Stock Market vs. Real Estate – Risks Explained
00:00:00.000 | how much risk are they taking, what could they lose?
00:00:02.560 | - I would say for the stock market,
00:00:03.480 | which we know is much more volatile,
00:00:04.960 | let's use the most recent bear market as an example.
00:00:07.160 | Typically in a bear market,
00:00:08.680 | which we know happens roughly once every five years,
00:00:11.720 | the average loss is about 30%.
00:00:13.800 | What you can also look forward to though is,
00:00:15.800 | you know, the gains can be pretty high in the good years.
00:00:18.520 | Five of the last 20 years,
00:00:19.720 | the stock market was up more than 20%.
00:00:22.120 | The average return was 26%.
00:00:23.960 | And so that's a pretty good year.
00:00:25.200 | Imagine compounding your asset,
00:00:26.840 | your net worth by that amount.
00:00:28.320 | - Well, I think that is one area
00:00:29.960 | where real estate does stand out versus equities.
00:00:32.960 | That is unusual to see large drops in home prices.
00:00:37.240 | The real name of the game with real estate
00:00:39.480 | and the way you mitigate against volatility is just time.
00:00:42.480 | This is not a quick get in and get out strategy.
00:00:45.640 | The risk of principal loss is actually,
00:00:49.000 | I think significantly less than in the stock market.