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When it comes to growing your money and achieving financial security, deciding between investing in real estate or the stock market can be quite the head-scratcher. It's not just picking one over the other; it's about understanding how each can play a different role in your overall investment strategy. Many people own their homes, and lots of American workers have some of their retirement savings tied up in stocks. Both are big players in the investment game, but it's not always clear which one should take the lead.
Let's take a look at what each investment type brings to the table. This chart here shows how much you could have made if you put $100 into real estate (that's the red line) and the stock market (the blue line).
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Unlocking the Potential of Real Estate Investments
Owning real estate can feel more solid because it's something you can touch. It can bring in regular income if you rent it out, and it's also known to stand up well against inflation. Plus, you get some very significant tax breaks, which is always nice. Say you buy a $100,000 property with just $20,000 down; if the property's value goes up, you could make a decent profit. But, real estate can be pricey to get into, it's not easy to sell off quickly if you need cash, and it can be a hassle to manage, especially for rental properties.
The Dynamics of Stock Market Investment
Stocks, on the other hand, are much easier to jump into and out of, you can spread your money around different types of companies easily, and you don't need a lot of cash to start. Historically, stocks have given better returns than real estate. But stocks can also be a roller coaster ride with their prices going up and down with the market's mood swings.
Insights into Returns and Risk Management
Looking at the long-term, things like the Vanguard Real Estate ETF and the S&P 500 ETF show us that both real estate and stocks have their ups and downs, and how well they do can depend on how the economy's doing. Some people might prefer the steady feel of real estate, while others might like the flexibility and growth potential of stocks.
Diversification: Balancing Risk and Reward
Smart investing is all about not putting all your eggs in one basket. Having a mix of real estate and stocks could help you handle the risks better and take advantage of what each has to offer. Real estate can be a more stable, long-term bet; while your money might be tied up a bit longer, the value of your property is likely to stay solid even when the economy gets shaky. It's a way to guard against inflation and gives you the chance to earn a steady income and appreciation over time.
On the flip side, stocks can be quite the wild ride. They have the potential to grow your money quickly, and you can sell them off fast if you need to. But remember, the stock market can be unpredictable—values can swing dramatically, and it's possible for investors to see their wealth take a big hit in a single day's trading. Balancing these two can give you the best of both worlds: the security of tangible assets and the opportunity for quick growth.
The key is to mitigate one risk against the other by having a diversified portfolio.
Final Thoughts
So, the tug-of-war between real estate and stocks isn't about which one wins; it's about how you use them together to meet your financial goals and what you're comfortable with when it comes to risk. Both paths can lead to wealth, each with their own set of pros and cons.
For those who like the idea of investing in real estate but don't want to deal with the hassle of managing properties, there's something like the Blue Lake Multifamily Fund. This lets you put your money into real estate through a fund that's managed by professionals. This way, you can still get the financial benefits and tax perks of real estate, but without the stress of being a landlord. It's a more laid-back way to add real estate to your investment mix.
As always, Be Bold, Be great, and Keep Pushing Forward!
P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.
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If you are an accredited investor interested in learning more about passively investing in multifamily properties, click here to complete our investor form and schedule a call with our Investor Relations team.
About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.