The Diversified Blog

A wealth management blog dedicated to creating a long lasting sustainable retirement.

Risks of Owning Real Estate

Is Real Estate Investing Right for Me? 

 

The hot real estate market in Boulder and Denver has generated a lot of interest from investors who wonder whether they should get in on the real estate action instead of investing in the stock market. I don’t blame people for wondering. Through both the popular press and word of mouth, success stories abound, suggesting that an investment in real estate may offer a more reliable ride to easy street. 

 

Is the hearsay worth heeding? I’ll explain more in a moment, but here’s the bottom line: There is solid academic evidence suggesting that the real estate market often marches out of step with stock and bond markets, and that it has its own risk/return story to tell. That means that a sensible (typically, small) allocation to real estate may make sense within a well-crafted, globally diversified portfolio. 

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Lessons for the Next Crisis

Here is a nice article provided by Dimensional Fund Advisors:

 

Capital markets have rewarded investors over the long term, and having an investment approach you can stick with may better prepare you for the next crisis and its aftermath.

 

CLICK HERE TO READ MORE:

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Will White House Scandals Derail the Stock Market?

Here is a nice article provided by Anne Kates Smith of Kiplinger:

 

By Anne Kates Smith, Senior Editor, From Kiplinger's Personal Finance, August 2017

 

Investors are wondering if the stock market’s Trump bump could morph into the Trump slump as questions continue to swirl around the White House regarding its Russia connections. It’s a high-stakes concern. Since President Trump’s election in November, stocks have risen 14% on high hopes for the president’s pro-business agenda, which includes corporate tax cuts and regulatory rollbacks. But policy has been overshadowed by probes in Congress and in the Justice Department.

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Academic Research Produces About Three to Five Good Ideas Every 20 Years

 

In a recent article by Ron Rimkus, CFA he asked Nobel Laureate Eugene Fama some questions regarding investing. Eugene Fama said to stick with the basic factors. 

 

"One of the problems with the financial industry today," Fama lamented, "is that academic research produces about three to five good ideas every 20 years. However, the financial industry packages and sells about 10 new ideas per week." The industry has clearly begun to embrace passively managed index funds and such factor-based products as smart beta. 

 

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How Survivorship Bias Can Skew Your Views on Mutual Fund Performance - 2017

How Survivorship Bias Can Skew Your Views on Mutual Fund Performance updated thru 2016

 

It’s important to avoid treating the market like a popularity contest by chasing outperformers or running away from the underdogs. But neither do most investors want to go into the market entirely blind. For that, there are database services that track and report on how various fund managers and their offerings have performed.

 

Besides ample evidence that past performance does not predict future returns, there is another reason we advise investors to proceed with caution when considering past performance: Many returns databases are weakened by survivorship bias.

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