Stock Market Investing vs. Real Estate Investing

[Jason Riddle]

This is not a question of which is better, as since this is on Biggerpockets, the bias is obvious.

My question is for the folks that are invested in both the Stock Market and Real Estate. What is your strategy for investing in both markets?

For example, some folks will invest a certain percentage in real estate, say 15-20%, and the rest goes to the stock market. Others might be trying to reach a specific cash flow goal in real estate, thus it may be higher like 75%, and then once that reach that goal, they will change their investment percentages.

I'm just curious on folks thoughts on this.

[Ryan Muska]

I currently have 10% of my net worth in stocks and the other 90% in real estate. 

This is not my end goal/intention, I'm just young and don't have a lot of net worth. 

My end goal is to have about 25-40% in the stock market/bonds/etfs/etc. and the rest in real estate. I want to be heavier in real estate, but I don't want to have all my eggs in one basket, as they say.

[Henry Lazerow]

I have around 80/20 in realestate/stocks but if find a good deal that ratio changes. Stocks are liquid and pretty easy to sell as long as not in a huge bear market, I have a HELOC can pull from in that situation. Overall i way prefer real estate.

[Joe Villeneuve]

No set ratio.  My main investments are in RE.  I invest in the SM ONLY when there is an opportunity that presents itself, then once that opportunity becomes profit, I get out of it before I lose it.

[Steve Vaughan]

If you know REI, be fluid and flexible between the 2. Go all-in RE when the sun is shining on it, stay in the leisure shade of money markets and paper securities when its not. Like now LOL

[Eric Gerakos]

100% rentals and trust deeds.

[Nick Robinson]

@Jason Riddle
I wouldn't and do not have a set percentage I put towards each. I think both are valid ways to create Cash Flow/Dividends it just depends on what do you want to use as your vehicle. When I invest in stocks, I have the same analysis as when I invest in RE. I want a strong dividend yield that has dividend growth. For example, if I buy a stock that makes a 4% dividend, and it has a dividend growth rate of 10%/year over in 10yrs I am going to have a 10.37% dividend on my original investment, and I can just reinvest dividends and really make money with compound interest. Just like in RE I want something that CF and can support the property and pays me to own it. The rents ideally will grow over 3.2%, which is the long-term rate of inflation I know government #s. Then the goal is to use that CF to invest more money into more property.

What makes RE in my mind better than stocks is that I can use leverage to improve my returns. I can do the same thing with stocks but margin loans are more volatile than RE loans so there is a greater probability of loss. Another big advantage of RE is depreciation which allows me to collect that CF tax-free. Should add an advantage of stocks is I can reinvest my money quickly where in RE it takes time to build up a down payment.

Remember the main goal of investing is to buy things that pay you to own them. So, in retirement the income you receive pays for a lifestyle that you want. For everyone that is different. If you want to retire in Arkansas obviously your CF number does not to be as high as someone that wants to retire in Newport Beach.

[Bobby Paquette]

Quote from @Jason Riddle:

This is not a question of which is better, as since this is on Biggerpockets, the bias is obvious.

My question is for the folks that are invested in both the Stock Market and Real Estate. What is your strategy for investing in both markets?

For example, some folks will invest a certain percentage in real estate, say 15-20%, and the rest goes to the stock market. Others might be trying to reach a specific cash flow goal in real estate, thus it may be higher like 75%, and then once that reach that goal, they will change their investment percentages.

I'm just curious on folks thoughts on this.

Sold my stock put into syndication. Only stocks now are my Military TSP & my Brokerage Stock that I get from selling houses. Other than that, RE all the way in my opinion.

[Jim Rivell]

I once heard on a podcast to have your portfolio replicate your knowledge base. Some advice will tell you that 100% concentration in one asset class be it real estate or stocks is too risky and to diversify. Have your portfolio or net worth allocations follow your knowledge. 

[Steve S.]

Tiger 21 is a group of ultra-wealthy individuals with a minimum net worth of $10 million. If you look at the aggregate asset allocation of its 750 members, they have 49% in real estate and private equity and the rest in public markets and cash. This was not by design, but my investable capital is ~50% in my 401k and 50% in private syndications. https://tiger21.com/insights/asset-allocation-report-2021-1s...

[Jake Andronico]

@Jason Riddle

Great question. 

I actually have part of my cash flow from my properties going into the market. It allows me to continue to build my cash reserves and future house accounts with the bulk of the cash flow, but it doesn't feel significant and will continue to compound over time. 

As I've seen larger investors later in life - simpler is almost always better. 

There is something to be said about the simplicity of the market. That being said, a simplified paid off rental portfolio isn't a bad place to be either. 

My thought is always - "Why not both?" :)

[Kevin Crowell]

Hi Jason,

RIght now, I have about a 50/50 split but I am constantly moving it around depending on opportunity that I see within my area and the people that I meet. Within each area, it also depends on how you invest. Are you looking for cash flow in real estate or are you looking for the home run investment? Within the stock market, are you investing in dividends or are you investing in tech? It all depends on what your end goals are. Keep the end in mind and your current actions will help dictate what moves you can take right now. Please let me know if you have any questions. Good luck.