The Winning Combo: Why Investing in Real Estate AND the Stock Market is the Smart Move

A lot of people wonder how to get started as an investor and where they should put their money.  The two opportunities most investors hone in on are either the stock market or real estate and they think they need to pick one or the other.

The truth is that an investor can choose to invest in both assets and that may be suitable for most people. Here’s why:

Diversification: One of the golden rules of investing is diversification – spreading your investments across different assets to reduce risk. Real estate and the stock market represent two distinct categories, each with its own set of risks and rewards. By allocating funds to both, investors create a robust portfolio that can weather the storms of market fluctuations. When one sector experiences a downturn, the other may well be on the rise, providing a hedge against volatility.

Stability Through Real Assets: Real estate, often regarded as a tangible asset, offers a sense of stability that the stock market sometimes lacks. Physical properties, such as residential homes or commercial buildings, have intrinsic value and can provide a steady stream of rental income. Even in economic downturns, people need places to live and businesses require space to operate, making real estate a resilient investment over time.

Liquidity and Growth in the Stock Market: On the flip side, the stock market boasts liquidity and the potential for rapid growth. Stocks represent ownership in companies that can innovate, expand, and generate profits over time. The ability to buy and sell stocks quickly provides investors with liquidity, allowing them to capitalize on market opportunities and adapt to changing economic conditions.

Income Generation: Real estate and the stock market offer unique income streams. Real estate investors can benefit from rental income, while stockholders may receive dividends from profitable companies. Combining these income sources not only enhances overall portfolio returns but also creates a more reliable and diversified cash flow.

Long-Term Wealth Building: The magic lies in the long-term perspective. Both real estate and the stock market have historically demonstrated the potential for substantial appreciation over time. By adopting a buy-and-hold strategy, investors can leverage the power of compounding and accumulate wealth steadily. This long-term approach mitigates the impact of short-term market fluctuations and allows for the realization of significant gains.

Rather than choosing one over the other, savvy investors may choose to own both stock investments as well as real estate. A simple way to get started in the stock market is to follow Warren Buffett’s advice and start by purchasing one of the S&P 500 index funds. You could do this in an employer sponsored 401k plan or open up a Roth IRA. We work with a handful of financial planners and if you need a referral, we’d be happy to refer you to one! 

A great way to get started in real estate is to purchase a 2-4 unit property and owner occupy one of the units.  We discuss this strategy in more detail here! 

If you’d like to book a time to chat more about developing a long term strategy, click here!