Should You Invest in the Stock Market or Real Estate?

2026 | Investing for Growth Client Conversations

In weighing investment properties vs. stocks, it’s important to consider the pros and cons.

What You Need To Know

Real estate, which can be financed with borrowed funds, has historically increased in value over time. But property maintenance, taxes, and insurance can be expensive.

Stocks have traditionally offered higher long-term returns than real estate. Mutual funds, ETFs, and retirement accounts offer professional management. But markets can be volatile, especially in the short run.

Real-estate investment trusts (REITS) offer a way to invest in both stocks and properties. But REITS are sensitive to changes in interest rates and are sometimes vulnerable to property-specific risks.

Investing for Growth

Could International Markets Be Gaining Momentum?

As international stocks regain momentum, now may be an opportune moment to reevaluate equity allocations.

You’re standing at the crossroad of an important investment decision, torn between the allure of the stock market and the tangible promise of a real-estate investment property. But which investment is better for you?

Owning property is often viewed as a major tenet of the American dream: a sign of financial success. A recent Gallup poll shows more Americans view real estate as the best long-term investment vs. stocks or mutual funds by a 38%-to-20% margin.¹ But real estate is sometimes viewed as more of a younger person’s game. Gen Z and Millennials (ages 21-43) tend to view real estate as the ultimate investment, while their older counterparts (ages 44+) gravitate toward stocks as the smartest path to wealth.²

Both stocks and real estate have advantages and drawbacks. Let’s take a look.

Potential Advantages of Real Estate

Real-estate properties have historically increased in value over time. For example, consider the growth from 1970 to now; then, the average price of a US house was $27,000. By early 2026, a comparable investment property would be worth approximately $500,000, though values vary widely by location and property type.³ For a long-term owner, that appreciation could represent a meaningful source of retirement funding if the property were eventually sold.

Owning real estate also allows qualified buyers to use leverage: a down payment can be paired with mortgage financing for the remainder of the purchase price. Qualified homeowners can deduct mortgage interest on up to $750,000 in mortgage debt. Additionally, real estate is a physical asset with intrinsic value, ensuring it will retain some value even during severe financial downturns.

Potential Disadvantages of Real Estate

While it’s possible to buy an investment property with as little as 5% down, it can be much more difficult for potential buyers to come up with the 20% down payment necessary to avoid private mortgage insurance, which significantly increases the monthly payment amount.

Additionally, it may be difficult for many 25-year-olds to spare the time and attention needed to maintain an investment property while they’re just beginning their careers—not to mention the significant expenses associated with hiring property managers and paying for property taxes, insurance premiums, repairs, renovations, and labor. These ongoing costs could very well rise over time.

Real-estate investors also must consider the time and resources needed for evaluating new properties, tenant screening, addressing tenants’ questions and concerns, and maintaining a property. Finally, there’s the issue of limited liquidity; it may take months to sell a house or other investment property, particularly in a slack housing market.

Investing for Growth

Could International Markets Be Gaining Momentum?

As international stocks regain momentum, now may be an opportune moment to reevaluate equity allocations.

While equities and real estate are both considered successful long-term investments, stocks have historically held a clear edge.

Potential Advantages of the Stock Market

Alternatively, the stock market offers another avenue for investment. A young adult can begin with relatively modest amounts and, by investing consistently over long periods, may benefit from compounding—though results will depend on market performance, contribution levels, fees, and time horizon.

The primary effort required is choosing which companies to invest in and monitoring them on an ongoing basis. To help mitigate some of those challenges, an investor may consider purchasing shares in mutual funds or exchange-traded funds (ETFs), which require less responsibility than direct ownership and can offer a diversified portfolio. Fees vary but are generally lower than real-estate fees.

While equities and real estate are both considered successful long-term investments, stocks have historically held a clear edge. As FIGURE 1 shows, a real-estate investor who paid $161,100 for a property in 1996³ (the average price at the time) would have seen its value grow to $514,600 by year-end 2025. But if the same amount were invested in the S&P 500 Index⁴ in 1996, it would have grown to more than $3 million over the next 30 years.

FIGURE 1

Stocks Have Significantly Outpaced Real Estate the Past 30 Years
Growth of $161,100 in Stocks vs. Real Estate (1996-2025)

Growth of $153,600 in Stocks vs. Real Estate (1994-2024)

As of 12/31/25. Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. Stocks are represented by the S&P 500 Total Return Index, which reflects price appreciation and reinvested dividends. Home values are represented by the Average Sales Price of Houses Sold for the US. Data Sources: Morningstar and Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, 7/26.

Furthermore, investing shares through accounts such a 401(k) or individual retirement account (IRA) allows for tax-deferred or tax-free growth. This tax efficiency can enhance long-term returns and provides valuable advantages.

Potential Disadvantages of the Stock Market

However, stock returns can be volatile due to several factors. Economic events such as recessions, interest-rate changes, and geopolitical tensions can significantly impact stock prices.

Moreover, company-specific performance, including financial health and earnings reports, also contributes to unpredictability. Staying abreast of companies’ financial results and trends impacting their industries is essential, but time-consuming.

What If You Could Have the Potential Benefits of Both?

Sometimes you don’t have to choose. Real-estate investment trusts (REITs) offer a blend of benefits between real estate and stocks. They provide exposure to real estate without the hassle of property upkeep and offer liquidity similar to stocks, allowing investors to quickly exit their investments if necessary. Additionally, dividends have been a meaningful component of REIT returns. REITs have outperformed the S&P 500 Index over the past 25- and 50-year periods, while stocks have outperformed over the 1-, 5-, and 10-year periods.⁵

On the other hand, REITs have several drawbacks, including high sensitivity to changes in interest rates, dividends that are often taxed at higher rates than other investments, and exposure to property-specific risks.⁶

While real estate offers stability and intrinsic value, the stock market has provided greater accessibility and returns. Ultimately, the choice depends on your individual preferences, risk tolerance, and financial goals. It’s also important to note that a well-diversified portfolio may include a mix of asset classes, including real state, stocks, and REITs.

Talk to your financial professional about which type of investment
is appropriate based on your financial goals.

¹ USA Today, “America’s Favorite Investment Is Not What You Think,” 7/3/26.

² Bank of America Institute, “2024 Bank of America Private Bank Study of Wealthy Americans,” 6/18/24. Most recent data available.

³ Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, Average Sales Price of Houses Sold for the United States [ASPUS], US Census Bureau and US Department of Housing and Urban Development, retrieved July 9, 2026.

⁴ S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.

⁵ The Motley Fool, “REITs vs. Stocks: Which Investment Is Right for You?” Matthew DiLallo, 4/1/25.

⁶ SoFi, “Pros & Cons of Investing in REITs,” Dunleavey, MP, 2/26/25.

Important Risks: Investing involves risk, including the possible loss of principal. • The value of the underlying real estate of real estate-related securities and REITs may go down due to various factors, including, but not limited to, the strength of the economy, the amount of new construction, laws and regulations, costs of real estate, availability of mortgages, and changes in interest rates. REITs are also subject to risks associated with property management, financing, and their ability to qualify for favorable tax treatment.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting, or legal advice. As with all matters of an investment, tax, or legal nature, you should consult with a qualified tax or legal professional regarding your specific legal or tax situation, as applicable. The preceding is not intended to be a recommendation or advice. Tax laws and regulations are complex and subject to change.

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