Pros and Cons of Stocks vs Real Estate: Is one better than the other?

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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[GrahamStephan]

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 :)

[the_jean_mum]

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?

[widewatching]

Can't Believe your Channel is Free
Thank You! Real Value Here.

[jasonchen]

Great Video Graham. I'm a 23 years old real estate agent from China, I got lots of great advice here, keep up the good work man!!

[vpham]

Having dabbled in both stocks and real estate, I prefer stock. It's liquid, very little commission paid to others, and if you do your research, you can hedge your losses. With real estate, I have to pay hefty commissions, it's not liquid and I hate dealing with people, particularly shady contractors and renters.

[thedoncan]

I like it that your content is pretty genuine, logical and honest and not so click-baiting like a lot of other channels.

[Mlindsay]

Graham your advice never ceases to amaze! I just went under contract on my first home and wanted to share! I'll be having roommates to help with my payments and build equity faster. Could you please make a video regarding how someone like me can maximize the advantages of having roommates and maybe a better way to manage it? Thanks!!

[mikemagruder]

Great breakdown and very honest. It really does come down to personal preference and what one is comfortable with. Warren Buffett would take the counter argument that stocks are a far better investment, but the truth is that it doesn’t matter which is “better”. What matters most is adhering to basic financial principles like buying $1 of value for $.50, buying something that generates a good rate of return over time, etc. There are some great books out there that discuss this:
1. The Warren Buffett Way
2. The Little Book That Beats the Matket
3. Rule #1 Investing
If you follow the advice in these books, or what Graham is saying, it doesn’t matter which investment you choose. You can make 10-15% per year in both. This is how one builds wealth! Keep up the great work!

[rsimpkinsg]

He compared the average stock market return to probably best case ever for a land lord.

[aleksanderdoleqi]

"The Return of King Graham". That's the notification I get everytime you post. Thank you for taking the time to make these videos man!

[mwKqs]

By not allowing the stock investment to use leverage is not a fair comparison. Yes, you can find brokerage allow overnight leverage 2:1, 4:1, &6:1. Even the interest rates on leverage for stock is the same or sometime lower. Totally agree with you! best to invest into both market.

[DavidDiMuzio]

Great video man. Very well put. I agree based on my experience, particularly with real estate.

[kidcitylynnwood]

My kid is, just a kid to me, be proud of yourself, look around, do you see many if any that have the knowledge you do. Great info, thank you.😊

[CrackinDutches]

Like that jacket Graham. Its rare to come across real estate/investing videos on youtube with so much valuable info packed into it, keep up the great content.

[nkatekoshibambu]

Thank you Graham, so perfectly explained. One of the best vids out there on the subject!

[UnbreakableHonor]

Both are good investments although I stay away from real estate because I like to stay location independent

[Foslopac]

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

[harikrishnanchandramohan]

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

[Shura]

Hi Graham, just wanted to say THANK YOU! I watched this video about a year ago and went straight to open the equivalent to a 401K in my country. I'm really glad I did it! Thanks man! Now, I'm ready for the next step, investing in stocks - cuz easier - and hopefully soon real estate. The information you put out on your channel is worth pure GOLD! Can't thank you enough. And... you're a lot funnier than all the other investment guys on YT :D Love your channel!

[young]

This is amazing. Thank you for actually breaking it down and giving us numbers.