Someone asked me recently: “What is the best way to build wealth?”

It’s one of those questions that sounds simple until you actually think about it. Ask a financial advisor and they’ll tell you: the stock market, index funds, compound interest. Ask a real estate agent and they’ll tell you: rental properties, leverage, appreciation. Ask a serial entrepreneur and they’ll tell you: own a business, build equity, create something that runs without you.

Here’s my full disclosure: I am not a financial advisor, and nothing in this article is financial advice. But I have built seven-figure net worth in all three arenas — real estate, business ownership, and the stock market. So I’m not speaking from a textbook. I’m speaking from experience.

And my honest answer to “what is the best way to build wealth” is this: there is no single right answer.

The best path depends on who you are — your risk tolerance, your time, your personality, and the season of life you’re in. But all three paths are legitimate, proven, and data-backed.

Let’s look at each one honestly.

Path 1: The Stock Market

If someone handed you $153,500 in 1995 and you invested it in the S&P 500 index, you would have over $3.4 million today. That same $153,500 invested in residential real estate — the average home price at the time — would be worth approximately $503,800. That is not a typo.

The stock market has averaged 9–10% annual returns over long periods. Real estate has typically averaged 3–6% appreciation, depending on location.

The stock market wins on pure historical return, accessibility, and simplicity. You can start with $50. You don’t need a down payment, a contractor, or a property manager. There are no tenants calling you at midnight. A well-diversified portfolio of low-cost index funds requires minimal time and minimal expertise.

That said, the stock market demands something most people wildly underestimate: emotional discipline. Markets drop 20–40% periodically. The investors who panic and sell at the bottom are not the ones who get rich. I did this in the midst of the 2008/2009 financial crisis — fortunately at that time it wasn’t a ton of money and I was young enough to make it up. The ones who stay invested, who keep contributing during downturns, who ignore the noise — those are the people who retire wealthy.

The Numbers

• S&P 500 average annual return: approximately 10% before inflation (roughly 7% inflation-adjusted)
• $500/month invested from age 25 to 65 = over $1.7 million at a 10% average annual return
• A 2024 Bank of America study found Gen Z and Millennials (ages 21–43) are more likely to favor real estate, while those over 44 tend to favor stocks as the smartest long-term wealth path

Tax-Advantaged Accounts: Start Here

There are significant tax advantages to investing in retirement accounts. The most common vehicles include:

• 401(k) — Pre-tax contributions that reduce your taxable income today; taxes are paid upon withdrawal in retirement
• Traditional IRA — Similar to a 401(k); contributions may be tax-deductible depending on your income and whether you have a workplace plan
• Roth IRA — Contributions are made with post-tax dollars, but growth and qualified withdrawals are completely tax-free
• HSA (Health Savings Account) — Often called the “triple tax advantage”: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free

If you’re just getting started, follow this sequence: First, contribute to your 401(k) up to the employer match — that’s free money. Then, aim to max out your Roth IRA each year. After that, go back and maximize your 401(k) contributions. If you’re eligible and investing for healthcare, layer in an HSA.

Best For…

• People who want a passive, low-maintenance investment
• Those with limited starting capital — you can begin with as little as $50
• Investors with a long time horizon (10+ years) who can ride out market volatility
• Anyone who wants to take full advantage of tax-advantaged retirement accounts

Path 2: Real Estate

The stock market may win on raw percentage returns, but real estate has a secret weapon that the comparison often ignores: leverage. When you buy a $400,000 rental property with $80,000 down (20%), and the property appreciates 5%, you have gained $20,000 on your $80,000 investment — a 25% return. Try that math with an index fund.

Real estate also generates income while you hold it. Rental properties produce monthly cash flow that tends to rise with inflation, giving you purchasing power protection that stocks don’t offer in the same tangible way. And the tax advantages are substantial — depreciation, mortgage interest deductions, and 1031 exchanges can shelter significant income from taxes.

