Why a Brokerage Account Can Be a Smarter Investment Than Real Estate
Many people see real estate as a natural way to build wealth, but investing through a brokerage account can offer meaningful advantages—especially when it comes to taxes, flexibility, and ease of management.
Tax Efficiency: Keeping More of What You Earn
Tax efficiency is one of the biggest differences. Rental income from real estate is generally taxed at ordinary income tax rates, which for high earners can mean losing a significant portion to taxes.
In a brokerage account, investors have access to strategies and investments that offer more favorable tax treatment, including:
- Tax-free or tax-favored income from municipal bonds, particularly valuable for those in higher tax brackets
- Qualified dividends taxed at lower rates than ordinary income
- Long-term capital gains treatment when holding investments beyond one year
- Tax-loss harvesting opportunities to offset gains and reduce annual tax liability
- Step-up in basis at death, which can eliminate capital gains taxes for heirs
Real estate does offer depreciation benefits, but these can be recaptured as ordinary income upon sale, and passive loss limitations often restrict their usefulness for high-income earners.
Liquidity and Flexibility: Access When You Need It
Investments in a brokerage account can usually be bought or sold within a day, giving you the flexibility to:
- Seize opportunities
- Meet unexpected expenses
- Rebalance as your goals evolve
Real estate is far less liquid and may take months to sell, often with transaction costs of 6–10% or more.
For affluent families managing cash flow needs, charitable giving, or multi-generational planning, this liquidity is invaluable. You're never forced to sell at an inopportune time simply because you need access to capital.
Diversification: Managing Risk Intelligently
With a brokerage account, investors can spread capital across hundreds or thousands of companies, sectors, and global markets—all without the concentration risk of owning a single property or even a portfolio of properties in one geographic area.
This diversification helps:
- Smooth returns over time
- Reduce exposure to local economic downturns
Protect against natural disasters or neighborhood-specific challenges
A diversified portfolio does not assure a profit or protect against loss in a declining market.
Simplified Management: Your Time Has Value
Real estate ownership often involves:
- Property management
- Maintenance and repairs
- Tenant issues
- Insurance claims
- Unexpected capital expenditures
Even with professional management, there's ongoing oversight required.
Brokerage investing requires far less hands-on involvement. Modern platforms and professional advisors provide tools to manage taxes efficiently and rebalance portfolios systematically. This allows you to focus on your career, family, and other priorities
The Bottom Line
Real estate certainly has its place in a comprehensive wealth plan, but it shouldn't be the default choice simply because it feels tangible.
For many high-net-worth investors, brokerage accounts offer superior tax efficiency, flexibility, and ease of management—translating to better after-tax, risk-adjusted returns over time.
Curious whether your investment mix is optimized for your situation? Let's discuss how strategic allocation between asset classes can help you pursue your long-term wealth goals.
The views stated in this letter are not necessarily the opinion of Cetera Wealth Services, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
