Ideally a diversified financial portfolio would include both real estate and stock market investments. But, which investment contributes more in building toward higher personal wealth? This was a question posed recently by New York Times author Renae Merle, who believes there has been a paradigm shift relating to investor confidence in the real estate market. This shift paves the way for Wall Street investors to make their claims for stock market investment superiority to real estate investments. Here are the arguments on both sides.
Real estate is the largest investment an average person will make in their lifetime. Throughout the financial history of America real estate ownership has been the cornerstone to personal wealth. The basic model of successful real estate ownership is to purchase real estate in a quality location, hold it for at least ten years and hopefully have your investment double over that period of time. Though the current real estate market has experienced decline in values for most investors, long term investments still hold good opportunities for wise investors. The best argument for real estate investments over stock investments is that though real estate has seen sharp decreases in value, overall it’s much more stable than stocks and promises much greater long term results.
On the other hand, the stock market has success stories of cunning investors turning five-hundred percent profits on investments within a year. These figures are nearly impossible for real estate which is seen as a more conservative long term investment. Most stock market investors don’t put nearly as much into the stock market as they do into their own property. But, with the opportunity of exponential growth, greater profit on stock investment than real estate is certainly attainable. With the real estate market being lackluster as it is Wall Street hopes people will divert funds from real estate to stocks. Technology stocks in the 90’s were particularly lucrative and there will always be fields in the stock market that produce greater gains than real estate.
Which areas do you have more confidence in, and how would you divide investments in your portfolio?
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