Who wins between real estate and stock investing?

How to know which is right for you.

Hi friend,

I mentioned I would write a bit about real estate investing.

Yesterday one of my brothers started a debate with me on how real estate is the easiest way to riches so I guess later became sooner automatically.

Who wins in the battle between financial markets and real estate?

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If you know me you will expect my answer: it depends.

Like one of the bands in last week’s festival was singing, there is no black and white, only shades of grey (Biohazard).

My brother is right that real estate is an easier way to riches.

Many wealthy people have supported and accelerated their path relying on real estate investments.

So why do I not invest in real estate?

I simply do not have a feel for real estate markets and if I had to research I would need to spend amounts of time similar to other assets.

Additionally, I would have to spend time on location assessing the state of potential investments. This is an advantage compared to financial assets where we cannot show up to a business and get a tour and some assets are completely intangible.

Fun fact, in some older investing books some authors do recommend showing up to businesses and then more often than not you actually can get a tour, not sure, never tried.

Ultimately I don’t want to deal with maintenance.

Investing in real estate is more akin to investing actively in private businesses. You have access to the engine room. Are you going to be the mechanic or will you manage mechanics and guide them to your profits?

So why is investing in real estate a good idea then?

As my brother points out, in many cases, you can get easy access to loans for real estate. On top of that, once you own real estate assets, you can use them as collateral for other loans. Know how to play the real estate flipping game well and you can grow quite fast starting out with little capital.

The key notion is knowing how to play the game well.

Your execution skills are what define your success.

I have knowledge and experience in other sectors so I have a much higher probability of identifying successful investments there. I am also good at executing on growth stocks and crypto. In comparison, real estate is not so appealing to me.

Eventually, I will likely invest in real estate as well, but it is not compatible with my current lifestyle and goals.

One of the key concepts I teach is to not invest against yourself. Find assets you understand and combine them with a trading window and routine you enjoy. Doing anything else will bite you eventually in ways you attribute as bad luck so you never really diagnose the issue.

If I really want to be exposed to real estate investments I can invest in REITs on the stock market. Real Estate Investment Trusts. That way I remove all the elements that I do not like and the investment itself is similar conceptually to investing in stocks with a dividend strategy.

Alternatively, I can invest in XLRE or similar ETFs that track the real estate sector.

I love the flexibility of the stock market and the infinity of strategies one can come up with.

What about you? What is your take on real estate?

Have fun and make profits,

Chris

Thank you for reading! :)

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DISCLAIMER: None of this is financial advice. This letter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.