Risk Assessment: Real Estate Investment vs. Stock Market

When it comes to investing your hard-earned money, it's crucial to consider the potential risks involved. Two popular investment options that attract many investors are real estate and the stock market. Both avenues offer unique opportunities and challenges. In this blog post, we will conduct a comprehensive risk assessment, comparing real estate investment and the stock market. By examining various factors, we aim to provide readers with valuable insights to make informed investment decisions.

Real Estate and Stocks

Real estate: Real estate includes movable assets like buildings and land, such as houses, offices, and undeveloped land. Real estate investors hope to make money from rental income and gain from long-term property appreciation. It provides a hedge against inflation, long-term wealth building, and diversification.

Stocks: Stocks give shareholders a stake in a company's profits and assets by representing ownership in it. They offer liquidity and the possibility of capital appreciation and are traded on stock exchanges. Some stocks pay dividends, and investors can diversify across different industries and business sectors.

Considerations: Real estate is desirable for generating income and building wealth because it offers tangible assets and steady income. Although subject to market volatility, stocks provide liquidity and the opportunity to profit from the growth of successful businesses. When deciding whether to diversify their portfolio or choose between real estate and stocks, investors should consider their risk appetite and investment goals.

Advantages of Stocks:

  1. Liquidity: Stocks are highly liquid, allowing investors to buy and sell easily on stock exchanges.
  2. Diversification: By owning shares in several businesses across different industries, investors can spread their risk.
  3. High Return Potential: Stocks provide the chance for significant capital growth and high return potential.
  4. Dividends: Some businesses pay shareholders dividends, which adds to their income.
  5. Easy accessibility: Brokerage accounts with low minimum balance requirements can be used to invest in the stock market.

Disadvantages of Stocks:

  1. Market volatility: Due to changes in the market and other economic factors, stock prices may experience jarring fluctuations.
  2. Lack of tangible ownership: Although stocks represent ownership, owners have no actual influence over the decisions made by the company.
  3. High-Risk Stocks: Some stocks are regarded as high-risk, posing the risk of losses in the event that the business performs poorly.

Advantages of Real Estate:

  1. Tangible Assets: Real estate offers physical properties that investors can see and touch, providing a sense of security.
  2. Regular Rental Income: Rental properties produce consistent rental income, providing steady cash flow.
  3. Diversification: For risk diversification, investors can own different kinds of properties in various locations.
  4. Long-Term Appreciation: The value of real estate may increase over time, creating equity and wealth.
  5. Inflation Hedge: Real estate is often considered a hedge against inflation, as property values and rents tend to rise.

Disadvantages of Real Estate:

  1. High Entry Costs: Acquiring real estate properties may require substantial upfront capital.
  2. Property Management: Investors need to manage properties, which can be time-consuming and involve additional costs.
  3. Market Risks: Real estate values can be affected by economic downturns and local market conditions.

Stocks VS Real Estate: Key Differences



Real Estate

Asset Type

Ownership in Companies

Physical Properties and Land


Highly Liquid

Selling Takes Time

Potential Returns

Potential for High Returns

Long-Term Appreciation

Income Source

Capital Appreciation, Dividends

Rental Income


Market Volatility

Market and Local Property Risks


Indirect Company Ownership

Direct Control over Properties

Entry Costs

Lower Initial Investment

Higher Upfront Capital Required


Diverse Investment Options

Diversification Across Properties

Inflation Hedge


Considered a Hedge Against Inflation

Real Estate Vs Stock Market: Risk Assessment Summary

Risk Factors

Real Estate Investment

Stock Market Investment

Market Volatility









Potential Returns

12 - 20 %

7 - 10 %


None - Low


A) Market Volatility 

One of the primary considerations when assessing investment risks is market volatility. In real estate, market fluctuations tend to be relatively stable compared to the stock market. Real estate prices typically experience slow and steady growth over time, making it a more secure option for risk-averse investors. However, local economic factors can influence property values, causing short-term fluctuations.

On the other hand, the stock market is known for its inherent volatility. Stock prices can change rapidly in response to economic, political, or company-specific factors. This volatility can present significant risks but also opportunities for high returns. Investors need to carefully analyze market trends and stay updated on relevant news to make informed decisions.

B) Liquidity 

Liquidity refers to how quickly an investment can be converted into cash without significant loss in value. In this regard, the stock market offers high liquidity. Investors can buy or sell stocks almost instantly, allowing them to respond swiftly to market conditions. This liquidity provides flexibility and easy access to funds.

Traditional real estate, on the other hand, tends to have lower liquidity. Selling a property can be a time-consuming process, involving various legal procedures and finding suitable buyers. 

Additionally, in a downturn, it may be challenging to sell a property quickly, potentially leading to financial constraints. Investors should carefully consider their financial needs and the impact of illiquidity on their investment strategy. But via real estate structured debt, there is certain liquidity by which your shares can get transacted in a secondary market. 

C) Initial Investment

The initial investment required is another critical factor to evaluate when considering real estate or the stock market. Traditional real estate investments generally require a significant upfront capital investment. Investors need to consider expenses such as down payments, closing costs, property appraisals, and renovation or maintenance costs. But non-conventional real estate investments like real estate structured debt have minimum initial investments for as low as $12k.

