Real estate vs. Stocks

[Lance H.]

Hi everyone,
I realize this has been discussed before about which one is better and I think the general concensus is both.

I am writing an economic paper on this topic where I plan to compare the two, so what I am looking for is a list of all the pluses and minuses of both.(example, real estate can be leveraged more, stocks have lower transaction costs) From the biggest to the smallest differences. Any help would be truly appreciated and if you would like to be put down as a source for the paper please let me know and I will get your info.

[Account Closed]

In my opinion, you should be in both. I am and have been since the beginning.

Originally posted by REIJourney:

Mostly it has to do with your comfort level, education and tolerance for risk.

Personally - we prefer real estate (obviously) for multiple reasons. We've been burned twice in the market (once during the dot com bubble and another recently). The markets move too quickly - a crash could theoretically happen in minutes. A real estate crash typically takes months or years giving you time to think, strategize and react.

It's true that the stock market historically has more volatility but as many have learned when the real estate market crashes some times you can't get out in time.

What is fundamentally true with any asset market is those who try to time them get burned.

This is a common misconception. Stocks generate an income stream in two ways. First is via dividends. Many companies and all ETFs throw-off cash on a regular basis as dividends. The second and even better source of income is via options. Holding the right stock or ETF and then selling covered calls on them will generate anywhere from 1% to 15% return EACH MONTH. It depends on how vigorously you want to work them.

I don't day trade. I usually sell my covered calls early in the cycle and that's it. Unless something really unusual happens, like a stop loss triggering, I just leave it alone. I am consistently generating 4% to 8% returns each and every month. It works so well, that is where I park capital expense reserve funds for all of the rentals.

All income from your stocks is passive. That is not always true of your real estate holdings. As to the tax advantages, some are better than others. I am amazed at how people think it is a good idea to trade a dollar for a quarter. That is what is happening with many of the tax deductions, not all, but many.

Actually, I think they are both great and encourage everyone to diversify and be in as many asset markets as you can. Real estate and stocks are just two of the asset markets to consider.