Comments on: Where To Invest Outside the Stock Market

By: BankFreeInvesint.com

BankFreeInvesint.com — Sun, 09 Nov 2008 01:45:47 +0000

Stock market junkies will continue to give you bad advise, like diversify, think long term, yada yada yada.

Invest in real estate, the best asset class. I am sure that some will argue that real estate is risky too.

Well, check this out http://www.pwcreval.com/value_cycles/cycle_methodology.pdf

If you chose to purchase at stages 8-11 then you are screwed. We are between stages 2 and 3 in many markets. Find below market properties which cashflow and hold them until stages 7- 8 and then sell or continue to hold them for a long time for cash flow.

By: Hal P.

Hal P. — Mon, 20 Oct 2008 16:05:15 +0000

Great advice. I particularly think that paying down debt is a key and should be focused upon. Frankly I think that should be number 1 on the to do list. Definitely setting aside some money for difficult times coming is a must too. That is to say I think that we are in for some difficult time in the coming 12 months as I think we’re in for some major inflation.

I noticed you didn’t mention any precious metals investments. Do you think there is any value to be had in purchasing “real” gold and silver. I say real as I know some invest in “paper” versions.

Also, what’s your take on credit unions as opposed to banks? With all the banks crumbling and being bought out taking more money from the FED I particularly find it worrisome.

By: Writer's Coin

Writer's Coin — Sun, 12 Oct 2008 15:55:07 +0000

I agree with most of this except the bit about the market and it’s 10% return. The more conservative number I follow is an 8% annual return and it’s important to note that this is over a long period of time. How could that be correct? Because while it may go down 25% this year, it means next year or the year after will have huge gains. Gains you may miss out on if you pull your money out and try to time the market. Past performance may not be an indicator of the future, but history (over a long enough period of time) certainly is.

By: Miss M

Miss M — Fri, 10 Oct 2008 23:27:52 +0000

I’m trying to convince my other half that he needs to follow the invest in yourself approach right now. His industry, Hollywood set designing, isn’t doing so hot and he hasn’t worked in months. That makes it a great time to get back to school, he’s not earning money anyway, and employers pay more for brain power than brawn power. I’m still doing my regular investing and I’m not sure what to do with my cash, I just paid off a car loan and it freed up a lot of cash. For now I’m setting it aside hoping to pick up a house cheap soon, but I’m worried I’ll kick myself later for not investing more heavily right now. If you don’t have other uses for your cash and at least a 10 year horizon, definitely now is the time to invest.

By: kitty

kitty — Fri, 10 Oct 2008 03:32:32 +0000

“You get a guaranteed X.XX % return (for many folks these days, 6.00%). The 30 year treasury is only returning 4% (tax free) right now.”
This really depends on what you think about the possibility of inflation. Sure right now you only get 4%, but the probability of inflation over the next 30 years is pretty tangible.
At least this is what a couple of (well off) friends of mine think, and they’ve been right on the money before: they got out of the market on time in 2000s; they also got out of the market last year and invested in gold and short ETF. Just a couple of weeks ago they bought a vacation home. They have about twice the cost of the home in only one of their investment accounts, yet they chose to take the mortgage specifically they think we’ll have inflation. I am not sure they are right, but it is something to consider.

Jeremy, I did it a couple of days ago, but I got SKK (ultra short Russell 2000), but unfortunately with only a small amount. I am up about 10% in one day. I wonder if we are close to the bottom though: usually when the panic level that high, it means we are close. I will watch tomorrow and decide if I want to buy another short ETFs or sell this one in case the G7 meeting over the weekend is successful in doing something to get Libor down.

By: Gates VP

Gates VP — Thu, 09 Oct 2008 19:29:48 +0000

Man you just took like a week’s worth of articles and crammed them into one

By: Mike

Mike — Thu, 09 Oct 2008 18:21:28 +0000

“Do you have any suggestions on where people can invest nowadays?”

You always have good advice for people Jim, but I have to disagree with you one this one point.

NOW is the time to buy stocks, when they’re on sale. There are some very profitable and stable companies out there trading at significant discounts.

While people may also be worried about contributing to their 401ks, this is the time when DCAing really pays off. I’ve actually boosted my 403b plan contribution up to 25% of my paycheck. I know it sounds scary and counterintuitive, but it’ll pay off a few years down the road.

By: Jeremy

Jeremy — Thu, 09 Oct 2008 16:11:37 +0000

Or if you don’t want to get out of the market but want to make money as it goes down, stick a little money in a short ETF or ultrashort ETF

I picked up some ProShares UltraShort Midcap 400 (MZZ) for around $85 a share a few days ago. Today it’s at about $98. A nice little 15% return.

Of course, I don’t recommend this for most people, and you should stick to the advice Jim has provided

By: Anonymous

Anonymous — Thu, 09 Oct 2008 15:45:06 +0000

Agree 100% in the need to invest in yourself. Completing an industry accreditation or a professional certification should be a constant task.

By: Al

Al — Thu, 09 Oct 2008 15:43:07 +0000

KJ made a point I’d like to second….when the VIX hit its all time-high in December of 1987, where did the stock market go from there? Up. And up. And up. And what happened to the stocks in the S&P 500 that people purchased when the VIX was at its all-time high? They went up, and up, and up! If your favorite shirt, blouse, dress, etc. is half-off at Macy’s, you run out and buy it, right? So if your favorite stocks are half off in the stock market, what do you do? Go into CDs and cash? No, silly! You buy! I still kick myself for not buying more when the market dropped 22 percent in October of 1987 and the Dow dropped from 2200 to 1700 in a day. (People today are freaked because the Dow slipped below 10,000. The stocks I bought at 1700 are still pretty valuable!

By: KJ

KJ — Thu, 09 Oct 2008 14:32:05 +0000

Excellent tips! I don’t want to get too off-topic, but the I take a longer view on the VIX. It reached an all time high around 150 in Dec 1987′ish. So it’s still far from that peak.

Still, I like the fact you’re looking at these Volatility indexes and sharing great advice. I plan to “re-use” some of your tips in my family / friend circles as I always seemed to be asked about Finances.

By: fred@opc

fred@opc — Thu, 09 Oct 2008 13:38:29 +0000

For a long time I have been preaching in my friend circles that paying down your mortgage SHOULD be the conservative component of your portfolio. You get a guaranteed X.XX % return (for many folks these days, 6.00%). The 30 year treasury is only returning 4% (tax free) right now. You’d have to be in the 35% tax bracket for it to make more sense to buy t-bonds than pay a mortgage.

Plus, unless you’re investing in retirement accounts, paying down your mortgage is safer from a legal perspective. Your retirement (401K, IRAs) and home can’t be taken from you in the unfortunate event you were sued and the other person won (e.g., bad car accident). Investment accounts, investment properties ARE fair game – if you have them, you should make sure you have sufficient personal liability insurance.

Finally, and this isn’t a *great* reason, but it is important for some. Once you put that money in your mortgage, it is MUCH harder to get that money back (you have to refinance, take out a HELOC, etc). With an investment account, you can just withdraw the money. If you’re the type of person that likes to keep barriers between you and your savings, paying down your debt is a much better way to guarantee you don’t spend that money on a new Lexus you (and I) can’t afford.

By: Miranda

Miranda — Thu, 09 Oct 2008 12:14:09 +0000

Thanks for the great tips! I especially like the one about debt. Sometimes we forget that what we pay in interest charges can be damaging to our overall net worth.