• Home
  • About
  • Advertise
  • Contact
  • Policy
  • Guest Post
  • Archive

One Cent At A Time

A Personal finance blog to get rich

  • Email
  • Facebook
  • Pinterest
  • RSS
  • Twitter
  • Beautiful Life
  • Becoming Rich
  • Beginners Guide
  • Extra Income
  • Productivity
  • Saving Money

Real Estate Vs. Stocks

March 20, 2017 2 Comments

Share this:

  • Tweet
  • Email

The two traditional forms of investing when saving for the long term are stocks and real estate. Both have proven to be successful over the past decades and offer a path to financial security, but which is better? Real estate or stocks?

Real Estate Vs. Stocks

The truth is that there is no one right answer for everyone. Each of these investments has their own advantages and disadvantages in building up a portfolio of assets and the deciding factor often comes down to personal preferences.

Advantages and Disadvantages of Real Estate

There are good reasons to select real estate as your investment model. Perhaps the most important reason is psychological.

The real estate is a tangible piece of property that you can look at and feels more real as an asset compared to stocks that look like numbers on a screen. Since the value of a property isn’t constantly changing, this can cause a big difference in how you treat the asset.

Instead of looking for a quick flip, you might be more likely to hold on to the property for the long term and collect rent from the house.

You can also use leverage by taking out a mortgage to buy properties. This makes them easier to purchase and improves returns if the property does well because you only needed to put down part of the initial payment for the house.

There are also tax advantages to owning properties. The government offers several tax deductions on property taxes and mortgage interest payments. Depending on your circumstances, the tax savings can be considerable.

Of course, real estate investing is also a considerable amount of work from taking care of the property to getting tenants. When something falls apart, tenants expect their landlords to fix it.

The costs can add up and reduce the profits from renting a house, especially if you have to hire someone to fix everything instead of doing it yourself. Also, finding tenants can be a challenge if the property is in a location without high demand.

Each day a property remains vacant is a day without income, but the costs to maintain the property needs to be paid throughout the year.

The other downside to a property is that real estate values rise slowly compared to stocks. This may be problematic if you are interested in selling the property in the near future.

Advantages and Disadvantages of Stocks 

Not to be left behind, stocks also are sources of considerable advantages compared to real estate purchases. The most obvious advantage over real estate is the passive nature of the investment.

You can buy stocks and leave them alone for decades without having to do anything. Professional management teams are already in place to take care of the companies.

Plus, it is a lot easier to buy and sell stocks than real estate. If you decide that you no longer want stock in a particular industry, you can switch to a different one with a click of a button. The transaction costs are also significantly lower than what a real estate agent collects.

The disadvantage of stocks is that they can be very volatile. When stock market crashes can occur very quickly and you can lose more than 30% in a matter of months.

The other disadvantage is that the management of companies can commit frauds that are hard to spot by a passive investor. A stock that becomes Enron loses all of your money.

Also, the income from stocks come in the form of dividends. Dividends are paid from company earnings that are already taxed once at a company level, whereas real estate doesn’t have this problem of getting taxed twice.

Rate of Return

The one area that ranks most important to many people is the rate of return of their investments in stocks or real estate.

When looking at overall numbers for investment returns between real estate and stocks, there is little question that stocks have increased more.

Over the decades, an equal investment in both stocks and real estate demonstrates the return of stocks is several times higher than real estate. Yet, there are other factors to consider.

Frequent stock trading can cause capital gains taxes that can take a large bite out the profits made from stock investing. Also, if you are deciding between renting a place or investing in stocks, the peace of mind from owning your own home is something to consider.

It should also be noted that while the overall numbers are important, it would be more accurate to look at exactly what was purchased so that you can properly judge your rate of return.

For example, an investment in Apple stock would have beaten any real estate investment, but an investment in a hot real estate market would beat the average stock at the right time.It depends mostly on what you choose for your portfolio.

Which is better?

In the end, when planning for the long term, both real estate and stocks offer solid investing possibilities for your portfolio. The best answer may be to invest in both so that you can enjoy the benefits of both types of assets.

The diversification can help you reduce risk and many people like the idea of having real estate. Due to the amount of capital required for real estate, for most people, this would be a stock portfolio combined with a house they live in.

However, savvy investors can use Real Estate Investment Trusts (REIT) for their real estate portion of their portfolio. REITS own real estate and have a professional management team in place.

Many trades on a market just like stocks so investors who buy them gain some of the advantages of buying stocks. The REITs also have favorable tax benefits and avoid the double taxation issue of most stocks because their earnings aren’t taxed at the company level.

