Real Estate vs. Stock Market Returns: Which is Right for You?
10–20% declines are common in the stock market. How does real estate compare?
Real Estate vs. Stock Market Returns: Which is Right for You?
10–20% declines are common in the stock market. How does real estate compare?
As an investor, you’ve likely felt the impact of recent market turbulence. In April 2025, equities lurched towards a technical bear market—defined as a peak-to-trough decline of 20% or more—as business policy uncertainty and unfavorable tariff news cratered investor sentiment.
The S&P 500, the most widely-benchmarked index in the United States and around the world, plunged 18.9% on a peak-to-trough closing basis in the roughly two months between Tuesday, February 19 and Tuesday, April 8, barely a percentage point shy of the bear market threshold.1
Data source: S&P 500. Koyfin. May 2025.
Public markets have since staged a rapid rebound. Thanks in part to a 90-day stay on a 145% tariff rate with China, the S&P 500 opened the month of June 2025 less than 4% from a new all-time high.2
But stock market investors may not be out of the woods yet. Absent further action, tariffs could resume on July 8,2 meaning that investors may potentially have to brace for additional volatility in the coming months.
Besides, not all market recoveries are that rapid, at least historically speaking. It's common for stock market investors to wait years—and sometimes even a decade or more—to regain losses after a significant downturn. Consider recent history:
2022–2023: After a 25% decline between January and October 2022, the S&P 500 didn’t regain an all-time high until January 2024.3 That meant investors spent two full years (2022 and 2023) in a drawdown.
2000s: Even more dramatically, the S&P 500 returned essentially nothing in the decade-plus between 2000 and 2013, thanks to the biting “dot-com” implosion of 2000–2003 and the even sharper Global Financial Crisis of 2007–2009.3
Experiencing these prolonged drawdowns can be stressful. Beyond the emotional toll, spending years simply recovering losses means your capital isn't actively growing towards your long-term goals. It highlights a key challenge in public markets: significant risk doesn't always guarantee commensurate returns, and dramatic declines can be a frequent visitor.
So, what alternatives can you consider if you want to diversify away from public market volatility without sacrificing return potential?
Private real estate: a promising alternative?
For investors seeking to diversify away from the daily drama of public markets, private real estate could be a potentially compelling alternative.
Historically, private real estate has demonstrated lower volatility compared to the stock market.3 That’s because the valuations of real estate and the private funds that own them tend to be more stable and change more slowly. This stands in sharp contrast to publicly-traded assets, which tend to fluctuate dramatically based on news, sentiment, or trading algorithms.
Private real estate could be especially beneficial for portfolio diversification, too. According to Ares Wealth Management, “private real estate had a 0.04 correlation to the S&P 500 Index over the past 20 years, and a negative correlation of 0.28 over the past 10 years.”4 In short, this means that private real estate may perform well even in a year where the stock market is struggling, which in turn suggests that allocating part of your portfolio to private real estate could help cushion the overall impact on your wealth.
A closer look at multifamily
Within the broader landscape of private real estate, multifamily properties could offer specific advantages that may be particularly attractive. Specifically, investing in private multifamily real estate funds—which pool capital and invest in large baskets of loans or multifamily properties—could offer a different risk-reward profile and potentially more consistent return patterns.
Like private real estate in general, multifamily assets are typically valued using an income-based approach. This means the more income a multifamily community produces, the more it’s worth. Here, what sets multifamily apart is the resilience of the asset subclass’ rental income in the face of inflation.
Specifically, residential rents have outpaced broader inflation by a cumulative 26% since the beginning of the century.5,6 This historical tendency for rents to keep pace with or exceed inflation means that the income generated by multifamily properties rises in tandem with the cost of living.
This, in turn, could potentially drive continual increases in property valuations and serve as a potential hedge against inflation for multifamily investors.
Data sources:
Consumer Price Index for All Urban Consumers: All Items in U.S. City Average. St. Louis Fed. May 2025.
Consumer Price Index for All Urban Consumers: Rent of Primary Residence in U.S. City Average. St. Louis Fed. May 2025.
One advantage of investing in multifamily through a private real estate fund, in particular, is that your fund manager can, in certain cases, influence or exert direct control over the underlying deals. When making multifamily equity investments, fund managers can potentially participate in the acquisition, construction, renovation, management, and disposition of assets. These actions can directly impact rents (and thus valuation), offering a pathway to "forced appreciation" not typically available in public markets.
