Stocks vs Real Estate---Which is Better?
Analysts often argue that the S&P 500’s long term trend of 9.8% return outperforms real estate with home price increases of 3.4%. There’s one major flaw with this. This type of analysis is oversimplified and is an apples to oranges comparison. It compares the increase in stock values with the appreciation of home values. It completely ignores the equity gain due to mortgage paydown and appreciation and the tax benefits of depreciation. When all sources of returns are factored in, real estate can easily return over 30% making it still an excellent investment despite today’s higher interest rates.
Another important advantage of real estate that shouldn’t be overlooked is that it provides a permanent passive income. 3 out of 5 retirees outlive their retirement savings. Unlike stocks, real estate provides a continuous income stream without touching your assets.: