Stocks vs. real estate: Two approaches to building wealth

​Stocks and real estate are two of the most popular ways to grow savings. Some people prefer to buy stakes in companies, while others want to earn rental income. But which approach works better for the average investor?

Billions in five minutes

At a Berkshire Hathaway shareholder meeting, Warren Buffett was once asked why he invests in stocks rather than real estate. Buffett replied that the stock market offers more opportunities. The company can purchase hundreds of millions of dollars’ worth of securities within minutes without disclosing its identity to the seller.

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Real estate transactions are more complicated. Even after agreeing on a price, the parties continue to discuss financing, debt, tenants, the condition of the building, and the terms of the transfer. Owners, banks, lawyers, and creditors may all be involved, so closing a deal can sometimes take months or even years.

Buffett does not claim that real estate cannot generate returns. Berkshire purchased such assets after the 2008–2009 crisis, when prices fell sharply. However, stocks were also trading at low prices during that period, and transactions were much easier to complete.

Historical performance supports his choice. Since the beginning of 1988, the S&P CoreLogic Case-Shiller U.S. National Home Price Index has risen by approximately 374%. Over the same period, the S&P 500 gained around 2,218%, while its total return exceeded 5,000% when reinvested dividends are included.

Rent, mortgages, and cash flow

Buffett values the speed of a transaction, while Robert Kiyosaki, author of Rich Dad Poor Dad, focuses primarily on the flow of money. He considers real estate an asset only when rental income covers the mortgage, taxes, insurance, repairs, and other expenses. Under this approach, a primary residence that generates no income is considered a liability because it requires additional spending every month.

Kiyosaki is skeptical of the stock market and has warned that it could experience the largest crash in its history in 2026. He believes a major reset of the financial system may lie ahead. The investor issued similar warnings before the 2008 financial crisis, when the S&P 500 lost around 57% from peak to trough.

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Kiyosaki prefers assets that can be controlled directly and used to generate regular income. In addition to real estate, he frequently mentions gold, silver, and Bitcoin.

Two markets under pressure

The debate between Buffett and Kiyosaki is taking place against the backdrop of a challenging 2026. According to Russell Investments, the S&P 500 recovered from its initial decline in less than three months and then reached new highs. Expected earnings for companies in the index had grown by an average of approximately 16% annually over the previous three years.

A significant share of the market’s growth is linked to companies developing AI and the infrastructure supporting it. As a result, market performance is becoming increasingly dependent on a limited group of technology leaders. Analysts identify geopolitical tensions, supply chain disruptions, and sharp changes in interest-rate expectations as some of the main risks.

Real estate is also facing rising costs. According to JLL, commercial fit-out costs increased by as much as 10% in London and Seoul and by 8% in New York between the first quarter of 2025 and the first quarter of 2026. Expensive financing and construction are causing developers to launch fewer projects, reducing the supply of high-quality properties.

This is forcing investors to choose properties more carefully. Demand remains strong for modern buildings in attractive locations, while outdated properties require additional investment and take longer to find tenants. As a result, two properties in the same city can generate very different returns.

The entry barrier matters as much as returns

For a private investor considering an ordinary apartment rather than an office building, the main limitation is the entry barrier. The first question is usually simple: how much money are they prepared to invest? Buying shares in an S&P 500 index fund may require only a few dozen or a few hundred dollars. The portfolio can be expanded every month, and part of it can be sold during a trading session when needed.

Real estate requires much more money upfront. For example, a property priced at $250,000 would require a $50,000 down payment if the buyer puts down 20%. Closing costs, insurance, repairs, and taxes must be added to that amount. If the tenant moves out, the owner will temporarily have to cover the mortgage and utility payments using their own money.

Through a single index fund, an investor can spread $10,000 across hundreds of companies. An apartment buyer invests a much larger amount in one property, one neighborhood, and one rental market. However, real estate gives the owner more control: they can raise the rent, renovate the property, change how it is used, or sell it after making improvements.

A difficult choice

So, which should investors choose: stocks or real estate? Stocks are better suited to those starting with a small amount, who want to buy and sell assets quickly and do not want to manage a property themselves. However, this convenience comes with volatility: the value of a portfolio can decline significantly within weeks or months.

Real estate offers greater control and can generate regular rental income, but it requires substantial starting capital, a financial reserve, and constant attention. Investors must account for the mortgage, taxes, insurance, repairs, and periods without tenants.

The choice therefore depends not on which asset is universally “better,” but on the amount available to invest, the investment horizon, and the willingness to manage the asset. Stocks are simpler and more liquid, while real estate can be more profitable when rental demand is stable and the property generates positive cash flow after all expenses.