The Dow Jones Industrial Average is a stock market index that tracks the 30 largest, publically owned companies in the USA. Institutional traders, the media, and everyday investors watch this index to give them an idea of what is happening with the stock market and the health of their individual portfolios. On July 21st, 2011, the Dow closed at 12,724. On Monday August 3rd, this dropped to 11,896, then again on August 8, and on August 10th it finally hit a low of 10,719 representing almost a 10% freefall. The following Monday this went back to 11,482 at the time of writing this article, we are back down to 11,000. What a ride.
Some investors stayed in while others panicked and pulled out with fresh wounds from the last market collapse. If you analyze the data that has come out of this recent fiasco, the general consensus is the true winners are large institutional traders, stock brokers, and Wall Street, not the everyday investor.
The question is, are stocks a safe bet? When was the last time you opened your 401K or Broker statement and saw consistent double digit returns? For those of you tired of the wild swings and small or negative returns, I would recommend looking towards investing in real estate.
Typically when I talk to people about investing in Real Estate, they bring up 3 common perceived barriers; Current News, Liquidity, and size of investment.
Current News: Everywhere you turn, the media does an excellent job telling you about the horrific stories in the housing market. People are scared about real estate, especially with all the foreclosures and short sales popping up in neighborhoods across the country. This bad news creates opportunities and gives people the ability to buy at “Bottom of the Market Prices”. A downturn gives you the ability to buy anything from residential to commercial properties at historically low prices.
Liquidity: There is no doubt, an advantage to stocks is you are always just a click or phone call away from cashing in your stocks or portfolios. However, any advisor will tell you that your strategy should be to hold for the long term measured in years, not months. In addition to this, the national average for selling a home is 90 days and in some markets it’s a low as 35 days.
Size on Investments: Many people like the low initial investments associated with stocks and mutual funds. You can contribute to a 401K or for a few thousand dollars own stock or shares in mutual funds. What many people don’t realize is the same options are available with real estate. Savvy real estate investors create investing groups called syndicates that pool together peoples money to acquire assets. This allows people to invest a small amount of money to buy something that otherwise might have been out of their price range. Typically these syndicates offer preferred returns starting at 8%.
Don’t let the media or fear of real estate prevent you from investing in Real Estate. Now is a great time to take care of historic prices and boost the returns of your portfolio.