Santa Cruz Real Estate Blog

Real Estate Returns VS. Stock Market Returns

real estate returnTruth be told, comparing historical stock market returns with real estate returns is an apple to oranges affair but it is still possible to get a general idea of how each one fared over a specific time-period through Exchange Traded Funds (ETFs) and their historical returns in asset value.

First, let us define what an ETF is:

An ETF is a security that holds and tracks a collection or group of securities (i.e., stocks). ETFs are listed on an exchange just like a stock and therefore trade just like stocks.

For this particular example, the following ETFs will be compared as they give a good indication of the overall results of the U.S. Stock Market and U.S. Real Estate over a 10-year period. :

  • S&P 500 ETF Total Return (SPY)
  • Vanguard Real Estate ETF Total Return (VNQ)

At the time of this writing, the 10-year average return for SPY was 11.39% while the average return during the same period for VNQ was 8.68%.

This, of course, does not include the dividend yield or even rent paid to the investor during the given period.

Again, measuring stock market returns to real estate investment returns does not give a clear indication of which one offers the investor a better absolute return but it does help to show that both their asset values do increase at a decent rate over time.

If there were a way that rental income could be averaged and factored in alongside real estate asset values during a given time frame, there would more...

The Differences Between Real Estate and Stocks

So what differentiates stock investing from buying real estate?

buying investing real estate property in santa cruz

For one thing, stocks are usually the more popular investment because people with large or small budgets can invest in them.

On the other hand, investing in real estate requires a larger upfront payment, which most small-time investors do not have.

Some of the fundamental aspects of real estate investing are as follows:

  • Entails the purchase of physical land or property.
  • Rent can be collected for a steady income stream.
  • Investors can make money through property appreciation as well.
  • Purchased property can be leveraged to acquire more holdings.

The general particulars of stock investing are as follows:

  • Buying a stock of a company is buying a piece of that company.
  • Investors make money when the value of the stock increases.
  • Investors make money when companies pay out dividends (not all companies pay dividends).
  • Dividends may be reinvested to purchase more stock of a company and thus grow the initial investment further.

Even though stock investing has traditionally been the more popular investment vehicle when an investor purchases a piece of real estate they own a tangible asset. In other words, they own something concrete and not a piece of paper stating that they own part of a business they will most likely never...

What's the Better Investment : Real Estate or Stocks?

stock marketAn investment portfolio of a mix of stocks and real estate is always ideal but what if owning both were not possible?

 What if you could only choose one of them and had to stick with it for the rest of your investing life?

 Which one would be the better choice?

 While stocks have been a traditional mainstay for investors for over two centuries within the U.S. - the New York Stock Exchange (NYSE) began in 1817 - many would-be investors have not considered the benefits of using real estate as an investment vehicle instead of just a place to lay one’s head.

 Real estate can offer lower risk, higher returns, and more diversification than stocks if invested correctly.

 That is not to say that stocks do not offer benefits to investors, it is just that real estate has many more practical applications that can translate into real-world value - value that a stock certificate can not achieve outside of the investment arena it is traded in.

 So, which one is the better investment vehicle?

 Each investor’s financial situation and goals are different which makes the final decision an individual one.

 However, sound investing information can go a long way to helping investors make a decision that is right for them.

 By no means is this article trying to negate investing in one asset class over the other. Its main objective is to ...

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