I’ve never been big on property, yet I’m retired. So both forms of investment do work.
There are many forms of investment risk. The most obvious are the risks your type of investment will reduce or increase its value. If you put your money into a high interest account in a bank, you’re assured that you’ll get back your investment plus the interest earnt - even though, with current interest rates, that isn’t much. With just about any other investment there’s a chance you won’t get as much back as you put in. And each year different investments are better - some years the peak performer is international shares, and property does poorly, while in other years the opposite occurs.
Most forms of investment have risks associated with the actual individual investment. When you buy an index fund you’re reducing this risk because you’re buying a bucket that contains a number of different individual investments. So an index fund inherently has less risk (of this type) than individual property investments. You should be comparing purchase of individual stocks to investment in property to get a realistic comparison. In both cases you really need to look at your potential investment and ensure that you’re not buying a lemon, and that it really has the potential you think it has. Mining towns are notorious for poor investment property - even though they can also give you exceptional returns. Similarly, some mining stocks are little more than a gamble. If your investment property doesn’t rent, you’re not going to make much from it and you’re not going to be able to negatively gear it either.
The property market is also much more diverse than most investors appear to think. It’s not only houses. A relative once owned the local supermarket and that was a real money spinner for her. Another relative specialises in owning factories that she rents out. Both of these people had done a fair bit of due diligence before deciding on their investments, and both really knew their investment area. I think it’s very important (if you’re not just going to buy the index) to actually spend time understanding the market you plan to invest in - whether it’s property, shares or any other of the myriad opportunities for investment - and that this is far more important than the type of investment you actually purchase.
Most of the time, index investment gives you a way to invest without having to do as much due diligence as other investments, without getting your fingers burnt.