Whichever choice you make, make sure you keep focused on your goals to build a long term portfolio. The road to retirement and financial independence is a journey that can’t be rushed.

About the author: Nick Karr is a private investor with years of experience. From his early days working on Wall Street to now writing a private investment blog at Pugvestor, he’s always believed in empowering individual investors to take control of their own financial destiny.

LIKE THIS POST?
I agree to have my personal information transfered to MailChimp ( more information )
Join our community of 8000+ subscribers to increase your net worth and build wealth
We hate spam. Your email address will not be sold or shared with anyone else.

Share this:

  • Tweet
  • Email
The tool that changed the way I manage my personal finance - Personal Capital, The Best Free Personal Finance Tool

Want to start a WordPress blog now? The onecentatatime.com blog is hosted by Siteground Web Hosting. For only $3.95 a month, Siteground can help you set up and host your website/blog quickly and easily.

About the Blogger Hi I am SB, a personal finance enthusiast with a career in software development. I am an immigrant to the USA since 2005, after being born and brought up in India. This 40 something technocrat lives and breathes personal finance whenever he gets time from the day job, job as a husband and a dad

Some links on this page may be affiliate links, if you make a purchase following the links, I may earn a commission. Read affiliate disclosure here
« The 6 Things You Need To Start A Business
Money Management Through the Eyes of a Boy Scout »

Comments

  1. Joanne Mahoney says

    March 21, 2017 at 3:44 PM

    My husband and I have invested in stocks and REITS. Neither of us want the hassle of a rental. We have done pretty well too. With 5 more years until retirement, so far, we are on goal!

    Reply
    • Pugvestor says

      March 22, 2017 at 1:03 PM

      Congrats on getting so close to your goal! I avoid the hassles of a rental property as well, but for some people it makes sense.

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.



Create your own blog in 20 minutes and $20

Personal Capital, a free tool to change your financial health today

I use and suggest Upstart, for your personal loan need

CreditKarma, a free tool to check your credit scorey

I use Coinbase, for my crypto investments

101 Cents at a Time

101 Ways to Earn Extra Money on the Side
201 Frugal and Perfect Birthday Gifts
101 Ways to Save Money Everyday
101 Ways to be Better and Successful at Work
101 Ways to Save Environment and Energy
101 Frugal and Romantic Anniversary Ideas
101 Low-Cost Men's Fashion Ideas
101 Personal Finance Tips
101 Ways to Reuse Household Stuff
101 Things to Do, When Nothing to Do
101 College Graduation Gift Ideas
100 Tips for Ecommerce Startup
101 Ways to Enjoy Indoor During Winter
101 Ways to Beat Procrastination

Popular Posts

Quick Cash - How to make $100 legally, in a day
Living well on less than $15,000 a Year
Top survey sites for side income
What to do when auto repair goes wrong
Where should I invest my money now?
20 Ways to be productive and happy at work
51 Ways to get out of debt
Be a better person in 15 days, 15 ways
Income ideas for retirees and senior citizens
51 side jobs for college students
Urgently need a large amount of money?
Should I buy or should I rent?
Best Personal loan providers
25 Ways to save environment
25 DIY car repairs to save money
How to decorate office cubicle
How to show your wife you care
50 Financial Rules for Success
51 Frugal weekend family activity ideas
Become Rich By Saving 1 Hour Of Daily Wage
How much do I need to save for retirement?
How to negotiate your salary

Follow us on FaceBook

About Author

SB

Blogger by choice and IT manager by profession. Finance is my passion and gardening is my greatest satisfaction. Born in India, settled in US, Husband and a father. I created this blog in 2011 with a vision to help others. Thanks for your patronage. More info on my "about" page.

View all posts


Subscribe

Join our community of 5000+ subscribers to increase net worth and build wealth

Advertisements

Personal Stories

How I got a new HP computer replaced
Was COVID circulating in USA in fall of 2019?
How my credit score went up 800+
Why I didn’t invest in Bitcoins
How I controlled impulses to buy things
Why this blog is named One Cent at a Time

Subscribe via Email

Site Disclaimer

Disclosure of Material Connection: Some of the links in this web site are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
Read full Affiliate disclosure


One Cent at a Time is published by SB. The opinions expressed herein by him are his own and not those of his employer or anyone else. All content on One Cent at a Time is for entertainment purposes only. By reading this blog, you agree that SB and/or One Cent at a Time is not responsible for any actions taken after reading this blog. For the full disclaimer, click here .

Major Media Mention

One Cent at a Time Media Appearances

Copyright © 2023 One Cent At A Time · Designed by Nuts and Bolts Media