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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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