Rather than looking into real estate, investors look to the stock market as a way to “get rich quick.” They do not want to invest a lot of money, time, and work, so they look to liquid assets like stocks. However, unlike real estate, the movement in the stock market does not necessarily indicate the performance of the economy as a whole. The stock market mostly bases itself off of buildup and a herd mentality. Real estate, as a tangible asset, offers itself as a safety net with worthwhile long term returns.
For example, on March 18, 2020, hedge fund manager Bill Ackman had a gloom and doom attitude and said in a CNBC interview that “hell is coming” and then shorted the market as a result of the recent surge of COVID-19 in the United States. Investors started to follow suit and sold most of their positions, leading to the Dow Jones Industrial Average’s worst one-week performance since the 2008 financial crisis. However, not long after, Ackman started to long the market and made $2.6 billion from shorting and doubling down on his hedge fund’s existing positions, such as Hilton Worldwide Holdings, Warren Buffett’s Berkshire Hathaway, and property group Howard Hughes Corporation (McCrum and Aliaj, “Inside Bill Ackman’s $2.6bn big short”). Now, as of almost a month ago, the Dow had its best quarter since 1987. However, the rally in the stock market was simply a way for investors to buy low and cover up the U.S. economy’s big flaws such as the U.S. dollar’s implosion and the debt bubble that could burst very soon.
Companies come and go, but people will always need to live somewhere. Populations usually increase, which means that more people will look for a place to stay. Furthermore, Daniel Lesniak, founder of Orange Line Living, a real estate brokerage firm, mentioned that real estate offers a wide variety of options, as “you can buy a house with the intent of flipping it, then rent it if the market turns south. If you buy a rental that appreciates in value significantly, you can sell it. Real estate can be refinanced, rehabbed, and rezoned” (“Real estate is still the best investment you can make today, millionaires say – here’s why”). Unlike a stock, where an investor buys and watches its value change by outside factors, real estate is an asset where the investor can control and tinker with it in any way he wants.
Furthermore, if an investor does his research, his investment will always appreciate over the long term, i.e. a few decades. Some people might not be able to afford waiting that long for an investment to pay off because they have to pay expenses monthly. In that case, for some years they should primarily focus on investing in their own professional growth because that will not only provide the most stable source of income, but it will also drive up the actual productivity of the economy instead of having the economy artificially grown through the constant printing of money. At some point in life, they will most likely have saved enough money to jump into real estate investment.
In the end, each investor has a different risk tolerance and different ability to take on risk, not to mention they should diversify. All factors considered, look to real estate instead of stocks, as real estate gives an investor better returns given the lower risk relative to other assets.