The median net worth of homeowners is dramatically higher than renters. There are real estate tycoons and stock market tycoons. There are no renter tycoons.

The honest downside? Real estate is not passive — at least not in the beginning. Tenants, maintenance, vacancies, property managers — it’s a business. And it requires meaningful capital to get started. Transaction costs alone can eat 6–10% of your sale price when you exit.

The Numbers

• Residential real estate appreciation averages 3–6% annually, but leverage amplifies that substantially
• Private real estate had near-zero correlation to the S&P 500 over the past 20 years — making it a powerful diversifier
• 46% of American millionaires hold investment real estate, even if it is not their primary wealth source
• Real estate investors may spend 20% of rental income on property management and maintenance costs

The House Hacking Strategy

One of the most underrated wealth-building tools of all time is house hacking. When you buy a house as a primary residence, you get a more favorable interest rate and need a lower down payment than an investment property. Here’s how to use it:

• Buy a house, fix it up, and live in it for at least 2 years
• After 2 years, you can sell it and utilize the Section 121 exclusion — a tax rule that allows you to exclude up to $250,000 in capital gains ($500,000 for married couples) from federal taxes on the sale of your primary residence
• Alternatively, use a 1031 exchange to roll the proceeds into another purchase and defer capital gains taxes entirely
• Or keep it as a rental, buy another primary residence, and repeat the cycle
• Bonus points: create additional income by renting the garage, finishing the basement into a separate lock-off unit, or renting rooms

Rinse and repeat. Each cycle builds equity, improves your tax position, and expands your rental portfolio — with primary residence financing rates the whole way.

Best For…

• People who are comfortable with active involvement and problem-solving
• Those who understand a specific local market well
• Investors seeking cash flow, inflation protection, and tax benefits
• Anyone willing to use leverage strategically and manage the associated risks

Path 3: Owning a Business

Business ownership is the highest-risk, highest-reward path to wealth — and it is also statistically the most common one among self-made millionaires. In a five-year study of self-made millionaires, 61% were entrepreneurs who built businesses they were passionate about. Other research suggests that you are roughly ten times more likely to become a millionaire if you own your own business versus working for someone else.

The reason is simple: businesses can scale in ways that a rental portfolio or stock account cannot. A property generates rent. A stock pays dividends. A business generates revenue that can grow 20%, 50%, or 10x in a single year — and can eventually be sold for a multiple of earnings, creating a liquidity event that can generate more wealth in one transaction than decades of investing.

The median net worth of self-employed families is $380,000 — over four times the $90,000 held by the typical wage-earning family. Business equity is the second-largest component of American household wealth, behind only primary residence.

But let’s be brutally honest. Within the first year, over 20% of businesses fail. Within five years, nearly half are gone. Within ten years, about 65% have closed. Business ownership carries a level of risk — financial, emotional, and personal — that the stock market and real estate simply do not. It requires the widest skill set and the most time, especially in the early years.

The Numbers

• 61% of self-made millionaires built their wealth as entrepreneur-business owners
• 45% of families in the top 10% of net worth have business equity — compared to just 3% in the bottom 25%
• The first-time startup success rate is approximately 18%
• Business equity represents 34% of all non-financial assets held by American families

Best For…

• People with a specific skill, product, or service and a clear market for it
• Those with high risk tolerance and the resilience to navigate failure
• Individuals who want control over their income and schedule
• Anyone willing to put in intense effort early in exchange for potential outsized rewards later

Side-by-Side Comparison

	Real Estate	Stock Market	Business Ownership
Historical Return	3–6% + rental yield	9–10% avg. annual	Highly variable — unlimited upside
Starting Capital	High (20% down)	Low (start with $50)	Medium to high
Time Required	Moderate to high	Minimal (passive)	Very active early on
Risk Level	Medium	Medium (long term)	High
Liquidity	Low (slow to sell)	High (sell in seconds)	Very low (hard to exit)
Leverage	Yes — amplifies returns	Limited (margin)	Yes — OPM & business debt
Tax Advantages	Strong (depreciation, 1031)	Good (Roth IRA, 401k)	Significant deductions
Income While Holding	Yes — monthly rent	Dividends (modest)	Salary + distributions

 

Before You Choose a Path: Build Your Foundation

Regardless of which arena you choose to start building wealth, the same foundation underlies all three. Without it, the best investment strategy in the world will underperform. With it, even a modest start compounds into something remarkable.

