Invest in multifamily housing and you’re likely to see a higher rate of return than stock investing with much less volatility and with greater tax benefits.

While the history of stock market returns shows us that the market has been up more than it’s been down, anyone with a sizable chunk of stock market shares would tell you that this investment vehicle is not for everyone. In order to be successful here, you must have the perseverance to hold through stomach-churning drawdowns—without any reassurance that your portfolio will make a full recovery.

Real estate investing, on the other hand, provides a level of safety, stability, and certainty that the stock market can’t offer. Multifamily real estate in particular also has the potential to grow your portfolio faster than the stock market. And given low interest rates and current demographic trends, it’s a safe bet to say that multifamily real estate investing will be experiencing tailwinds well into the future.

Investing in both markets (multifamily and stock) can create a strong, diversified portfolio, but the former has a number of advantages over the latter. Let’s compare and contrast the two investments— both passively and actively— and see why multifamily real estate is the best option for faster growth with the lowest volatility.

👉 Active Stock Market Investing

The goal of active investing is to earn returns that beat the S&P 500 (also known as “beating the market”). This requires deep dives into the finances of various companies, bonds, and individual assets—not to mention staying ahead of macro market trends. Active strategies include day trading, position trading, swing trading, and scalping. Some investors choose to open a brokerage account and trade securities themselves using one or more of the above strategies. This is a full-time job, one that’s highly speculative, notoriously risky, and too often based on luck. Somewhere in between passive and active, there’s also the option to hire a firm to manage your portfolio and employ active strategies.

👉Active Multifamily Investing

If you have the time, expertise, and want to retain decision-making authority on how to run your property(s), you may want to take an active approach multifamily investing as a single player. Here, you have the advantage of retaining all profits and income. But keep in mind, to do this requires being on top of every detail. You, and you alone, are accountable for everything from permits to accounting to repairs. The sheer number of local government agencies you’ll be dealing with is enough to send many would-be active investors running. You can also go the syndication route as a general partner. Still within the active investing umbrella, you would be the one to raise capital from investors, find the property, outsource management, and more. Unless you are able to do this full-time—and have the network to back your endeavors up—it may not be feasible or at all lucrative. And while the downside risk for passive investors is limited to their initial investment, general partners take on unlimited personal liability and open themselves up to potential litigation.

👉Passive Investing in the Stock Market

When people talk about passive investing in the stock market, they’re likely referring to index funds. Instead of betting on individual stocks, passive funds are made up of holdings that track a market index like the S&P 500, Dow Jones Industrial Average, or the Nasdaq. These don’t require active professional management, so investors enjoy some of the lowest fees around.

Passive investing in the stock market also assumes a buy-and-hold strategy. By definition, these passive funds are meant to match the performance of the index, not to beat it. As such, it will average modest returns over time. The upside? You’re also spared a lot of the volatility that comes with aggressive trading.

When it’s all said and done, it’s debatable if active management is much more lucrative than passive indexing. Over a ten-year period, most fund managers’ performance lag indices like the S&P 500, also known as underperforming the market. So, unless you’re Warren Buffett, you might want to stick with a passive strategy when it comes to the stock market.

👉Passive Investing in Multifamily Properties

If you have the capital but lack the knowledge, time, or interest in actively managing a multifamily real estate investment property, the most attractive option is becoming a limited partner, or passive investor, in a syndication. Through this partnership, you would invest your money with trusted experts who shoulder the responsibility of active management. All you do, aside from the funding component, is receive both reports and returns at a predetermined frequency (typically monthly, quarterly, or annually).

Obviously, you’d relinquish a lot of control, but that’s the whole point of passive, right?