Should an investor own stocks or real estate?


The stock market and real estate markets have both been a place for preservation of capital, appreciation, and income. It’s no secret that the stock market has created more millionaires and billionaires than any other vehicle. However, real estate allows for a high interest savings account if you own your own home and the ability to generate income while building long-term assets if you own multiple rental properties.

Here’s a great photo from a neighborhood in Washington, DC published in the Post back in 1926. This neighborhood has seen between 4–5.37% growth over the last 91 years. The dow jones index has seen about 5.63% in the same time, plus dividends. Homes in this neighborhood are now in the $600-$800k range.

That extra 2.0% in dividends means a lot over time, especially when you think about the taxes and other liabilities you need to account for with real estate that never come into play with stocks. That doesn’t mean real estate isn’t an investment in some cases. Owning a home is buying an asset, but an asset that over time will likely produce the same appreciation as inflation will take away. So it’s a store of value only.

For example, on $600,000 at 5% over 50 years grows into $6.8 million. That same investment at 7% grows into $17.6 million.

The bottom line: Every percentage point counts. Don’t settle for lower rates of interest.