Is it better to invest in stocks or real estate?

I like to always have a diversified portfolio of investments to spread my risk. However, many people often compare real estate which has historically shown a rather conservative increase in prices of around 4% compared to an average stock market appreciation rate of about 7%.

What people neglect to mention is that real estate is generally a leveraged investment. For example, if you put 25% down on an investment property you are leveraging 4:1 giving you an average return on your investment of 16%. You usually can’t do this with stocks and most other investments. Don’t forget that while leveraging an multiply your gains it can also multiply your losses if prices decline.

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