The thought process regarding your personal residence as an investment is seldom realistic. For example, do you pay yourself rent every month to occupy this investment property? In other words do you consider the free housing you get if you consider the house an investment.

And is it appropriate to deduct mortgage interest when comparing one type investment to another? That is the cost of money. No matter what you invested the money in, if you didn't have the cash at the outset, you would have had to borrow it to make the investment. If you had paid cash for the house and borrowed on margin to make the stock investments, would the stocks not have returned a profit? Sure, the interest paid has to come off any profit you make from a house, but that is true for any investment. It isn't an inherent difference between investing in stocks and investing in houses. It is just because real estate allows leveraging of your investment that mortgage interest comes into play.

But suppose you pay cash for your dwelling. Bottom line is that if real estate appreciates in price at an average of 5%/year (which is pretty good actually) there is no way you can make a competitive profit if you figure in even just maintenance, insurance and taxes. The real profit comes from the "free" rent.