Stocks Made Me Money. Notes Changed How I Invest.
It’s a question We’ve heard for years: “Why would I invest in real estate notes when I can just put my money in the stock market and earn 8-10+%?”
The truth is, we don’t think it’s a bad question. In fact, it’s one investors should ask before putting money into any investment or class of investments. If you’re going to tie up capital in notes, rentals, stocks, businesses, or anything else, you should understand why you’re doing it…and what the end goal is.
My answer may surprise some people because I’m not anti-stock market. I like stocks. I trade stocks monthly. I believe the stock market, if used correctly with discipline, has been one of the greatest wealth-building tools ever created.
I also buy notes.
For me, the decision was never about choosing one over the other. It was about understanding what each investment does well and where each one has weaknesses.
Stocks vs. Notes – What to Consider
Investor Age and Time to Retirement
One of the first things we ask people interested in notes (or stocks) is to consider their age.
If you’re 30 years old and investing for retirement, a stock market correction (say, losing 30% of your holdings) may not bother you very much. You still have decades to recover from whatever happens next. History suggests that, over the long term, the market has rewarded patient investors.
The conversation changes (a lot) when someone is 55, 60, or 65.
If you’re within ten years of retirement, a major market downturn becomes more than an interesting headline. It can directly impact your plans.
A portfolio that drops 30% or 40% shortly before retirement may take years to recover. Historically, the market has always come back, but that can feel like a very long time when you’re preparing to leave the workforce.
That’s one of the reasons I like notes.
A performing note doesn’t wake up every morning and decide it’s worth 20% less because investors are nervous about interest rates, tariffs, elections, or something a Federal Reserve governor said on television.
If the borrower continues making payments, the note continues performing.
Don’t get me wrong…that doesn’t mean notes are risk-free. Borrowers can stop paying. Properties can lose value. Foreclosures can become expensive and time-consuming. Every investment carries risk. BUT…unlike a stock…I have collateral.
The difference is that note investors tend to focus on the loan’s performance rather than on daily fluctuations in market quotes.
Income Production
I also like the fact that notes produce income.
When I buy a stock, a large portion of my return often depends on appreciation. I expect the value to increase over time. With a note, I’m purchasing a stream of payments. I know the interest rate. I know the payment amount. I know my return… and outcome in advance.
There is something very comforting about receiving checks rather than waiting for a chart to move upward.
Collateral with Real Estate Notes
Another thing that attracts me to notes is the collateral.
Most of the notes we purchase are secured by real estate.
If everything goes according to plan, the borrower continues making payments, and everyone wins. If things don’t go according to plan, there is a property securing the debt.
Again, collateral doesn’t eliminate risk. But it goes a really long way to protecting my investment, especially since I picked my ITV (how much I wanted IN the deal to begin with).
When people compare notes to stocks, they often focus entirely on returns. I understand why. Return is easy to measure and certainly should not be ignored. What often gets overlooked is the role diversification plays in a portfolio. Many investors think they’re diversified because they own several mutual funds or several different companies. While those are diversified across the stock market, they’re still tied to it. When the market falls, almost every stock will fall with it…to some degree.
I like having some of my money in assets that don’t necessarily move in the same direction.
That’s one of the reasons I own both stocks and notes. There are periods when stocks perform exceptionally well. There are periods when cash flow and stability become more important. Rather than trying to predict which environment will come next, I’d prefer exposure to both.
There’s another practical consideration that rarely gets discussed…the emotional part.
Are you a Stock Investor, Note Investor, or Both?
Many investors think they are comfortable with stock market volatility until they actually experience it.
It’s easy to say you’ll stay invested during a bear market. It’s much harder when financial news is predicting disaster every night, and your account balance keeps shrinking.
Some investors handle that stress just fine. Others discover they sleep better when a portion of their portfolio is generating predictable cash flow from assets they understand.
That’s not a mathematical “rate of return” argument. It’s a psychological one.
And investing is often as much about behavior as it is about numbers —constant behavior. So, when someone asks me why I buy notes instead of simply earning 10% in the stock market, I don’t see it as an either-or decision. I own stocks because I believe in long-term economic growth. I also like stocks with good dividends (so I get a good return while I’m waiting for a stock to grow). I own notes because I like cash flow, collateral, and the fact that they don’t move in lockstep with the stock market.
Both have earned a place in my portfolio.
The goal isn’t to find the perfect investment. The goal is to build a portfolio that can withstand different market conditions, generate the returns you need, and let you sleep well at night.
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