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Real Estate Investing vs Investing in the Stock Market: Pros and Cons

Are you searching for a way to expand your investment portfolio to be a bit more diverse? Or are you new to investing and not sure where to begin? Even veterans of investing might choose to move into new products to use innovative investment strategies. A common question in all these situations is: should I invest in real estate or stocks?

The truth is that many choose to invest in both. If you’re wondering which of these investment vehicles is right for you, you need to know the pros and cons of each.

Understanding how the investments work can also give you a better idea of which investment option is the right one for your situation.

“Don’t wait to buy real estate. Buy real estate and wait.” - Will Rogers, actor

What to Know About Real Estate and Stocks

Real estate and stocks are extremely different. Stocks are somewhat abstract and intangible while real estate is easier to understand and fully tangible. Stocks are easier to get started with but have a higher level of volatility over a short period. However, they can easily be instantaneously liquidated. Unlike real estate, stocks often require less attention and time.

Real estate has a higher barrier to getting involved in it but tends to be more stable in both the short and longterm. More input may be needed to maintain and manage real estate, but this is avoided if you are a passive investor. Buying real estate can be expensive but once you get started, the equity from properties can let you expand your properties. But my favorite aspect is that you can impact the value of your investment through forced appreciation, AKA renovations.

Pros and Cons of Investing in Stocks

Stocks have high liquidity which means anyone can buy and sell them quickly. A few clicks are all it takes. The process can be almost entirely automated. If you have stocks and suddenly need an influx of cash, liquidating part of your stock portfolio is simple to do. Stocks are also easy to start with due to being inexpensive in many cases.

However, stocks are volatile in the short term. The prices are constantly changing. For someone inexperienced, this can be very stressful. Since it’s easy to buy and sell stocks, emotional decisions can be made that aren’t great for your overall investment portfolio.

You also have little control in terms of the future of your stocks. You can choose which to buy and sell but you can’t control the operational decisions. This means that the value of a stock could go up or down without you having any input into that at all.

Pros and Cons of Investing in Real Estate

Real estate tends to be easier to understand for most people. Everyone understands why property is valuable. It’s also easy to leverage if you invest in the right types of properties and increase their value through renovations. This dramatically increases the value of the property, allowing returns to be positively impacted. This can't be done with a stock.

It’s a safe investment since housing is a need and that will never change. Supply and demand doesn't change too much based on the cycles of the economy. Plus, land is a limited resource so investing in desirable locations means you’re likely to retain the value even if the economy goes into a downturn. In all of the markets we invest in the value of real estate has doubled every 10 years.

However, traditional real estate investing requires more of a hands-on process than stocks. That is why I am so passionate about passively investing in apartments with an investment group. This removes the main con when it comes to investing in real estate.... being a landlord.

The last con is that investing in real estate is also far less liquid than stocks so getting money fast won't be possible. Your money will be invested for a number of years with payouts coming your way until the property is either refinanced or sold.

Where Will You Put Your Investment Dollars?

Your own needs will play into whether you should dabble in stocks, property, or both. However, for those with stocks who want to diversify, moving into real estate is often a great choice. There are many real estate choices out there to give you what you need, whether that’s hands-on ownership or investing in a property with other people.

Next Steps

If you are ready to start passively investing in real estate, watch our Master Class 'Profits To Wealth' and join our Whole Wealth Investing Group so we can help you determine what your investment goals are and how we might help you.


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