What is a Better Investment, a House Or Stocks

Some financial planners will tell you that you can get a higher return on your money by investing it in the stock market rather than in a home. These financial planners will say the over a long period of time, the return on your money from the stocks will beat that of the return on your money from a home.

That may have been true back if you were in the market before the year 2000. It is definitely not true now. From 1982 on the stock market or the Dow Jones Industrial Average has grown so much that it went over the 10,000 mark. This is such a huge gain and is so much more than was thought to happen. The law of probability now comes into play. The stocks will fall back to where they should be. It was a great ride while it lasted. Nothing lasts forever.

The gains the Dow has seen were great to stock investors. There is a problem with all these previous huge gains. The economy of the United States grows at a much slower pace. You will end up with a wealth of paper. That is what it is, just paper. The real economy will catch up to the paper economy. So if you look at the cycle, stocks will grow slowly as the real economy and the paper stocks start to meet where they should be.

Now buy a home. Homes appreciate at a rate of about three to four percent. Much better than a slow growth stock market. So if you do the math a one hundred thousand home with a ten thousand dollar down payment with a low interest rate will increase by a factor of four or five. This results in a rate of return of around 24 percent.

you may say what about the expenses to keep up the home and actually live there. You have to live somewhere do you not? No matter where you live, there will be expenses. This is true whether you own a home or rent. There is still the electric bill, Heating oil or gas, food, etc. You have these expenses anyway. Therefore no need to count them in the gain from real estate you will make. Also, rent payments go up. A fixed rate mortgage stays the same.

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