Should I Invest in Stocks or Real Estate?–Charts of the Day

Strange Skyscraper in Bochum, Germany.
  • We should invest in stocks or real estate, precious metals to fight inflation and the crisis.

  • In the past 25, 80, or 150 years, stocks over-performed real estate.
  • In the last 12 months, too.

  • Overweight stocks if you can take higher risks.

Nice house. Prices can Also Fall.

Stocks or Real Estate Investing–The Dilemma

What is better, should we invest in stocks or real estate, gold, or other assets?–this is an evergreen investing question. But under this year’s extraordinary circumstances, the decision may be more important. In the middle of a coronavirus-crisis, in the shadows of heavy economic, financial and political uncertainties, safe havens may get more popular. Some people are looking for tangible, real assets, physical investments, inflation hedges. (Other people buy shares of strong online businesses, “quarantine stocks”.)

Gold futures have reached a new historic high on Friday ($1,980.10), and stocks are surprisingly strong. Stocks aren’t tangible, but may also serve as inflation-hedge. One of the biggest personal finance challenges today is to keep the real value of our investments. In a world where central banks print virtually unlimited amounts of money.

I’m wondering if it was better to invest in stocks or real estate in the past? What is financial history teaching us?

U. S. Real Estate in a Quarter of a Century

In real terms, that means, inflation-adjusted, the Case-Shiller Home Price Index surged to 160 from 100 points in 25 years and 5 months. That is 1.9 percent p. a. At the end of the 90s, a real-estate bull market began in the US, but it was interrupted by the “Lehman-crisis”. A longer downtrend emerged in approximately 2007-2012. The effects of the coronavirus-crisis are still unclear. The chart of shows no signs of falling prices in May yet.

Chart: The Case-Shiller Real Estate Price Index, 1995 Base. Surged to 160 points from 100.
Chart: The Case-Shiller Real Estate Price Index, 1995 Base (Source:

The S&P 500 Total Return Index rose to 6,227.81 from 575,52. (End of December 1994–End of May 2020.) This was almost an 11-fold surge and 9.83 percent p. a. The US inflation index increased by only 70.6 percent which equals 2.1% p. a. (The S&P 500 Total Return Index contains the positive effect of the dividend payouts. The “normal” S&P 500, doesn’t.)

The conclusion is, US Stocks had a 7.7% yearly real return in the last quarter of a century. Far more than the 1.9 real return of the home sector in all the States. (Some regions and other sectors, like commercial or industrial objects, may be different.)

Real Estate ETFs vs. Stocks listed 28 real estate ETFs investing in the U.S. real estate market. Also, at least 11 global real estate ETFs exist. The returns of all 39 funds are very different, between two-digit returns in positive and two-digit ones in negative, year-to-date. We charted four of them, compared with the S&P 500 index. All real estate ETFs underperformed the leading stock market indicator in the last 12 months. The two global funds sank much lower than the other two targeting the US market.

Chart: Invest in Stocks or Real Estate. Four ETFs lagging the S&P 500 index.
Chart: Invest in Stocks or Real Estate. ETFs: Real Estate Select Sector SPDR Fund (XLRE, USA), Vanguard Real Estate ETF Total Return (VNQ, USA), WisdomTree Global ex-US Real Estate Fund (DRW, Global), iShares International Property ETF (WPS, Global), and the S&P 500 Stocks Index. 1 year. (

Stocks Beating Real Estate Investments

Read these interesting quotes about two long-term types of research.

Since 1940, the median home value in the United States has increased at an annualized rate of 5.5%. Adjusting for home size, the annualized increase on a per-square-foot basis drops to 4.6%. After accounting for inflation, the average home value has risen by just 1.5% per year. Stocks have generated roughly 7% per year over the long run after accounting for inflation. 



A group of researchers from the San Francisco Fed (…) found, from 1870 to 2015, worldwide housing returns were 6.9% after inflation, versus 6.7% for the stock market. Those were global numbers. In the U.S., stocks beat real estate 8.5% to 6.1% in real terms. And they also showed the volatility of real estate prices was lower than stock market returns.




Volatility is used to measure the risk of investments. A lower volatility means lower risk.

Should I Invest in Stocks or Real Estate, Then?

Germans are calling real estate investments “Betongold” (concrete gold), they trust very much in this asset. But, as you see also on these charts, real estate is not always bullet-proof, crisis-resistant. But possibly in the long term, it may be. Real estate ETFs, REITs seem like other stocks for me. Volatile and risky investments. But maybe less risky than the classic stock market.

So, should we invest in stocks or real estate? I would say, both. Or, better, all three: Precious metals, stocks, and “concrete gold”. Diversification has a lot of sense. But if you are young, if you can take higher risks, overweight stocks. Historical data shows this asset over-performed real estate in many periods.



I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research or consult your advisors before making any investment or financial or legal decisions.

I’m long in gold miner stocks and silver, short in the S&P 500, and the German DAX at the time of writing.

(Photos: Cover image: Skyscraper in Bochum. Image by Peter H from Pixabay)

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