Financial instability, turmoil in the market, rising prices, falling stocks, mergers, foreclosures, the Four Horsemen of the Apocalypse; all signs of a market on the brink of the R-word. We won’t say the R-word here at “The Warrior”—it’s never a good idea to mention it out loud. But if you watch the news at all or listen to the radio or really are alive in any way you’ve heard analysts mention their likely dooms day scenarios.
Most economists would agree that we are currently not in a recession. The generally agreed upon definition of a recession is an overall slowing of the economy. We run into a few problems here because there are many measures of the economy and hardly anyone can agree what a slowing is. So we turn to the National Bureau of Economic Research, a non-profit, non-partisan organization which assigns dates and lengths of recessions in U.S. history. They define a recession as, “a period of declining output and employment.” Whether we are currently in a recession, sliding into a recession, or coming out of a recession is really all semantics at this point; if you polled Americans they would all agree the economy is somewhere they don’t want it right now.
Therein lies the problem: consumer confidence. One of the key indicators of economic well-being, it has been far from stellar the past few years. Blame it on whomever you like, but it needs to change. We at “The Warrior” want it to start right here at Marquette. It’s no secret that the key to success is buy low and sell high, and what better time to buy than right now. Stock and home prices can’t get much lower, and every indication is pointing towards the economy rebounding in a few years or so. That makes this the perfect time to invest. But what to look for in an investment?
Real estate, despite what the market experts are telling you, is a good investment opportunity. There is a limited supply, and even though demand is down now it has to pick up eventually. Real estate is a great long term investment; that is if you have a couple hundred thousand dollars lying around. On second thought, don’t invest in real estate unless you have a lot of capital.
When looking for stocks, you want a stock with a high yield and low price. You also want a stock that gives out dividends. Why? The same reason money now is worth more than money in the future – you can reinvest. Diversify, diversify, diversify. You don’t want to put all your money in tech stocks and then find out that Silicon Valley burned down last night.
Finally, look down the road. It’s not a bad idea to start a Roth IRA account now, even if you can only afford to put a little in at a time. That’s the beauty of compound interest.
Don’t listen to CNN or CNBC all the time. Remember, they get paid to tell people what they want to hear, and for some reason people want the end of the world scenario right now. You can get a leg up on everyone else if you start now.
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September 25th, 2008 at 6:03 pm
I have yet to go wrong on coupon and dividend-paying investments. There are some great companies out there that pay out great dividends, and some rather obvious ones to avoid (financials) at the moment. And, as you note, in the IRA you don’t get taxed on the dividends - it’s really a good way to go.
As far as real estate goes, if it’s not bringing in income, and you’re concerned about it losing value - hedge it. cme.com (Chicago Mercantile Exchange) trades futures on either 10 or 20 major residential markets (geared towards developers and banks), and protectyourhomeequity.com provides the same basic service but is geared more towards the homeowner.