So which is the "better" investment...stocks or real estate? In this video, I do my best to break down the pros and cons of each option and weigh the results against the potential return one could possibly expect to achieve. Since picking individual stocks can vary so widely in price, as would flipping a house, I'm comparing long term rental real estate to an total stock market index fund.
It’s a hard question to answer, and a lot comes down to personal preference, but these are some things to take into consideration before we break down the numbers. Just for clarification - picking individual stocks, day trading, or swing trading is NOT included - you could achieve much higher returns and many people do this. However, since you could also invest and flip real estate, I felt this would be an unfair comparison with too many variables - which is why index funds vs rental properties were used.
Each have their upsides and downsides…
Pros for index fund investing:
-It’s completely passive. Once you spend a few minutes going to a website and buying a stock, you’re done.
-You don’t need tens of thousands, or hundreds of thousands of dollars like you generally need with rental real estate.
-There are no hassles of working with tenants, fixing items, or maintenance.
-You can buy index funds within a tax advantaged account such as an IRA or 401k.
-Stocks are fairly liquid and you can cash out quickly when you want to sell.
Pros for real estate investing:
-You have total control over what you buy and at what price
-You can take advantage of undervalued properties and areas
-You can add square footage, remodel, and gain quick equity and increase cash flow
-You can leverage your money and achieve potentially higher returns
-You can receive consistent rental income
In terms of the raw returns, generally real estate CAN yield a higher return, usually if you leverage your money - HOWEVER, the higher return is balanced by the amount of work, skill, and knowledge needed to find the right deal and close on the right price. Real estate is also not an entirely passive investment, so even though you can make significantly more, it also comes with more work. If you’re looking for something entirely passive, stocks will likely yield a little less but it comes with the ease of not having any responsibilities or obligations. So much of it comes down to personal preference. My recommendation is to do both 🙂
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Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq

By Stock Chat

where the coffee is hot and so is the chat

29 thoughts on “Pros and cons of stocks vs real estate: is one better than the other?”
  1. Avataaar/Circle Created with python_avatars Chyna Craft says:

    I wish you addressed the possibility of being passive in real estate by hiring a property manager. Can you make another video talking about this?

  2. Avataaar/Circle Created with python_avatars Kent H says:

    Here is the rub. the real estate investment uses leverage which increases risk! If your stocks go down nobody is asking for money, whereas if you cannot rent your property for a 4 months, you may lose your whole investment.

  3. Avataaar/Circle Created with python_avatars Torque says:

    Even if you buy RE without leverage, your cashflow will be higher than stocks. Dividends pay 1-4%, whereas rentals can pay 7-10%.

  4. Avataaar/Circle Created with python_avatars Not Real says:

    Haha I'm loving these old videos.

  5. Avataaar/Circle Created with python_avatars Sphanation Sphanation says:

    I'm currently invested in commodities,futures,stock options,mutual funds and stocks.

  6. Avataaar/Circle Created with python_avatars Sphanation Sphanation says:

    There was a legendary stock trader who turned 100 000$ into 850 000$ in eight yrs imagine if it was just ten yrs

  7. Avataaar/Circle Created with python_avatars MarkSmith says:

    Need a lot more capital to do real estate

  8. Avataaar/Circle Created with python_avatars Harikrishnan Chandramohan says:

    @Graham Stephan. What do you think of stablecoins with APY of 12.68%. Safer and consistent returns than any index funds or real estate.

  9. Avataaar/Circle Created with python_avatars Jeannie Velzeboer says:

    Great video though I think you were more biased towards Real Estates! Personally, I think stocks are "better". Major con however is that it needs your time, which is easily countered by working with/through an expert. Made my first million earlier this year through one. Have dabbled into Real Estates more than a few times, won't say I've been so lucky.

    Another advantage is that you need relatively lesser capital to go into stocks than real estate.

    Lastly, can you do the job of a Landlord? Can stocks call you by 12am about a broken pipe?

