Stocks Vs. Real Estate

The Apprentice #3, Kendra Todd, was on yesterday’s Bulls & Bears. I admit, I was hoping to see her cry again, but alas, no such luck. Now loose in the real world, Kendra is a real estate agent in Florida. Her segment dealt with which is a better investment right now, stocks or bonds. In Kendra’s opinion, it’s real estate. Definitely, real estate.

Now, let’s make this clear. Real estate is a nice investment. I hope everyone owns their own home. But in the long run, real estate will never, ever, ever, ever outpace stocks. Never. This isn’t just my opinion, it’s reality. It won’t happen because it can’t happen.

A house is simply an asset. No matter how hard it tries, it will never be anything more than an asset. A house does its job by just sitting there. But a stock is different. A stock is part ownership in a corporation. A corporation is people using assets to create wealth. This ain’t just a matter of definitions.

You can buy a share of stock of a company that can buy a house. A house can’t invest in a corporation. You can form a corporation and issue stock. With the proceeds, you can do cool things, like…buy a house and rent it for profit. After a while, you’ll have enough money to buy another house. Then another and another. Soon, you’ll have a nice stable of houses. That’s what businesses do—they grow. If they don’t grow, they’re replaced by businesses that do. It’s that simple, and a house can never do that.

I know people treat stocks like lottery tickets. And sure, stocks often act like lottery tickets. But ultimately, stocks are claims on real assets. Stocks are a unique investment. No other investment offers you what stocks can do. That’s why every analysis of long-term returns shows that stocks always beat everything else. For the long run, stocks are the best investment to own. Period.

Posted by on July 18th, 2005 at 10:30 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.