Apr 26, 2021

Using Real Estate To Balance Your Investment Portfolio

The key to a good investment strategy and planning for retirement is balance.  Real Estate and especially your personal home should be part of that strategy.  Very often when the stock market is up, real estate is down.  We now have a situation when both the stock market and real estate values are at record highs.  This is happening because interest rates are so low and because the federal government is pumping trillions of dollars into the economy.  

Frankly, it all scares me a bit because I remember both stock market and real estate market crashes and down turns.  Buying when either market is at record highs can be dangerous in the short run.  People with a long term horizon will do just fine as long as they are not forced to sell in a downturn, which is when real losses would be realized. 

Maybe a good rule of thumb is to have a third of assets in real estate, a third in moderate risk stocks and the remaining third split between bonds and money market cash, or government guaranteed CD's.  What goes up will surely come down.  Both stock and real estate markets are cyclical.  It is only a matter of time when we will see a downturn, particularly if President Biden raises taxes and or the Federal Reserve raises interest rates.  

The key is not having too many eggs in one basket.  Working with a good financial advisor is the best way to go to diversify assets.  But whatever you do, real estate that carries with it certain tax advantages should be part of the picture.  Over time, homes will increase in value.   However, watch what happens with the tax code and make your investment decisions accordingly.