Better Investment: Stocks or Real Estate?

Roller coasterIt’s been dubbed the worst week for stocks in at least 75 years. If you were watching last week’s tail-wagging, as the DOW dropped 700 points in ten minutes, dipped below 8,000, then rallied back and forth to soar to record gains Monday, you probably have whiplash.

Yet, this latest stock market shudder comes on the heels of a real estate mortgage debacle of epic proportion.

Individual investors need to make a choice in these volatile times. Do you take a chance on the stock market? Is real estate investment a better bet?

One of our members, Charles H., wrote to us to offer his opinion. Charles and his wife live in San Diego, an area hit by a tsunami of foreclosures. They live on a fixed income, a combination of rental property, bonds and social security.

“I’m 63,” Charles writes, “and I have just lost more than 20% of my retirement account over the past week in the stock market. But, over the past 18 months, my rental property has also depreciated about 20%.”

So how does an investor choose between two seemingly losing propositions?

Charles is going with his gut. “All in all, I am much less comfortable with the stock market than my local real estate market. Given the global nature of this economic crisis, my confidence in the stock market is very low. I don’t see myself investing in stocks again for a very long time.”

For those who don’t like riding roller coasters, the real estate market may seem more grounded.

Charles thinks so. “The difference between the two is that my rental property continues to produce income and I have less cash tied up in it because of my leveraged position. At least it’s close to home and seemingly within my control. I see some good prices in good neighborhoods now.”

We want to know what you think. Please comment below to share your opinion with other investors like you.

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See our feature Better Choice: Fund IRA or Pay Down Mortgage

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