Real Estate or Stocks: Which is the Better Investment?

CNBC reported last year that Americans tend to prefer to hold their money in real estate or cash when they believe they won’t need to touch that money in the short term.

For money they planned not to spend for at least 10 years, 25 percent of Americans said they would put that money into real estate. Another 23 percent said they would keep it in cash. Stocks were a distant third on that list, with just 16 percent of Americans identifying the stock market as the preferred place to keep their money.

Why does real estate appeal most to 1 in 4 Americans? Well, it is a more tangible place to park money. Plus, real estate offers non-investment benefits: You can live inside your investment.

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But is a house, an apartment or a commercial property the best place to put your long-term funds? Not necessarily.

Certainly, cash is not the best place for your nest egg. Inflation will eat away at its value in the long term.

Stocks, however, have historically had a higher rate of return than real estate. After accounting for inflation, stocks have historically returned about 7.5 percent annually in the US since 1900, and real estate has returned about 3 percent annually.

But this also doesn’t mean stocks are the best place to park your long-term funds either. Most likely, you’re best served by investing in a mix of real estate and stocks. Kevin Mercadante at DoughRoller has a great piece on this.

“Reaching early retirement or financial freedom is possible with both stocks and real estate,” he says. “… The ultimate goal is to pick at least one investment and commit to it for as long as it will take to achieve either your early retirement or financial freedom.”

So, how do you allocate the right mix of real estate and stock market investment? That depends on you: Primarily your housing needs, your risk tolerance, how much effort you want to put into managing your assets.

The team at recently published an infographic that explores a handful of those strategies:

Source: Real Estate vs.

Stocks: Which is the Smarter Investment? [infographic] –

Whatever you do, StockHax says, just be sure to put your long-term funds into some kind of asset that has the ability to grow in value. Otherwise, you expose yourself to inflation — as nearly 1 in 4
Americans prefer to do — and ultimately give up control of your financial security.