On the other hand, stock market investments often have a lower barrier to entry. With the rise of online trading platforms, investors can start with a relatively small amount of capital. However, it's important to note that larger investments tend to offer more diversification and potential returns.

D) Diversification 

Diversification is a risk management strategy that involves spreading investments across different assets or sectors. It helps reduce exposure to any single investment and minimizes the impact of potential losses. When it comes to diversification, the stock market provides greater opportunities. Investors can choose from a wide range of stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other financial instruments.

In contrast, real estate investments offer unlimited diversification options. Real estate investors can diversify within the sector by investing in different types of properties, such as residential, commercial, or industrial. Additionally, investing in real estate investment trusts (REITs), real estate structured debt or real estate crowdfunding platforms can provide some level of diversification without the need for direct property ownership.

E) Potential Returns 

Assessing potential returns is crucial for any investor. Real estate investments like real estate structured debt have the potential to generate high returns spanning from 12 percent to 20 percent over the long term. Rental income, property value appreciation, and tax benefits can contribute to the overall return on investment. However, it's important to note that returns can vary based on location, market conditions, and the effectiveness of property management. 

According to historical data, the average annualized return of the S&P 500 index, a widely used benchmark for the U.S. stock market, has been around 7 percent to 10 percent over several decades. However, the stock market is subject to greater volatility and short-term fluctuations. It's important to carefully analyze individual stocks, sectors, or indices and consider risk tolerance before making investment decisions.

F) Maintenance 

Maintenance requirements are an essential consideration for investors. Real estate investments typically require ongoing maintenance and management. Landlords must handle tenant-related issues, property repairs, and general upkeep. These responsibilities can be time-consuming and require active involvement or hiring a property management company, which affects overall profitability.

In contrast, stock market investments do not require active maintenance. Once you've invested in stocks, the companies take care of their day-to-day operations. However, periodic reviews and adjustments to the investment portfolio are recommended to align with financial goals and market conditions.

Best Alternative to Conventional Stock Investing: Structured Debts

Structured debts backed by commercial real estate are an option for investors looking for a different type of investment than traditional stocks. Compared to conventional stock investments, this investment strategy has special benefits.

1. Stable Income Stream: Structured debts backed by commercial real estate provide a predictable and steady income stream. According to how the debt is structured, borrowers pay interest to investors.

2. Collateralized Investment: Unlike stocks, where ownership represents a share in a company, structured debts are collateralized by tangible commercial real estate assets. This provides an added layer of security, reducing the risk associated with the investment.

3. Lower Volatility: Real estate investments are generally less volatile compared to stock markets, providing investors with a level of stability and insulation from market fluctuations.

4. Diversification: Investing in structured debts backed by various commercial properties allows for portfolio diversification across different real estate assets, locations, and industries.

5. Transparency: Real estate investments often provide detailed information about the underlying assets, such as property valuation, occupancy rates, and lease terms, giving investors greater transparency.

Bottom Line

In conclusion, both real estate investment and the stock market offer opportunities for investors, each with its own set of risks and rewards. Real estate tends to be less volatile, provides steady growth, and offers diversification within the sector. However, it requires a significant upfront investment, has lower liquidity, and demands ongoing maintenance. 

On the other hand, the stock market offers high liquidity, the potential for higher returns, extensive diversification options, and lower initial investment requirements. However, it comes with higher volatility and requires active portfolio management.

Ultimately, the choice between real estate and the stock market depends on your risk tolerance, investment goals, and personal circumstances. It's advisable to consult with a financial advisor and conduct thorough research before making any investment decisions. By understanding the risks involved, you can create a well-balanced investment strategy that aligns with your long-term objectives.

Assetmonk is a well-established alternative investment platform in the United States, that offers various investment options, including structured commercial real estate debts. Among their fixed-income investment products is the Labrea Series A, which presents an opportunity for investors. This real estate structured debt product is designed to provide appealing returns, offering an assured Internal Rate of Return (IRR) of 18 percent. If you have any questions or require additional information, our team is readily available to assist you.

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  3. How to Evaluate Alternative Investments as an accredited investor.
  4. Top real estate markets to invest in the US.


Q1. Which is the better stock market or real estate?

A. Real estate investments like real estate structured debt provide returns spanning from 12-20 percent. But, stock markets give returns of 7-10 percent.

Q2. Are stocks riskier than real estate?

A. Stocks are generally considered more volatile than real estate. The stock market can experience significant price fluctuations in response to economic, political, or company-specific factors. Real estate prices, on the other hand, tend to show slower and steadier growth over time.

Q3. Why real estate is safer than stocks?

A. Real estate investments, particularly rental properties, can generate a steady stream of income through rental payments. This regular cash flow can provide stability and act as a hedge against market volatility. Stocks, on the other hand, rely on dividends, which can be inconsistent and may not always provide a consistent income stream.

Q4. How much return on real estate investment?

A. Real estate investments like real estate structured debt provide returns spanning from 12-20 percent.