.

With capitalizing each month, it can still be considered as an investment that is profitable. Timing matters a lot in this investment and many newbies fail to understand it.

Degree of Risk: Actively managed real estate provides better returns and lower risk than stock market investing.

|||Investing in real estate is comparatively safer than stocks.||

Similarly, because of the complexities involved in stocks, and because of ever-changing developments in the value of stocks, the return on investment in stocks is not sure. It is difficult to predict the returns from individual stocks.

|||It doesn’t take any skill to buy stocks, and anybody with an internet connection can.||

It is easy to buy and sell stocks on the internet, but it’s not easy to make a profit in the stock market. Many people fail at stock market investing because they are unable to determine which stocks they should invest in and when to sell them. To make a successful investing in stocks, you need a good 'ear' to listen to what is being said in the market. You have to know of the many market changes which potentially can affect the stocks you buy. You have to be able to determine the next big thing.

|||Real estate investments are booming in the US.||

A real estate in US is a sure shot way to make money, provided that you are willing to grab up any property which comes in your way. These days, everybody wants to invest in real estate, as the returns on real estate investment have been quite impressive.

Tax Advantages: Real estate investing provides unique tax advantages.

The capital gains one can take advantage of when investing in Real Estate are much higher in comparison to stocks. Unlike traditional investments in stocks, Real Estate Investors have a chance to write off property taxes, mortgage interest, repairs and all other property related expenses. Tax deductions can boost the after-tax income earned from a real estate investment.

Leverage: Real estate investors can use leverage to build wealth.

There are many ways this can be done. You can leverage your own money using cash borrowed from a bank or issuing a hard asset-backed loan. You can leverage other people’s money, such as family members, friends, and others you meet that share your investing goals in exchange for a piece of the action. You can build wealth by combining your money with other money in order to maximize the success of the venture.

Inflation Hedge

One of the best things about investing when the economy is in its boom times is that it shields your money from inflation. Both stocks and real estate appreciate when the government monetary policies are inflationary. Thus, when inflation is high, you can use your money to buy stocks or real estate. This makes these investments a hedge against inflation.

Control of Investment

If you want to invest in a rock band, go ahead. Buy as many copies of their CD’s as you want and hope that its popularity grows steadily over the next few months.

Your niece just started her own business, and you can’t wait to invest. Buy as many items as you want to help her reach her fundraising goal.

Stocks and shares are a bit more complex than some of the pass-times we’ve mentioned. You don’t buy just a few copies or items of the product. You buy the entire company, and you control it. That’s the beauty of investing.

When you invest in stocks and shares, you can choose the companies you invest in. Your goal is to find companies that are doing well and invest in them; you want them to do better and better on the stock market.

When you manage companies, you can make a lot of money. You can also end up making a few mistakes too. But, either way, you are in control, and you take responsibility for the outcome. That’s the difference between investing in stocks and shares and real estate.

Our Recommanded Real Estate Services

Choosing Investing in Stocks Over Real Estate

Real estate is not all the same. Like stocks, there are many types of real estate. The choice between stocks and real estate depends on which type of investment (or types of real estate) you value more. Real estate provides a source of income that can go on for years. Stock market profits are generally realized in a year or less, through dividends, sales, or trading. Real estate becomes more valuable over time, as well, increasing in price as more people buy and sell. Stocks and mutual funds normally go in the opposite direction, becoming less valuable and often losing money.

Both real estate and stocks provide access to the vast wealth of the whole world. Real estate includes locally owned real estate, which generally won’t influence the world market price. However, it does allow you to buy at more favorable prices than outside investors, since you negotiate directly with local sellers. Stocks are far more popular in terms of circulation, since only those with access to them can buy them.

You can also access the investment potential of the real estate from the comfort of your own home, as long as you have access to the Internet. Investing in real estate through stocks and mutual funds is a bit more inconvenient. You have to be physically present to buy and sell stocks and to sign the paperwork involved in purchasing mutual funds.


Your investment portfolio should consist of several investment types. This is called diversification. Diversification is important so that no single investment will have a detrimental impact on your portfolio. To understand how diversification works in the context of your portfolio, let’s take a look at an example. Imagine that you have two investment options: stocks and real estate. When stocks are performing well, you might choose not to invest in real estate. Conversely, when real estate is on the rise, you might invest less in stocks. This is called diversification.

