Real Estate VS the Stock Market in Economic Uncertainty

In times of economic uncertainty, real estate and the stock market have significant impacts on your finances. That’s why comparing the two is essential to ensure you achieve your financial goals with lower risks involved. Is it better to invest in real estate or the stock market?

In this post, you’ll learn the differences in investing in real estate and the stock market.

Real Estate Vs. Stock Market: Volatility

With mutual funds, investors can put in place as low as $100 per month. On the other hand, real estate needs higher capital in substantial amounts. That’s why stocks are far more volatile or liquid as compared to real estate investments.

Here are some good-to-know facts about the differences in volatility between stocks and real estate:

  • Borrowing against stocks is easier as compared to real estate investments, if you want to venture to other businesses, like franchising. Franchising is one type of investment that you might want to consider, so check this directory site for more details.
  • Stocks are flexible, easy to sell, and very liquid. You can reallocate stocks into your retirement account and are tax-free. Because of the volatility of stocks, the percentage growth is higher in one year.
  • If the company or economy is facing challenges, stocks can be extremely volatile, and your investment can be dissolved in an instant, resulting in bankruptcy.
  • Real estate may provide a lower percentage growth in the first year, but once you have enhanced and established your asset, it becomes appealing, and the profit keeps pouring. That’s why choosing the right real estate investment is a must.

Real Estate Vs. Stock Market: Volatility: Return on Investment

As an investor, you want to make sure you get a high and steady return on investment. Of course, there are a lot of factors to consider when choosing the right investment, whether it is an online business or e-commerce, stocks, or real estate. You would either earn fast and lose quickly, or earn slow but gain a higher revenue as time goes by.

Here are the facts about the average stock market and real estate return on investments:

  • Stock Market: According to Credit Monkey, in the 1950s, the stock market had high returns of up to 16%. The average returns of the stock market today is around 7%. In the 2000s, the returns are negative 3%. For the last decade, the average return is 6.88% due to the tremendous economic impact in 2008, with the stock market extremely affected.
  • Real Estate Market: According to Investopedia, the average 20-year return on investment in the commercial real estate runs at around 9.5%. On the other hand, diversified and residential real estate investments average 10.6%, which is better than commercial real estate. The best performance goes to real estate investment trusts or REITs with an 11.8% average annual return.

Factors Affecting the Stock Market and Real Estate Investments

Several factors are affecting the performance or return on investment in the stock market and real estate investments. As an investor, you have to be aware of these factors to ensure you make a sound decision whether to push through or pull out your investment or even closing the deal.

Here are the important factors to consider when choosing investments:

  1. Stock Market

  • Economics: The economic factors you have to consider that move the stock market include economic growth, unemployment, inflation, and interest rates. A higher profit for companies means a higher value for stocks. Stock markets soar high with declining interest rates and so does the falling unemployment rate or economic growth.
  • Politics: Electing a friendly foreign government moves stock markets higher. The negative and positive effect of politics on the stock market highly depends on the country and other circumstances, but political uncertainty generally moves stock markets lower.
  • Man-Made and Natural Disasters: These disasters may affect the economy negatively, as well as the stock market. Markets tend to move down because investors fear the negative impacts of the disaster on economic growth. A man-made disaster, like the blowing up of an oil refinery, can put downward pressure on stock prices.
  • Market Psychology: There are times when everyone wants to buy and also periods when panic happens, and every investor is cramming to sell.
  1. Real Estate

  • Demographics: The composition of a population or demographics, such as race, age, gender, income, population growth, and migration patterns significantly affect how real estate is priced. Any major shifts can dramatically impact real estate trends for many years.
  • Interest Rates: Use a mortgage calculator if you’re planning to buy a property with a mortgage. Changes in interest rates influence an investor’s ability to buy a residential property. The lower the interest rates, the lower is the cost to get a mortgage to purchase a home. It creates a higher demand for the property, which also pushes the prices up.
  • The Economy: It is measured by several economic indicators, including the Gross Domestic Product or GDP, employment data, manufacturing activities, and the prices of goods. Generally, when the economy is sluggish, so is the real estate.


When choosing between real estate and the stock market, you have to consider several factors, most especially the economic factors. Generally, when there is economic growth, your return on investment increases; however, when the economy is in a downward direction, your passive earning potential also decreases. In times of economic uncertainty, it’s best to weigh your options and talk to the experts before making a final decision.

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