"S&P 500 Return Calculator, with Dividend Reinvestment," Select "January 1928" and "January 2013." Diversification. Investing is complicated. They found from 1870-2015, worldwide housing returns were 6.9% after inflation, versus 6.7% for the stock market. A Wealth of Common Sense. Michael Blue Jay. But in 2020 the barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you. DQYDJ. The comparable average return … Investing in the stock market makes the most sense when paired with benefits that boost your returns, such as company matching in … Since WW2, equities have outperformed housing on average, but had much higher volatility and higher synchronicity with the business cycle. You’ll find various statistics about the historical returns of stocks and bonds, and they can be frustratingly different from one source to another depending on the data used, the period examined, and myriad other details. The stock market has consistently produced more booms and busts than the housing market, but it has also had better overall returns as well. Simply click here to learn more and access your complimentary copy. These costs eat into your returns. Understanding the Compound Annual Growth Rate – CAGR, Millennials: Finances, Investing, and Retirement, Real Estate Investment Trust (REIT) Definition, S&P 500 Return Calculator, with Dividend Reinvestment, Dow Jones Industrial Average Dividends Reinvested Price Calculator (With Inflation Adjustment), All-Transactions House Price Index for the United States, Compound Annual Growth Rate (Annualized Return), Long-term real estate appreciation rate in the U.S, Could Small-Cap Reversals Persist Through 2020. Stocks returned 9.5% annualized during the same time. , The inflation-adjusted appreciation on the Dow Jones Industrial Average (DJIA) over the same 84-year period was 1.9% per year. Consider this simplified mathematical example. Real estate values tend to barely outpace inflation. Real Estate 101. But it does illustrate the long-term return potential of real estate investments. Royce Investment Partners. However, over longer periods of time, the effects of interest rate fluctuations tend to balance out, and we can get a better look at how the performance of these two asset classes stack up side by side. However, one good way to visualize the power of investing in real estate is to examine how real estate investment trusts have performed over time. Excluding the actual cash flow of real estate, real estate still does better over certain time periods than stocks: The Housing Growth Potential is Greater If you consider the actual cash flow of the properties, stock investments don’t stand a chance. According to Standard & Poor's, the dividend component was responsible for 44 % of the total return of the last 80 years of the index. Comparing the rates of return has to include all these elements. © 2018 - 2020 The Motley Fool, LLC. This Site is affiliated with CMI Marketing, Inc., d/b/a CafeMedia (“CafeMedia”) for the purposes of placing advertising on the Site, and CafeMedia will collect and use certain data for advertising purposes. For many people, building long-term wealth often boils down to a questions of real estate vs. stock markets. Both have shown historical positive returns, and both have been two of the most reliable vehicles for middle class financial growth in the United States for 100-plus years. 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