Investing Answers
The S&P 500 is down more than -9% from five years ago. If you haven't already, maybe it's time to consider moving your money out of stocks, and into some of these alternative investments.
Gold
When inflation besets the economy and the dollar starts to lose its value, gold is traditionally the best proverbial mattress in which to stuff your cash. Between 1976 and 1980 inflation rose at a rapid +8.84% per year, a significant move by any standards. This means that if you had literally stuffed your cash in a mattress during this decade, it would have lost nearly -30% of its purchasing power!
On the other hand, the value of gold increased +369% during the same period (after correcting for inflation). As soon as investors regained confidence in the dollar, gold bullion quickly lost nearly -50% of its peak value. Still, investors who got in before the bubble made a handsome profit.
To compare, gold appreciated +109.3% from 2006 to 2010. This time the gain was due to increased uncertainty surrounding debt and equity markets alike. During the previous great spike in gold prices, it was more difficult to jump on the bandwagon, as the only way to gain exposure to the commodity was to own physical bullion. Today, it is easier to own gold through an investment in an ETF such asSPDR Gold Trust (NYSE: GLD) or via options and derivatives.
Real Estate
A key part of realizing the American Dream is home ownership. Leading up to the Great Recession of the late 2000s, politicians and lenders realized this and enacted policies that quickly drove up the percentage of Americans in homes. Well, as we are now well aware, these seemingly benevolent actions in effect distorted financial and real estate markets to the point of collapse. According to bankrate.com, the average 30 year fixed mortgage rate is currently 4.36%. Anyone who has ever bought a home knows that this is the perfect opportunity to refinance and lock in an incredibly low rate.
The question today is whether property values have hit rock bottom after a period of drastic revaluations.
Of course, there are several different ways to invest in real estate. If you have the capital, you can always buy properties and lease them out, but this can quickly become strenuous and time consuming. If you aren't retired or looking for a new career, another real estate investment vehicle is a Real Estate Investment Trust (REIT). A REIT is a corporation investing in real estate that doesn't have to account for corporate tax, but in exchange is mandated to distribute 90% of income to investors. Essentially, it is a mutual fund investing in real estate rather than securities. And just like securities, REITs can be publicly traded, allowing any investor to put some real estate in their portfolio. [Interested in REITs, but don't know where to start? Check out our recent article, Lock In High Yields with 5 Historically Strong REITs.]
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The question today is whether property values have hit rock bottom after a period of drastic revaluations.
Of course, there are several different ways to invest in real estate. If you have the capital, you can always buy properties and lease them out, but this can quickly become strenuous and time consuming. If you aren't retired or looking for a new career, another real estate investment vehicle is a Real Estate Investment Trust (REIT). A REIT is a corporation investing in real estate that doesn't have to account for corporate tax, but in exchange is mandated to distribute 90% of income to investors. Essentially, it is a mutual fund investing in real estate rather than securities. And just like securities, REITs can be publicly traded, allowing any investor to put some real estate in their portfolio. [Interested in REITs, but don't know where to start? Check out our recent article, Lock In High Yields with 5 Historically Strong REITs.]
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