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Where Are
You Going To Go?
Most
investors would admit the past two years have been rough in
the investment arena. Long-term or short-term investor; even
day-traders have some battle scars. The markets, the economy,
and interest rates are looking brighter and should get more
positive as we go through the next 12 months. But, some investors
just aren't ready to jump back into the battle. Some may never
be ready again. So, where are you going to go? Historically
the investor who has bought stocks with at least a 3 to 5
year time horizon has done better than almost any other investment,
but there are other places to get a decent return on your
money. Generally the rule still holds that there is a
direct correlation between risk and reward. Put your money
in a FDIC insured savings account and you're likely to get
a 2 percent return on your investment. It's not very exciting
but it is virtually risk-free unless the entire banking system
tanks, at which time you'd better have a little place in the
country with a large garden. Certificates of Deposit have
been a traditional safe haven for those willing to tie up
their money for 3-months to 10 years. For those more in tune
with what is available on the Internet, they can get 5.5 percent
from ING Baring in an online savings account that has no length
of deposit restrictions.
Municipal
bonds have some attractive tax benefits for those in the highest
tax brackets. With muni's you'll receive the stated coupon
rate if held to maturity and if interest rates go down you
can receive some appreciation by selling the bonds prior to
maturity. Precious metals are a traditional parking place
for capital, but you're unlikely to see much appreciation.
REITs provide an opportunity to participate in a pool of real
estate or real estate backed loans. Many REITs have a specific
focus so if you want exposure to a particular type of real
estate you can simply pick and chose, whether your interest
is commercial, apartments, medical complexes, warehouses,
shopping malls, or undeveloped land. Buying and holding
real estate directly has been a time tested path for capital
appreciation. Granted your stocks will never call you at 2
o'clock in the morning to tell you a hot water heater looks
like Yellowstone's Old Faithful geyser, but rental property
can be a good hedge against inflation, produce a good cash
flow, and long term appreciation. Foreign markets and commodities
are an option away from the stock markets, but if you are
uncomfortable owning stocks, you'll be super uncomfortable.
All things considered, most investors will still be better
off holding a well-diversified portfolio of stocks.
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