1. Create Margin in Your Daily Life

You cannot invest what you don’t have. The single most important financial habit is spending less than you earn — consistently and intentionally. This isn’t about deprivation; it’s about design. Build a budget that creates surplus every single month. That surplus is your fuel. Without it, the stock market, real estate, and business ownership are all just ideas on paper.

• You don’t need to track every dollar, but you do need a high level plan for your money
• Be sure to have savings and investing worked into your spending plan every month
• Avoid lifestyle inflation too early in your investing career
• Focus on keeping your three biggest expenses reasonable (housing, transportation and food)

2. Create Stability

Wealth is built over time — and time requires stability. That means having an emergency fund (3–6 months of living expenses), keeping debt under control, and avoiding financial decisions made from a place of panic or desperation. Stability is what allows you to stay invested when markets drop, hold a property through a vacancy, or weather the slow early months of a business.

• Build an emergency fund before you invest aggressively
• Pay down high-interest debt — it is a guaranteed return at whatever rate you’re paying
• Keep fixed expenses low enough that a temporary income disruption doesn’t derail everything

3. Protect Yourself

Wealth is not just about building — it’s about keeping. A single catastrophic event without the right protection can erase years of progress. Insurance isn’t exciting, but it is the backstop that keeps a bad year from becoming a financial disaster.

• Carry adequate health, life, disability, and property insurance
• If you own a business or investment real estate, consult a professional about entity structure and liability protection
• Have a basic estate plan — a will and beneficiary designations at minimum
• Don’t let the pursuit of returns leave you exposed to catastrophic downside

4. Be Proactive So You Can Seize Opportunities

The best opportunities in real estate, business, and investing often come with short windows. The people who capitalize on them are not lucky — they are prepared. That means having liquid savings, maintained credit, and relationships in place long before the opportunity appears.

• Maintain a strong credit profile — you’ll need it for real estate and business financing
• Keep some liquidity even while investing
• Build your knowledge base continuously so you can evaluate opportunities quickly
• Surround yourself with people who are a few steps ahead of where you want to be

So What’s the Right Answer?

The right answer is the one that matches who you are.

If you hate managing things, don’t have much starting capital, and want a truly passive approach — the stock market is a proven, excellent path. Invest consistently in low-cost index funds, don’t touch it, and let time do the work.

If you are analytical, understand a local market, and want tangible assets that generate income while you sleep — real estate is a powerful wealth engine. The leverage alone makes it a category unlike anything else in the financial world.

And if you have a skill the market will pay for, an idea people need, and the stomach for risk and ambiguity — owning a business offers the highest ceiling of all three paths.

The wealthiest people I know didn’t pick one path. They started with one, built a foundation, and eventually used the cash flow or equity from that foundation to expand into the others. That’s not a coincidence.

The real enemy of wealth is not a wrong choice between these three paths. The real enemy is inaction — waiting for perfect information, the perfect time, or the perfect plan. All three of these paths have made ordinary people extraordinarily wealthy. All three have also humbled people who approached them carelessly.

The question isn’t which path is best. The question is which path best fits you — right now, with the resources, risk tolerance, and time you actually have.

Start there. Adjust as you go. Stay consistent. That’s the answer.

Ready to Build Your Foundation? Let’s Chat.

Whether you’re just getting started or ready to expand into a new arena, the first step is always the same: get clear on where you are, where you want to go, and what foundation needs to be in place to get there. I’d love to help you build that roadmap.