Dividends vs. Rent Payments

[Jorge Vazquez]

One of the biggest reasons people buy stocks is to build wealth so that with financial independence, you can retire early. Many financial experts talk about the 4% rule: you can withdraw 4% of your capital every year without exhausting your portfolio. It presumes that the real return of your portfolio is 4%. If you had to live off just 4% of your portfolio, you would need huge capital, to begin with. Most people don't have that. One of the biggest reasons I prefer real estate is that the rent payments are much higher than dividends in stocks. I am yet to find any stock in the market that can consistently provide a 10% return in terms of dividends alone.

Apart from the low dividends, if you want to create a cash flow using stocks, the only way is to be a day trader. It's a full-time job that will prevent you from doing anything else. Rental real estate can be largely passive and allow you to have a full-time job.