The major difference financially between the stock market and real estate seems to stem from the fact that real estate is costly to manage, and doesn't scale, and thus investment banks and major market players are unable to participate in a big way.
My knowledge of the stock market, even if I get a fancy MBA and specialize in finance, still won't be able to compete profitably with institutional investors that have massive pools of capital, inside knowledge, aggregated expertise, and highly optimized trading algorithms. As an individual investor I have no competitive advantage, even if I'm savvier than 99% of other individuals, because all the spread will be grabbed en masse by the big players.
By contrast, the number of non-experts buying and selling real estate, along with its relatively high transaction costs and necessarily local nature, means that even if I were only smarter than, say, 90% of people, I'd be able to do quite well because the spread wouldn't be gobbled up by the 99.999999th percentile financier.
As soon as electronically-managed liquidity is thrown in, and transaction costs become substantially lower for an elite subset, then it becomes much less "worth it" to participate. Thus, even REITs, by their very nature, are going to yield a lower return (pre-fees) than clever, well-managed individual real estate investments.
My knowledge of the stock market, even if I get a fancy MBA and specialize in finance, still won't be able to compete profitably with institutional investors that have massive pools of capital, inside knowledge, aggregated expertise, and highly optimized trading algorithms. As an individual investor I have no competitive advantage, even if I'm savvier than 99% of other individuals, because all the spread will be grabbed en masse by the big players.
By contrast, the number of non-experts buying and selling real estate, along with its relatively high transaction costs and necessarily local nature, means that even if I were only smarter than, say, 90% of people, I'd be able to do quite well because the spread wouldn't be gobbled up by the 99.999999th percentile financier.
As soon as electronically-managed liquidity is thrown in, and transaction costs become substantially lower for an elite subset, then it becomes much less "worth it" to participate. Thus, even REITs, by their very nature, are going to yield a lower return (pre-fees) than clever, well-managed individual real estate investments.