Similarly, multifamily debt fund managers can practice rigorous underwriting, leverage strong lending relationships, and use creative loan structuring techniques. These hands-on approaches, which aim at limiting loan losses and enhancing yields for investors, can potentially result in higher risk-adjusted returns for investors in comparison to the more rigid and standardized public fixed-income markets.
What’s the takeaway?
For high-net-worth investors interested in alternatives to publicly-traded assets, private multifamily real estate funds offer several compelling advantages:
Because multifamily real estate is priced using fundamentals rather than daily market sentiment, it tends to fluctuate less in value. This allows your capital to potentially compound more consistently, without the frequent need to recover from deep losses.
Multifamily real estate behaves differently from stocks and publicly-traded bonds. Adding private multifamily funds to your portfolio can potentially serve as a hedge against inflation and make it more resilient to downturns—especially when public markets struggle, like they did during the 2000s.
Private real estate fund managers can sometimes directly influence the underlying equity or credit investments they make. Skilled managers can potentially protect capital or enhance returns for private real estate investors in a way that is difficult to replicate in the public markets.
These advantages aside, private real estate funds can also potentially help you unlock unique advantages* not available to stock market investors, including depreciation, 1031 exchanges, or payment priority in the form of preferred returns. This unique risk profile, coupled with an ability to counterbalance public market swings, could make private real estate a compelling alternative for high-net-worth investors.
Tired of the stock market rollercoaster? Consider private real estate investment funds from DLP Capital today.
FAQs
Is investing in property better than the stock market?
There’s not a universally “better” investment; property and stock investments arguably both have a place in your portfolio. However, property investments can potentially serve as a hedge against inflation, generate ongoing cash flow, and deliver capital appreciation over time—all with less annualized volatility than the stock market.
Which is better, equity or real estate?
Neither equities nor real estate is objectively “better,” since they feature differences in liquidity, volatility, and annual returns. That said, real estate as a whole—and private real estate funds in particular—can potentially be less volatile than equities, and may allow investors to benefit from tax advantages (like depreciation or 1031 tax-deferred exchanges) not available to equity investors.
What investment is better than the stock market?
Private real estate could potentially be better than the stock market in delivering more consistent and less volatile returns over time. Unlock stocks, some real estate strategies like private credit can also benefit from an elevated interest rate environment.
Does Warren Buffett invest in real estate?
Yes. Beyond his primary residence in Omaha, Nebraska, which he purchased in 1958 for $31,500 (about $350,000 in 2025), Buffett also owns a 400-acre farm 50 miles north of Omaha, which he purchased from the FDIC for $280,000 in 1986, or about $817,000 in 2025. Buffett’s most significant real estate investment occurred in 2017, when he acquired a 9.8% stake in the publicly-traded REIT STORE Capital for $377 million.
Should I do stocks or real estate?
You don’t have to choose—you can (and should) allocate to both stocks and real estate. A Cornell study, for example, found that real estate should make up about 9% of your portfolio; various other studies have found an allocation of 10–20% to be optimal in terms of diversification. Stocks, bonds, commodities, and cash can comprise the remainder of your portfolio.
1S&P 500. Koyfin. May 2025
2Trump tariffs live updates: Trump pushes for trade deals with steel, aluminum duties set to double. Yahoo Finance. May 2025.
3Amid market uncertainty private real estate can offer stability and income. Nuveen. May 2025.
4Understanding Private Commercial Real Estate. Ares Wealth Management Solutions. June 2023.
5Calculations by DLP Capital.
6Is Real Estate an Inflation Hedge? Looking at Historical Trends. Vaster. September 2024.
*DLP CAPITAL IS NOT PROVIDING AND DOES NOT PROVIDE TAX ADVICE IN CONNECTION WITH THE FUNDS. PLEASE CONSULT YOUR TAX ADVISOR.
STATEMENTS ARE THOSE OF DLP CAPITAL ONLY AND ARE NOT GUARANTEED, NOR SHOULD SUCH STATEMENTS BE RELIED UPON. FORWARD-LOOKING STATEMENTS ARE EXPRESSIONS AND BELIEFS OF DLP CAPITAL AND SHOULD NOT BE RELIED UPON. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. NOTHING IN THIS IS A SOLICITATION OR OFFER OF SOLICITATION. ALL INVESTMENTS IN ANY DLP CAPITAL SPONSORED FUND ARE TO BE MADE AFTER A REVIEW OF THE PPM, OA, AND SUBSCRIPTION AGREEMENT. DLP CAPITAL IS NOT PROVIDING TAX ADVICE. CONSULT YOUR TAX AND LEGAL PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISIONS.
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