Why Real Estate Trumps Gold, Stocks, and Crypto

Gold, Stocks, Crypto, and Real Estate: Why One Investment Tool is Better Than the Others

By Steve Davis, CEO – Total Wealth Academy

Stock market investing is on the rise. A recent survey found that 61 percent of Americans now own stock, which is up from only 52 percent a decade ago.

When I see stats like those, I can’t help but think, “Nice landing, but wrong airport.” In other words, I applaud those who are investing, but I wish they knew that the stock market was not their best tool.

The problems with stock market investing

The main problem with the stock market is volatility. An upward trend can change rapidly and unexpectedly, and when it does, months — if not years — of gains can disappear in a matter of minutes.

During the past 100 years, the stock market has crashed 18 times, which means a crash happens once every six to seven years. For stock market investors, it’s not a matter of if it crashes, but rather when it will next.

While gold has been enjoying historic highs over the past several years, it’s also marked by volatility. In fact, fluctuations in the stock market typically have a negative correlation to the price of gold. When markets go up, gold goes down, which makes gold just as volatile as the stock market.

When it comes to cryptocurrency, volatility is part of its DNA. Crypto, unlike gold or stocks, has no intrinsic value. The crypto market is based entirely on speculation.

Whereas the stock market has a major crash every six to seven years, crypto had seven major crashes in its first decade, including a 53 percent drop in May 2021 that erased $1 trillion in crypto value in a week’s time.

For those who are relying on volatile investments for their retirement, timing is everything. Imagine that one of those periodic crashes happens in sync with your retirement. Do you have a Plan B when your 401K is suddenly half of what it was the day before?

Why real estate is a better option

There are a number of reasons why real estate is a better option than the stock market, gold, and crypto. The most notable is its lack of volatility.

Real estate investing addresses the problem of market fluctuations by providing you with the opportunity to secure a second stream of income. When you have a rental property, you continue to have a return on your investment, regardless of what’s happening in the real estate market.

I know this from experience. My rental properties lost 35 percent of their value in 2007 when the Great Recession rocked the market, but my rental income stayed steady.

With real estate investing, you also have more ways to make money, as stocks, gold, and crypto only provide a profit when the market increases. An increase in market value is just one of four ways that real estate provides a return on your investment.

Cash flow from rental income is the second way that real estate investments can provide income. The third involves the increase in equity that happens when the principal on a mortgage is paid down, and the fourth involves equity capture, which is something that is realized when a property is purchased for less than its actual worth.

An accelerated rate of return is yet another factor that makes real estate the more appealing investment option. With the stock market, the average rate of return ranges from 7 to 10 percent, but with real estate, the average rate of return is 20 percent. Even if you’re getting the highest average return on your stocks, real estate is still providing twice that.

Incorporating diversification in your investing

Most financial advisors will tell you that you can mitigate the volatility in the stock market through diversification. While that is true on some levels, diversification does not address the systematic risk found in the market.

I agree that diversification is important. If all of your eggs are in one basket, you’ll spend the rest of your life worried about someone kicking over that basket. Still, I encourage you to focus on real estate investing and diversify by investing in more than one property.

I also encourage you to embrace risk. Diversification is effective, but it doesn’t do away with the risks associated with investing. To grow as an investor, you need to accept that nothing of value comes without risk.

Real estate is a better investment option, but it is not a guaranteed option. There are risks involved and, unfortunately, those risks keep some people from investing in real estate.

Becoming an educated investor

Real estate is an all-around more reliable investment option than stocks, gold, or crypto. However, as with any investment, there is a learning curve.

Investing in some education about real estate investing will help you to increase your returns. I strongly recommend that you read some books, take some classes, and find a mentor or a group of investors to guide you before you put one dollar into real estate.

Any investment journey will have its share of ups and downs, but the key is to choose vehicles that have more ups than downs. Among all of the options that are available to investors today, real estate stands as the least volatile and the most robust. Those who are willing to become educated investors will find real estate to be a secure path to strong returns.

— Steve Davis, CEO of Total Wealth Academy, has spent three decades helping Americans, as well as those outside of the US, become financially independent. Through his Total Wealth Academy, which teaches people how to build a second stream of income with active and passive real estate investment, Steve has trained hundreds of thousands of people seeking a practical path to financial empowerment.