There's a lot of misinformation on this thread and statements like 'index investing isn't risky if you buy and hold therefore SO is wrong and OP is right' isn't very helpful. Let me please remind you all any form of investment involves risk, duh. Index investing is just like any other form of investment and is risky, don't ever believe 100% the markets will always grow. We could be sitting near at the top of the market right now. There's a lot of money to be made in the worlds biggest casino and 'the house' will defend it to the end, after all the house never loses as your the one putting capital at risk. 'Index always wins' is the MMM community dogma, much like the 'apple iphone 6 is the best phone ever' is the dogma of the hyper-consumer. I'm not here to bash MMM and believe he has sincere intentions and his principles are sound but even he has a vested interest in index funds as he takes a referrals from betterment et al. I am not saying he has been corrupted by cashing in, nor am I saying index investing has no part in everyone's portfolio, so hear me out.
Just like RE, index funds could 'fail'. The trinity study which suggests a 4% withdrawal is safe indefinitely hasn't taken into account the future, and any retirement/investment strategy that assumes that the past will simply repeat itself is open to the possibility of failure. This is your gamble. Will it? Won't it? Who knows. For this reason return on investment might be leading you astray. 10% annualised returns is great while the going is good, but what happens when your investment reverses for 30 years right as you take your retirement? I'm afraid retirement will be over before you can say "school's out!".
RE or Indexing? Which one will win the day? It's impossible to know because the future hasn't happened yet. One is fictional wealth based on 1s and 0s on a network of computers, and the other is bricks and motar. As such they have very different risk profiles, so it's not easy to compare risk.
Both markets are directly linked to the amount of easy money in circulation. Quick recap on economics 101, almost your wealth is fictional. Unless you directly own land or means of production, you wealth is imaginary if SHTF. I digress, when people have disposable income, they park it in RE, REITs, Index Funds, individual shares, gold whatever... during a recession, both RE and stock markets crash. Why? Because there's less easy money floating around and normal consumers are worried about their cash flow (oh no, I lost my job now I need to sell everything at a distressed price so I can feed the kids!). Now someone with plenty of savings know's this might be a good time to buy shares or RE, so they do. If everyone behaved like this the markets would be a hell of a lot more stable, but let's face it. The human race is stupid, it ain't gonna happen.
So, RE or Index funds? You're asking the wrong question. Why not both? Even better why don't you choose a portfolio that won't crash every time there's a recession? Who know's if the future holds prosperity or doom and gloom like the global economy that requires exponential growth in a world of limited resources...
Ever heard of harry browne's permanent portfolio?
25% stocks for prosperity
25% cash for recession
25% gold for inflation
25% long term bonds for deflation
When one or more parts of the portfolio are distressed by market corrections the others leaps into action. Imagine a scenario where the global economy is contracting because of an energy crisis. You just FIRE'd and the timing is terrible, your index portfolio dropped 60pct and it will take 20 years for the economy to recover because of energy shortages (or whatever apocalyptic scenario is more to your flavour). Inflation is rampant because of energy price hikes and the government is printing $$$ to pay for all the people out of work. Gold shoots up in value because people no longer trust the dollar.
The PP is simple, all you need to do is rebalance your portfolio on an annual basis and you can in theory weather all of these economic climates with a fancy pants return to boot (you were in it to win it in every market). Add real estate to keep SO happy. Sure's it's not passive, but it's another way of diversifying which is always a good thing.
http://www.amazon.com/The-Permanent-Portfolio-Long-Term-Investment/dp/1118288254Going all in on RED or BLACK is speculation, IOW, gambling. Why not match your bets? Traditionally the wealthy stayed wealthy because they control the means of production, now the wealth has been shared out a bit more (hello middle classes) there is opportunity to make money on the markets, though those that succumb to the allure of one chip or another are likely to end up in the pour house when their luck runs out.