How Do You Counsel Clients On the Balance Between Investing in the Stock Market and Real Estate?
Balancing investments between the stock market and real estate is a crucial decision for many investors. This article delves into the strategies employed by financial experts to help clients navigate this complex landscape. Drawing from insights provided by industry professionals, readers will gain valuable perspective on how to align their investment choices with their financial goals and risk tolerance.
- Balance Stocks and Real Estate for Diversification
- Prioritize Real Estate as Investment Foundation
- Align Strategy with Financial Goals
- Leverage Real Estate, Diversify with Stocks
Balance Stocks and Real Estate for Diversification
While advising clients on the balance of stock market investments versus real estate, I explain that both assets serve different -- though complementary -- purposes in a diversified portfolio. The stock market provides liquidity, compounding growth potential, and accessibility--even with small capital. In the long run, the S&P 500 has averaged approximately 10% annual return. Real estate, on the other hand, offers physical assets, inflation protection, and cash flow, but demands more active management and capital. For the vast majority of my clients, I recommend setting aside 60% to 70% for stocks (via cheap index funds or sector-related ETFs), 20% to 30% for real estate -- either via direct ownership, REITs, or diversification through crowdfunding platforms. The specific percentage will vary based on risk appetite, timeframe, and whether they are looking for passive income or capital appreciation.
Liquidity needs and leverage are critical to this balance. Real estate isn't easily liquidated in a downturn the way stocks are, which is why I advise clients to keep an emergency fund and not to over-leverage their properties. According to a recent study by Vanguard, a portfolio that contains 20% real estate exposure has reduced volatility by 15% without sacrificing competitive returns. For younger investors, stocks are generally the best way to build capital before moving into real estate, while for retirees, the goal is ultimately to build rental income. Regular rebalancing is critical -- when one asset class outperforms (a housing boom, for example), bite the bullet and trim back positions to keep aligned with your goals. The 'right' balance changes with life stages and market cycles and should be reviewed annually.
Prioritize Real Estate as Investment Foundation
I'm Austin Hair, an American Ninja Warrior national finalist, world champion wakeboarder, and an investor focused on helping others achieve financial freedom through passive real estate investing.
When clients ask how to balance investing between stocks and real estate, I don't advise abandoning one for the other--but I do emphasize the power of prioritizing real estate as the foundation. The stock market, especially over the long term, remains a solid place for wealth growth, typically compounding around 9-10% annually. I've got capital in the market myself and still believe in its potential. But the emotional and financial whiplash that can come with short-term volatility--like a 4% drop in a single day--can throw even the most seasoned investor off course. And if you're leveraging into specific bets or chasing high-fliers, the recovery from steep drawdowns can be painfully slow.
Real estate, by contrast, rewards patience and offers stability. It's not as flashy, but the steady 12-14% IRRs we're seeing, and sometimes even high-teen returns, are beginning to look a lot more appealing in light of stock market unpredictability. Those returns aren't just numbers--they're tied to cash flow, equity growth, and hard assets. The best part? They're backed by real value--not sentiment.
What I advise is this: keep a diversified approach, but use real estate as your stabilizer. Let it compound quietly and predictably in the background while still participating in the stock market for liquidity, broader exposure, or long-term plays. Especially now, when deals are beginning to make sense again, interest rates are stabilizing, and volatility in stocks is a daily reminder of risk, real estate brings a sense of confidence and predictability that's hard to match.
Austin Hair is a real estate developer who specializes in finding locations that allow his clients to scale faster and his investors to compound safer. With a career spanning over a decade as a professional wakeboarder and more recently as an American Ninja Warrior finalist, Austin brings a unique blend of discipline and calculated risk-taking to the world of real estate investment. As an expert in passive investing, he finds low-risk, high-return opportunities ensuring his investors realize substantial upside. Austin has been featured on NBC's American Ninja Warrior, CBS Sports, ESPN, and has more than 25,000 downloads on his podcast, Helping Healthcare Scale. He has spoken about real estate at the ADSO and the DEO.
Align Strategy with Financial Goals
When counseling clients on balancing investments between the stock market and real estate, the key is helping them align their strategy with their financial goals, risk tolerance, and time horizon. Both asset classes offer distinct benefits--stocks provide liquidity and potential for high growth, while real estate offers tangible assets, stable cash flow, and long-term appreciation. I typically recommend clients consider their need for passive income, diversification, and control over their investments.
For clients seeking monthly cash flow and inflation protection, real estate--especially income-producing properties--can be a powerful tool. It's also a smart hedge when stock markets are volatile. For those prioritizing liquidity and quicker access to funds, maintaining exposure to stocks through diversified index funds or retirement accounts is important. A balanced approach might involve holding core long-term investments in real estate (e.g., rental properties or REITs) while keeping a stock portfolio for growth and flexibility. Ultimately, I encourage clients to think about how each investment complements the other, not as an either-or decision, but as a way to build a resilient, well-rounded portfolio.
Leverage Real Estate, Diversify with Stocks
For me, when I'm advising clients, especially in my role as a real estate expert and founder of Vancouver Home Search, the key is helping them understand how real estate fits into the broader picture of wealth building, alongside the stock market, not necessarily in competition with it.
In my opinion, real estate offers something incredibly powerful: leverage and control. Unlike stocks, where you're a passive shareholder at the mercy of market swings, real estate allows you to physically improve the asset, force appreciation, and generate consistent cash flow, especially in a tight rental market like Vancouver. Plus, there are significant tax advantages that many people overlook.
That said, I always remind clients that diversification is essential. Stocks offer liquidity, easier entry points, and global exposure, while real estate provides stability, long-term appreciation, and tangible value. A typical recommendation I share is to maintain a foundation of real estate holdings (especially if you're already in your primary home), but balance it out with a diversified portfolio in the market, index funds, dividend-paying stocks, etc., depending on your risk tolerance and investment horizon.
Ultimately, it's about knowing your goals. If cash flow and long-term appreciation matter to you, real estate should be a key pillar. If you want growth with liquidity and less management, stocks are valuable. Smart investors, in my experience, don't choose one; they allocate wisely across both.