  10. Avataaar/Circle Created with python_avatars Apex says:

    YOU CANT USE THE MONEY INVESTED AS A DOWN PAYMENT FOR REAL ESTATE. APPLES TO APPLES GRAHAM

  11. Avataaar/Circle Created with python_avatars Noah Speirs says:

    Good idea getting rid of the instrumental in the background

  12. Avataaar/Circle Created with python_avatars Jason Rogers says:

    Had to watch this old video to remember why I chose real estate 🏡

  13. Avataaar/Circle Created with python_avatars Jesse Moore says:

    For the sake of having non-correlated assets in all kinds of economic conditions and diversification, I think you should cover all your bases and have both investment vehicles (stocks and real estate) in your portfolio. Over several decades both have created good returns for me neither overshadowing the other, although I give a slight edge to real estate for the tax advantages, especially if you also have “earned income”.

  14. Avataaar/Circle Created with python_avatars Tào Lao Mế Lao says:

    Absolutely love this piece of advice !!!!!!!

  15. Avataaar/Circle Created with python_avatars Mike D says:

    Easy answer: whichever you have more of a passion for.
    Real Estate has the greatest returns over time. However, if you hate dealing with Real Estate (and don't have money for a property manager), stocks are so much easier to earn a passive income and [typically] remain far more liquid. To make a good amount of money in the stocks though, you need to keep your ear close to the market.

  16. Avataaar/Circle Created with python_avatars Atli Thorarensen says:

    want both?….REITS

  17. Avataaar/Circle Created with python_avatars Profitglutton says:

    This isn’t quite a perfect comparison. The $100k stock market investment didn’t include reinvestment such as the monthly mortgage payments (which build equity). It would be better to include stock investments plus additional investments over 10 years and the return would blow real estate out of the water.

  18. Avataaar/Circle Created with python_avatars Hola! Woski says:

    Graham oh my days I unsubbed then subbed again and changed it to 3M subs

  19. Avataaar/Circle Created with python_avatars Chuanqi Wang says:

    You forgot mentioning one thing in stock market: Using option can turbo boost your return just like you collect rent from real estate. Using option in stock can passively generate 12-24% annual additional ROI in your investment portfolio. I will say stock is better.

  20. Avataaar/Circle Created with python_avatars Grant Allen says:

    What the Heck Graham, i don't feel like you asked me to hit the like button enough in this video! DISLIKE! unsubscribe…then resubscribe because the content is so good and you've clearly learned from your mistakes. all is forgiven.

  21. Avataaar/Circle Created with python_avatars Danny Dabbles says:

    “SunCor Financial MPI review"

  22. Avataaar/Circle Created with python_avatars lol says:

    Ok but what if I take that 1900/mo you pay in mortgage, subtract the 500 in rent, and put it into the index fund?

    $1900-$500=$1400
    $1400*12*10=$168,000

    If you continously put $1400/mo into your $100,000 index fund investment that grows at 7% per year, in 10 years your investment would grow to $428,831.46, or $160,831 in profit.

  23. Avataaar/Circle Created with python_avatars lol says:

    These numbers are a biased comparison. In his rental property he continued to put money into it. But his stock he left alone. If he had invested the same "mortgage" into the stock what would his returns look like?

  24. Avataaar/Circle Created with python_avatars Gordon Geissler says:

    How do you get a 30 yr fixed mortgage on a rental property (commercial loan)? Banks generally lend for 5 years on commercial loans.

  25. Avataaar/Circle Created with python_avatars Es2 Kaaay says:

    Hopefully, one day, my stocks will grant or help with my real estate plans. I Stroke?

  26. Avataaar/Circle Created with python_avatars m p says:

    Gooooood

  27. Avataaar/Circle Created with python_avatars ependysi says:

    Im lazy so I stick with stocks 🙂

  28. Avataaar/Circle Created with python_avatars Jake Nilan says:

    How effective do you think it is to invest in both?

  29. Avataaar/Circle Created with python_avatars Graham Stephan says:

    Thanks so much for watching! I apologize for the lack of uploads lately – I’ve had a LOT going on and I’m in the middle of trying to buy a property for myself, so things have been somewhat crazy. I’ll still do my best do upload as much as I can. Once things settle down I’ll be back to sticking with a more regular schedule 🙂

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