Most of us have been told that we should work hard, climb the corporate ladder, and invest in the stock market along the way to maximize our financial growth. This is exactly what I subscribed to for years.

A good friend of mine spends 60+ hours a week working, traveling to meetings, and managing high-level client work. He then spends nights and weekends trying to figure out how to leverage the stock market and other investments to grow his wealth. 

He’s worked hard to build a modest portfolio, but the constant ups and downs have made him realize the very real risks of investing in the stock market. He is stressed at work, and now he is stressed at home when he thinks about his stock portfolio and retirement plan. 

We’ve been lucky to find real estate investing early. We’ve felt more control and confidence in our investments than most people around us.

Let’s take a close look at investing in stocks versus real estate, the four basic risks of investing, how turnkey and land real estate investments mitigate risk, and why the stock market can be much riskier than real estate.

A Primer on Risk

As with any investment, there’s an element of risk. Just as you could have been hit by a bus this morning, unexpected things come up in life, in the stock market, and in real estate.

The key is not to look for investments that are risk-free (that doesn’t exist), but to understand the risks thoroughly, determine your threshold for risk, and ensure that you’re doing everything you can to mitigate risk.

Risk #1 – Consumer Behavior Could Change

Stock Market

Stock market investors bet on the success of companies that create products for people to use. Facebook, iPhones, Happy Meals, and soap are all consumable products. 

However, it’s impossible to predict the length those products will remain in favor, and a company’s popularity. Blockbuster had a long reign, but when technology and consumer behavior changed, the company stagnated, dragging investors down with it.

Turnkey Real Estate Investments

When you invest in real estate, you’re investing in a basic human need that will never go away: the need for shelter. As long as humans have existed, we’ve required a roof over our heads, and that need has only strengthened over time, especially with rising population trends.

Risk #2 – The Market Could Turn

Stock Market

One of the most common fears and possibly the biggest reason would-be investors remain on the sidelines is fear of a sudden market correction.

During a downturn, investors may exit quickly (which only solidifies their losses). Others aim to accept short-term losses in exchange for long-term gains. Historically, the market bounces back, but clinging to that “trust” is challenging during the downward trend.

Turnkey Real Estate Investments

Recessions are actually good for real estate investments, especially for workforce housing.

When faced with layoffs or pay cuts, homeowners may sell, and demand increases for more rental housing. Even when renters must cut costs, they more often prioritize housing costs and paying rent, opting to cut other non-essential expenses first.

Hence, during a recession, demand for rental housing actually tends to go up, thereby decreasing the risk.

Risk #3 – Competitors Could Come on the Market

Stock Market

When Netflix stormed the scene, they beat out Blockbuster because not only did they target the same audience, but they also got ahead of the technology and consumer trends.

Consumers don’t have insight into technology development or companies’ operations. Thus, new competitors can have a significant impact on investment returns.

Turnkey Real Estate Investments

Real estate competitors don’t just spring up out of nowhere because space, zoning, and permits are limited. When new homes are built, they’re always in the best shape and top of the line. 

Since the demand for workforce and affordable housing is on the rise, the risk of having high vacancy in well-maintained homes is fairly low.

Risk #4 – Not Having Control and Transparency

Stock Market

Investing in stocks is like buying a train ticket. The train is leaving, with or without you. Whether you’re on board or not is up to you.

When the market is sailing upward, the ride is smooth and exciting. During a correction, a terrible, helpless feeling takes over. The conductor (CEO) is unreachable, and you'd better buckle up.

Turnkey Real Estate Investments

When you invest in a turnkey real estate property, you know exactly who the property manager is, and you can reach out directly to ask questions and provide feedback.

Further, when you invest in a solid turnkey, you can be assured that there are multiple buffers in place to protect investor capital, such as streamlined tenant screening and placement processes, maintenance and repair efficiencies, and experienced professionals to handle the unexpected.

Plus, your property managers will keep you updated so that you have ongoing transparency into each investment.

Conclusion

There’s certainly no one “right” way to invest.

There are people who make money in the stock market, just as there are people making money in real estate.

The key is to assess your own goals and risk tolerance, then choose the path that will best help you meet those goals.

Here at Invest 5S, we provide multiple ways to leverage the power of real estate in your investment portfolio so you can take advantage of real estate’s cash flow, equity, appreciation, and tax benefits. 

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