Should You Invest $100k in Stocks or Real Estate?

Deciding whether to invest $100,000 in stocks or real estate depends on your financial goals and personal preferences. Stocks offer greater liquidity, making it easier to access your money quickly, and have historically delivered average annual returns of about 10.5%, although they can be volatile. Real estate, on the other hand, provides a physical asset that may generate rental income and offer tax benefits, but it often requires ongoing management and can take longer to sell. The risks also differ: stock prices tend to respond to broader economic and global factors, while real estate values are more influenced by local market conditions.

A financial advisor could help you create an investment plan that takes into account your goals.

Stocks vs. Real Estate: Historical Returns

When considering where to invest $100,000 in stocks or real estate, historical returns offer valuable insight. The S&P 500 has delivered a 10.54% average annual return since its inception in 1957 through 2024, showcasing stocks’ long-term growth potential.

Real estate investments show varied performance depending on the approach. Real estate investment trusts (REITs) outperformed stocks slightly between 1972 and 2024, with the FTSE Nareit All REIT index returning 11.14% annually. With dividends reinvested, the S&P 500 averaged 10.93% annually during this same stretch. This suggests that REITs may outperform stocks over long timeframes.

However, direct residential real estate tells a slightly different story—home prices rose just 5.4% annually from 1992 to 2024, according to CEIC data. ¹ This also highlights a key distinction: REITs trade like stocks and offer liquidity, while physical property involves maintenance costs and market-specific risks.

Risks and Volatility

Stock investments are inherently more volatile, with values potentially swinging dramatically within days due to factors like corporate earnings, interest rates and global events. While this volatility can lead to higher long-term returns, it requires investors to withstand periods of significant portfolio value erosion. Diversification across industries and market caps can help manage these risks, though stocks remain vulnerable to broad market corrections.

Real estate offers more stable price movements but introduces a different set of challenges. Physical properties are less liquid than stocks, making quick exits difficult during market downturns. A $100,000 real estate investment also concentrates risk in specific locations and property types, exposing investors to local economic shifts or regulatory changes.

Additional considerations include mortgage leverage risks, property management costs and unexpected maintenance expenses that can erode returns. However, real estate often provides built-in inflation protection through rising rental incomes and property values.

Both asset classes carry interest rate sensitivity, though stocks may rebound faster from rate hikes while real estate faces the immediate impact of rising financing costs.

Passive vs. Active Management

Your preference for passive or active management also plays a critical role. Stocks, particularly through low-cost index funds or exchange-traded funds (ETFs), offer a hands-off approach. These investments provide instant diversification, liquidity and minimal time commitment—ideal for those prioritizing ease.

Direct ownership of real estate, on the other hand, often demands active involvement, from property maintenance to tenant management. If you’re unwilling to take on these responsibilities, you can hire a property manager. However, property management fees are typically between 10% and 15% of monthly rental income.

For a middle ground, REITs provide exposure to property markets without direct management. Ultimately, the choice hinges on your willingness to manage day-to-day responsibilities.

Liquidity and Accessibility

Stocks are highly liquid, allowing investors to buy or sell shares instantly during market hours, making them ideal for those who prioritize flexibility. Online brokerage platforms have democratized access, allowing anyone with an internet connection to trade stocks with minimal upfront costs.

Real estate, however, involves longer timelines, selling a property can take months, and transaction fees like agent commissions or closing costs eat into returns.

While real estate offers tangible assets and potential rental income, its illiquid nature may challenge investors needing quick access to funds. For those weighing where to invest $100,000 in stocks or real estate, stocks often provide superior liquidity, while real estate demands patience and a longer-term commitment.

Tax Considerations

Stock investments typically trigger capital gains taxes when you sell appreciated shares, with rates ranging from 0% to 20% for long-term holdings (over one year) or higher short-term rates if sold sooner. Dividends are taxed as ordinary income or at qualified dividend rates.

Real estate offers more upfront deductions. Expenses for mortgage interest, property taxes and depreciation can reduce taxable income annually. Investors may also defer capital gains through 1031 exchanges or exclude up to $500,000 in profits (for married couples) when selling a primary residence.

