Warren Buffett's Take on Stocks vs. Real Estate: What You Need to Know

At the Berkshire Hathaway annual meeting this May, audience member Jackie Han stood up with a direct question for Warren Buffett. Coming from a Chinese family that valued real estate, Han asked Buffett why he continued to favour stocks over property.

In the US, real estate is a popular choice. According to a recent Gallup poll, 37% of Americans picked real estate as the best long-term investment, while only 16% chose stocks, reported CNBC.

Warren Buffett did not hesitate in his reply. He explained that while Charlie Munger, his long-time business partner, enjoyed real estate later in life, it was more of a hobby than a serious investment strategy, reported CNBC.

Buffett said if Munger had to pick between stocks and real estate for life when he was 21, he would have chosen stocks. Stocks offer more flexibility and greater opportunities, Buffett noted, especially in the U.S. market.

Data supports Buffett’s stance. From the start of 1988, U.S. residential real estate values rose 374%, as per the S&P CoreLogic Case-Shiller Index. In contrast, the S&P 500 climbed 2,218% during the same period.

When dividends are reinvested, the return on the S&P 500 surges to an impressive 5,006% since 1988. This massive outperformance highlights the power of long-term equity investing.

Real estate has its place. It can offer stability and tangible assets. But for growth and compounding returns, the stock market delivers better results.

Moneycontrol advises users to check with certified experts before taking any investment decisions.