Stocks vs. Real Estate

Both real estate and stocks have had their day, but the question you need answered is this: Which contender is the superior long-term bet today?

Round 7
One visitor to wrote: "I once lost 20% in one week holding Hewlett-Packard stock. That situation will never happen to me with a smart purchase in real estate."

He's got a point. Because real estate takes so much time and effort to buy and sell, it rarely soars or plunges. The Francis-Ibbotson study, for example, found that over the 27 years surveyed, homes in their worst year returned 3.5% and commercial property lost only 5.6%.

The S&P 500's worst annual performance was a 22.1% decline. That doesn't mean you can't lose your shirt and everything else on real estate. Hartford, Houston and Los Angeles, for example, experienced 20%-plus price drops at some point since the '80s. But those declines unfolded over several years, and all three markets recovered.

On the other hand, we're still a ways from knowing whether the current slowdown in the housing market is about to end or is only getting started.

Performance Leverage Costs Taxes Transparency Effort Volatility Diversification Decision
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