Real Estate vs. Stock Market: Which Option is More Secure?
By: Catherine West
Real estate is a hard asset. You can see it, touch it and feel it.
People always need a place to live. And real estate offers multiple types of returns.
Real estate has historically outperformed the stock market. As measured by the S&P 500 Index, the stock market realized an average annual
return of 10.31 percent from 1970 - 2016. The real estate market has an average annual return of 11.42 percent, as measured by the publicly traded
Real Estate Investment Trusts: the NAREIT Equity REIT Index from 1970-1977 and the DJ Wilshire REIT from 1978-2016.
In terms of dollars, if you invested $10,000 in the S&P 500 in 1970, by the end of 2016 your investment would have grown to $1,005,588. If you
invested $10,000 into the REIT indexes, your investment would have grown to $1,609,932.
Unlike equities, you can mitigate the risks of real estate. If there is a fire, you have insurance to protect you from loss.
But if a company goes out of business, you're left with nothing. You can't call the CEO and demand your money back.
Another advantage is the multiple exit strategies that real estate offers. You can buy, rehab, and sell. You can buy, rehab and hold. Or you can
wholesale, in which you get real estate under contract and then sell the home or assign the contract as quickly as possible, often to another
investor who will then fix up the property and rent it or flip it.
Running the numbers ahead of time can ensure that you will have positive cash flow for buy and holds, and that you have accounted for all costs.
Self-directed Individual Retirement Accounts (IRAs) are a great vehicle for investing in real estate. With a Roth IRA, money is taxed when it goes in
so you do not have to pay taxes when you withdraw money from your nest egg. Setting up your investment with the proper tax and asset
protection, such as appropriately using LLCs, Land Trusts, and a Family Trust, can help you build wealth for the future that you can pass on to
your children.
If your goal is to invest for the future and for your family, invest in real estate.
Real estate is a hard asset. You can see it, touch it and feel it.
People always need a place to live. And real estate offers multiple types of returns.
Real estate has historically outperformed the stock market. As measured by the S&P 500 Index, the stock market realized an average annual
return of 10.31 percent from 1970 - 2016. The real estate market has an average annual return of 11.42 percent, as measured by the publicly traded
Real Estate Investment Trusts: the NAREIT Equity REIT Index from 1970-1977 and the DJ Wilshire REIT from 1978-2016.
In terms of dollars, if you invested $10,000 in the S&P 500 in 1970, by the end of 2016 your investment would have grown to $1,005,588. If you
invested $10,000 into the REIT indexes, your investment would have grown to $1,609,932.
Unlike equities, you can mitigate the risks of real estate. If there is a fire, you have insurance to protect you from loss.
But if a company goes out of business, you're left with nothing. You can't call the CEO and demand your money back.
Another advantage is the multiple exit strategies that real estate offers. You can buy, rehab, and sell. You can buy, rehab and hold. Or you can
wholesale, in which you get real estate under contract and then sell the home or assign the contract as quickly as possible, often to another
investor who will then fix up the property and rent it or flip it.
Running the numbers ahead of time can ensure that you will have positive cash flow for buy and holds, and that you have accounted for all costs.
Self-directed Individual Retirement Accounts (IRAs) are a great vehicle for investing in real estate. With a Roth IRA, money is taxed when it goes in
so you do not have to pay taxes when you withdraw money from your nest egg. Setting up your investment with the proper tax and asset
protection, such as appropriately using LLCs, Land Trusts, and a Family Trust, can help you build wealth for the future that you can pass on to
your children.
If your goal is to invest for the future and for your family, invest in real estate.