Real Estate VS Stock Market Investing

real estate vs stock market investing

Real estate or stocks investing? Every experienced investor knows how complicated investing in these two entirely different markets is. And if you are a beginner, you probably lack the necessary knowledge, and you probably don’t know or are unsure what to invest in or how to invest in it.

If that’s the case, then you have come to the right place because, in this article, we will review and compare the advantages and disadvantages of real estate and stock market investing.

Before making the final decision of where to invest in, there are plenty of things to consider. Let’s see which of these two types of investments – real estate and stocks – might be a better option for you.

Investing In Stocks

By investing in stocks, investors buy shares of a company, giving them ownership in that same company. Yes, investors are buying part ownership of that company. And companies can either reinvest the money they earn into the business and pay no dividend or pay a portion of those earnings back to their shareholders. In that case, stockholders are paid dividends on shares.

This type of investment is suitable for risk-taking investors. Investors who want to double or even triple their investment from the stock market.

When investing in stocks, the saying “the higher the risk, the higher the returns,” explains it all. It is a risky market, but when investors do their homework right, the returns from the stock market can be massive. Not only do shareholders earn dividends, but by selling the shares at the right time, they have the chance to make a significant profit.

Investing In Real Estate

Investing in real estate, also known as tangible assets, has generated a steady amount of wealth for investors. Once the investors have bought the real estate, he can then rent out the property and receive regular rental income with capital appreciation over some time. This type of investment is suitable for investors who have money on the side.

However, both the price of the property as well as the returns are determined by factors such as country, city, location, and additional benefits of the property, such as a sea or mountain view, transportation access, etc. The right location is the key to successfully securing a steady flow of income for a long time.

Comparison: Real Estate, VS. Stock Market Investing

Investing both in stock and real estate are the two most common ways for people to start investing, but which one is a better investment choice? Let’s review some of the advantages and disadvantages both investment types have.

Long Term Investment

Both investment types are considered long term investments. However, experts in both fields think that stock investors have a better chance to earn money in a relatively lesser period. Successful stocks investors follow a buy-and-hold strategy. By holding onto their investments for an extended period, they have higher chances of it being successful. Also, the stock market is unpredictable, and stock prices depend on many factors.

On the other hand, investing in property might take years before the property earns its true potential if the goal is to sell the property at a higher value. In the meantime, by renting out the property, investors can earn passive rental income. Also, excellent quality rental properties are always in high demand, and rental income is likely to increase in time.

Investment Time

While some people believe that investing in stocks requires lesser time preparation, experienced investors know that this is not the case. Signing up with a reputed stockbroker, opening a trading account, and getting started sound easy. However, it takes time to research and study the market. The more informed an investor is, the better investment he will make.

Real estate investment, on the other hand, is a lengthy and challenging procedure. Unless you have a broker who knows precisely what you are looking for, finding the right property takes a lot of time. The location of the real estate is what matters most. Once the investor has found the perfect place and property, there are loads of paperwork and thorough analysis that follow before the final deal.

So, both investment types – real estate and stocks – have a lot of things that need to be considered and require a lot of time and preparation.

Taxes VS Fees

Property ownership comes with property taxes and additional costs, but investors get tax exemptions from owning a rental property. Tax exemptions are one of the main reasons why many people choose to invest in real estate.

For instance, not only are real estate investors not subject to self-employment tax, but they are also entitled to lower tax rates for their long term investments. Also, the government offers tax breaks for property depreciation, insurance, maintenance repairs, travel expenses, legal fees, and property taxes.

By investing in stocks, investors need a brokerage, and other fees might occur. In fact, every time you purchase an investment, it will cost you money, especially if you trade regularly.


Experienced investors know the importance of diversification. The more diversified a portfolio is, the smarter your investments are. Why? By investing in different stocks, for example, investors increase the potential of maximizing returns while minimizing risk. Different stocks react differently to the same event. Having a well-diversified portfolio is not a guarantee against loss, but it plays an essential part in reaching long-range financial goals.

By investing in stocks, investors can quickly achieve a well-diversified portfolio. However, when it comes to real estate investments, a substantial amount of money would be required if the investor wants to build a well-diversified portfolio.

Steady Income and Long Term Financial Security vs. Volatile Price And High Liquidity

Investing in stocks is quicker than investing in real estate, and due to the high liquidity,  they are easily bought and sold. How easy stocks are to buy and sell is one of the most significant benefits of this investment type. During market hours, for example, investors can exit the stock investment and liquidate not all but some of their equity investments. Also, stock prices tend to be more volatile in the short-term.

While investing in stocks is quicker and more comfortable, real estate investments are just the contrary. Investors cannot take out the money they’ve put in real estate as quickly as stocks could be liquidated. With this long-term investment, investors have to wait for the market to flourish and for the property price to rise in value. Also, they will have to look for a buyer that is interested in their property.

As mentioned above, through real estate, investors earn passive income in the form of rental income. With the right property investment, investors can cover their expenses, make extra money on the side, and even save for retirement.

Another benefit of property investing is long-term financial security. The property’s appreciation in value over time can bring on (increasing) financial rewards for a long time.

Sum up

Investing in real estate provides a steady income and long-term financial security, but these are not highly liquid assets. By investing in stocks, investors can quickly liquidate any, if not all of their equity investments and also exit the stock during market hours.


The most significant risk when investing in stock is if the company goes under, because then, so makes your investment. Investors could lose their entire investment if they have not adequately evaluated the company, and it performs poorly. However, due to the constant ups and downs of the market, this investment type could be very stressful for some people. Some news might influence the market, while others might not. Even experienced investors cannot predict the performance of a stock.

All markets have ups and downs tied to the economy and many other factors and trends, but when it comes to the real estate market, it tends to carry the lowest risks. Real estate is considered a low-risk investment because there is always a demand for rental property.


It is crucial to know that both investment types – real estate and stocks –  have a good investment return percentage. The FHFA series started in January 1991. Since then, stock prices have outperformed real estate prices. While the real estate prices have increased by 164%, the stock prices have resulted in a gain of over 700%.

While real estates may not be as liquid as stocks, they require research, as well as a large amount of money, but they also can provide passive rental income. Stocks do not require a significant amount of money, but they are subject to many factors and risks.

So, after reviewing some of the main advantages and disadvantages of real estate and stocks investing, taking the final decision should be a little bit easier for you. Whichever investment type you decide is better for you; you should always aim to diversify your investment portfolio.

Keep in mind that to create a well-diversified stock portfolio, investors would need smaller amounts of money compared to a well-diversified real estate portfolio where they would need a substantial amount of money. One way to ensure your portfolio is appropriately managed is by consulting or hiring a professional.

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