While stocks offer simplicity, real estate provides multiple tax-advantaged strategies that could enhance long-term returns.

Deciding Between the Two

Both options offer distinct advantages, but each shines in different scenarios.

Here’s how to determine which might align better with your priorities.

When $100k Might Be Better in Stocks

Investing $100,000 in stocks could be ideal for those prioritizing long-term growth and liquidity. The stock market historically delivers higher average returns over decades, making it a strong choice for retirement accounts or goals 10+ years out.

Passive investors who prefer low-maintenance portfolios may favor index funds or ETFs, which offer instant diversification. Additionally, stocks provide flexibility to adjust allocations quickly if market conditions shift.

When $100k Might Be Better in Real Estate

Real estate investing shines for those seeking tangible assets and monthly cash flow. Rental properties can generate steady income while building equity, appealing to investors who want to supplement their earnings.

Tax advantages like depreciation deductions and 1031 exchanges add financial benefits. This option suits hands-on individuals comfortable with property management or those using turnkey rental services. Real estate also tends to be less volatile than stocks, making it attractive for preserving capital.

What $100,000 Could Look Like in Stocks vs. Real Estate

Understanding how a $100,000 investment might work in practice can help illustrate the differences between stocks and real estate. Each option offers distinct opportunities for growth, income and flexibility depending on how the money is allocated.

Example: Investing $100,000 in Stocks

With stocks, the full $100,000 can be invested immediately in a diversified portfolio. For example, an investor might allocate:

• 60% ($60,000) to a broad U.S. stock market index fund
• 20% ($20,000) to an international stock fund, adding global diversification
• 20% ($20,000) to dividend-paying stocks or ETFs, generating regular income

Historically, a diversified stock portfolio has delivered average annual returns of around 8% to 10% over long periods. At an 8% average return, $100,000 could potentially grow to approximately:

• $216,000 in 10 years
• $466,000 in 20 years
• Over $1 million in 30 years

In addition, dividend-paying stocks may generate annual income of roughly 2% to 4%, or about $2,000 to $4,000 per year, depending on the portfolio’s yield. Stocks also offer liquidity, allowing investors to sell part or all of their holdings quickly if financial needs change.

Example: Investing $100,000 in Real Estate

In real estate, $100,000 is often used as a down payment rather than purchasing a property outright. For instance, an investor might use $100,000 as a 20% down payment on a $500,000 rental property, financing the remaining balance with a mortgage.

This approach provides exposure to the full property value while using leverage. Potential financial benefits could include:

• Rental income: After expenses, a property might generate $300 to $800 per month in net cash flow, or $3,600 to $9,600 annually, depending on location, financing costs and rental demand
• Property appreciation: If the property increases in value by 3% annually, a $500,000 home could gain $15,000 in value in the first year
• Equity growth: Each mortgage payment gradually increases ownership in the property

However, these returns depend heavily on factors such as property selection, financing terms, maintenance costs and local market conditions.

Real estate also carries additional responsibilities and expenses, including repairs, insurance and property management.

Comparing the Two Approaches

Investing $100,000 in stocks provides immediate diversification, flexibility and passive growth potential. Real estate, by contrast, may offer higher income potential and leverage but requires more effort and carries less liquidity.

Stocks allow investors to spread risk across many companies and industries, while real estate concentrates investment in a specific asset and location. On the other hand, leverage in real estate can amplify returns if property values rise.

Bottom Line

Choosing whether to invest $100,000 in stocks or real estate ultimately comes down to personal priorities and preferences. Stock investments typically offer easier access to funds and hands-off growth potential, while real estate can provide steady income streams and unique tax benefits. Market behaviors differ significantly; equities respond to global trends, whereas property values depend on local dynamics. Your timeline, willingness to manage assets and comfort with market fluctuations all play roles in determining the right path.

Tips for Investing

• Whether you want to invest in stocks or real estate, a financial advisor can help you better understand which investments work best in your portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Consider using an investment calculator to estimate how your portfolio might grow over time.

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