Real Estate

Stock Market

Liquidity

Very illiquid, typically 30 day waiting period, could easily be 2 to 3 times longer depending a variety of factors.

Very liquid, 0-3 day waiting period to get cash out after sale.

Volatility

Over the past decade value changes have shown much more volatility compared to previous periods (20% annual changes, both up and down in CA). Long term, real estate has had average annual returns (again for CA).

For someone investing solely in the major indices, those levels can easily change up to 25% in a single year, up or down. For those investing in a handful of stocks, and/or trying to time the market, there simply is no limit from a volatility standpoint.

Tangibility

Physical real estate can be seen, felt, touched, etc. Owning real estate means you own the land (in most cases) and the structure(s) above the land.

Most people own stocks in what's called 'street name', (meaning they get a statement from their broker showing their holdings each month). Some investors elect to own stocks in 'certificate form', meaning they have stock certficates held at home or in a safe deposit box.

Fees/transaction costs involved

Typically anywhere between 1-3% of the value real estate involved. For a real estate seller, the fees could easily be 6% of the real estate involved.

Fees can be as low as a few dollars per trade when using a discount broker. When using a full service broker, an annual fee of between 1.5 and 3% is typical, and collected each year

Time involved

Can be extensive when looking to acquire real estate and/or educate yourself about investing, less time involved when maintaining their homes.

Most successful investors regularly devote ample amounts to monitoring/researching their investments.

Self-directed v/s hiring a professional

Most real estate investors are self-directed, and, at least initially, do just about everything themselves outside any major repair work. These investors typically have a team made up of: an agent, loan officer, escrow officer, CPA and even a financial planner. Some people invest passively by simply providing their own funds to a lender to make private loans to a variety of sources.

For the true do-it-yourselfer who plans on trading individual securities, there are plenty of options/tools/brokers to assist them. On the flipside, there's plenty of sources for obtaining some level of financial management.

Taxation

There has been long standing preferential tax treatment, for most people, for owning real estate. The benefits are more favored for those owning as a primary home, but there's provisions for delaying taxation for rental property transactions also.

Gains and losses, in taxable accounts, are subject to some level of taxation in most cases. The general exception is when trading is done in a tax-deferred account such as a retirement account.