For example, if you are fixed-income, and you invest 100% in stocks, you risk a lot because there is a high potential for your stocks to fall in value. On the other hand, you can also put your money in lower risk investment types such as real estate and alternative investments. This way, if your stocks are taking a dive, you can use your investment in real estate or alternative investments to mitigate your losses.

Transaction Costs

When you purchase or sell a stock, you’re charged a commission. It’s based on the fair market value of the stock. These costs can add up in the long run.

If you’re investing for the long term, it doesn’t make much difference. You have to think about your ongoing costs. You have your annual taxes and your fees.

One of the biggest hurdles people have is that they like owning real estate. You can build equity in it and you have a vested interest in the property. There is none of that with stocks.

Real Estate is a better choice when it comes to capital gains. You have less taxes and sometimes even depreciation, which can lower your taxes substantially.


Whenever you’re thinking about buying an investment, you need to keep liquidity in mind. The cost of trading is a significant factor in the short-term volatility of an investment, so stocks are generally a safer option when it comes to liquidity.

Liquidity is a direct factor of the time it takes to complete a sale. When you’re selling stock, things are generally pretty straightforward. You find your broker (either online or in person), you complete the required paperwork, and you get your money. The same is not true of real estate. You generally have to put up the property in question as collateral, which means that if you can’t sell the property, you’ll be in trouble.

Easier (Less work)

If you listen to some of the gurus on the subject, you will hear some real estate pros say you can make more money in real estate investing than you will from stocks and that's the reason to choose real estate investing. Funny, but the stock market has made a greater percentage of millionaires and billionaires than real estate. So the mantra is, foolproof but not foolproofer.

Less Complicated

Trading in real estate is less complicated and less risky than trading in stocks. In real estate, you do not have to really worry about the technical aspects of the stock. In addition, you do not incur extra costs as a result of trading. When you trade real estate, you purchase real estate and proceed to keep it for a long period of time until you sell it. Nevertheless, in order to do this, you have to ensure that the real estate is safe, secure, and worth keeping in the long run.

Our Recommended Stock Brokers

There are so many different things that can happen to your money in the stock market.

Whether you have a lot of money or just a little, you need a good stock broker to help you get the most out of your investment possibilities, get you the best deal, and ultimately help you cover your basis in the market.

The thing that many people do not realize is that the stock market will make them more money if they involve themselves more in the situation.

Some people do not like to keep up with their investments, and it is easy to see why. The stock market offers little in its way of stability and predictability, so it is hard to know what is going to happen next. It is hard to make steady money.

However, in the long run, millions of people make their money in the stock market, and it is not just feasible, but also possible for you to do it. It just takes a little bit of knowledge, and a little bit of work.

In a lot of ways, real estate is a lot like the stock market.

There are a lot of different kinds, and a lot of different levels to them. There are reasons why real estate is a better investment than the stock market, because there are a lot of different things that you can do with it.

Summary & Personal Thoughts

The ideas behind Real Estate Investing and Stocks can be a bit overwhelming, as there is a lot of information and jargon surrounding both markets. In this post, we’ll discuss some of the key factors and key terms to know, and give you a brief overview on each. You may find that one market leans more towards your strengths and preferences than the other. It can help to have a clear understanding of each and where the market is today.

First, you have Real Estate Investing. Real Estate Investing (REI) has been a solid investment historically, and has had a steady growth with each decade. REI includes many different property types, such as houses, residential rental properties, multifamily units, commercial, and even mobile homes. There are also many different ways to invest in real estate – for example, as an owner/occupier, or as a potential rental, which can be a great way to diversify your portfolio and generate passive income.

The second market is stocks, and stocks has been a staple of investing for centuries. Stock investing includes Index Funds, which invest in a variety of indexes like the S&P500, and individual stocks in companies like Apple, Coca Cola, and so forth. This type of investing has exploded in the past decade, especially for retail investors. Anyone can walk into an online brokerage or broker like Fidelity and purchase shares of Apple or Ford.