Stocks vs. Real Estate
Excerpt from a post I made on the stock investing forum "The Motley Fool." The audience is stock investors who are equally passionate and successful in stocks as the BP community is in REI. Many of them think going all in on REI is as silly as going all in on stocks would be to Brandon Turner (relax Brandon, it's a joke!)
My goal is to discuss the powerful polarization of investors towards either stocks or real estate. Post begins below. Mind you this was posted behind enemy lines in the forums of the Motley Fool, the stock investing equivalent of BP. Enjoy.
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Below is the start of a saga about Real Estate Investing - wrought with accusations... Against who you might ask? Everybody that is successful in stocks. What a stereotype! Wow! Perhaps I'm biting off more than I can chew, but here goes.
Speaking of buying property, I've noticed something on the Motley Fool boards that has surprised me. The more I read about stock investing, the more I observe that many authors of stock investing articles are utterly averse to real estate investing. I'm reading that houses are often liabilities rather than assets, that they are an anchor that takes away from quality of life and peace of mind, that they don't yield returns that can compare to the equities market.
I've recently read and listened to several real estate books as well as hundreds of forum posts, articles, and podcasts from Bigger Pockets (A wildly successful club - the Motley Fool doppelganger in Real Estate), and finally bought my first house at the ripe age of 22. I myself could hardly hope to be called a "real estate investor" at this point, but it's a start.
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I think a majority of Motley Fool investors would agree that REI is a way to diversify and hedge your portfolio against the equities market, but not much more than that. Most don't seem to really consider it an investment, or at least not a worthwhile one.
Interestingly, our friends at Bigger Pockets have a reciprocal view. The gospel over at Bigger Pockets is that REI is the number one way to achieve financial freedom and long-term wealth. Stocks are nice too I guess, but they are a mere afterthought. Why tie up all that capital in a Roth IRA when you could be using it to buy up, rehab, rent out, and refinance properties, one after another? Real estate has magical properties of leverage, creativity, and scale-ability that you just won't find in stock investing.
Real estate is wildly complex and scary if you don't know what you're doing. Then again, so is stock investing. There are many smart, successful investors on both sides of the aisle. I believe that in a sense, which ever type of investment you think is better, will be. Perhaps it's a self-fulfilling prophecy. Both types of investing require a lifetime of self-education. Whichever class of assets you are better at investing in will probably be a better investment for you. Simple as that.
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In summary, there seems to be a powerful polarization among investors toward either stocks or real estate. I haven't met many people that are passionate/successful with BOTH classes of investments, but perhaps I will meet some investors here who match that description after all.
Caleb Teachout
Stay Scheming