Stock Investing Vs Gold and Real Estate
Author: James Leitz
Source: ezinearticles.com
Traditionally, stock investing has been associated with good times. People tend to invest in gold in times of economic crisis; and real estate investing has been viewed as relatively safe. When stock investing loses its luster investors often react and turn to the other two investment options to make money and offset stock losses. Should you do the same?
Anyone who follows the stock market knows that there are bull markets and bear markets … good times and bad times. If you invest in gold you know that the same is true there. The recession of 2008-2009 reminded investors that real estate investing has its ups and downs as well.
The good news is that historically these three investment options have not marched to the beat of the same drummer. For example, in a bear market for stocks real estate can do just fine, and/or gold can soar. The experienced and truly savvy investor tries to time the markets to be in the right place at the right time.
Should you play this game? I suggest that you do not. There’s an easier way to make money investing as an average investor. Playing the markets is risky.
Let’s talk about the money you are willing to invest and put at risk in order to earn a higher return over the long term. Divide it up 4 ways: domestic stocks (U.S.), foreign stocks, real estate and precious metals (gold).
Find a mutual fund company (family) that offers funds in all four categories; and decide how to divide up your investment assets across these 4 investment options. This is called asset allocation. For example: 40% to domestic stock funds, 30% to foreign stock funds, 20% to a real estate fund, and 10% to a gold fund.
Invest according to the asset allocation targets (say 40%, 30%, 20%, 10%) you have chosen.
Over time these percentages will get out of line as all 4 of these investment options will perform differently. For example, stocks in general might take a hit when real estate and gold perform well.
Instead of selling what appear to be your losers or otherwise trying to time the markets, simply rebalance your portfolio periodically. In other words, move money around to get back to your original asset allocation target percentages. This way you will automatically be moving money to investment options that have gone out of favor and are selling at lower prices.
Plus, you will be lightening up on the investments that have already made the biggest gains. Remember, there are bull markets and bear markets in gold and real estate as well as in the stock market. Take advantage of them and make money the easy way.
And cover all the bases: stock investing, real estate investing and gold.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com