When your hard earned retirement dollars evaporate due to the latest jobs report or the trials of a failing European economy, don’t you question the stock market being such a great place for you to invest? Have you ever calculated how much money you lose in market downturns over which you have absolutely no control?
Over time, the experts say, the peaks and valleys even out and you end up ahead of the game. On average, the market gains.
There’s only one problem with that theory. No one retires after an “average” gain. Their portfolio is either higher or lower. In addition, if it’s lower, they could be in trouble.
Look at the chart to the left, tracking the Dow Jones Industrial Average since 2000. If you had planned to retire in mid-2009, your portfolio was worth less than it had been nine years earlier. Your choices were to take the loss or to delay retirement, which is what many people did. Fortunately by 2013, four years later, the market had recovered enough for them to recoup their losses.
Is that any way to plan for retirement? Employees who invest in the stock market are at the whim of market forces that can drive stock up or down like a roller coaster. Investors have no choice but to hang on tight for the ride. Unfortunately, at stake is not an afternoon of fun, but the quality of their lives for years to come. Roller coasters are for amusement parks, not retirement accounts.
Real estate, however, is a much more stable investment that generates returns on investment that meet or exceeds stock market averages. Yes, real estate values took a pasting after the housing crash of 2007, but the secret to real estate is the profits from rents in addition to the appreciated value of property. Real estate investors thrived over the past six years because they were able to buy homes cheaply and rent them to record number of tenants. Now that prices are going up again, homes are appreciating at historic rates of 3 to 4 percent and rents are rising as well. Of course, real estate conditions vary by locale.
If you’re tired of riding the stock market roller coaster and you think that there might be a safer, saner, surer way to build your retirement nest egg, consider real estate. With HomeUnion, it’s even easier because the hard work of finding the right property, doing the transaction and managing it profitable is handled by experienced professionals who meet HomeUnion’s high standards of concierge service.
10% Annual Return?
Isn’t it true that the stock market has delivered a 10% average annual return?
“Don’t fall for the mistake many investors make when it comes to thinking about that 10% return” says Matt Kranz of USA Today. You can’t put your money in the stock market at the beginning of January and expect to have 10% more waiting for you at the end of December. It doesn’t work that way. That’s a compound average annual return over the long term. In fact, the stock market very rarely generates a 10% on-the-nose return in a year. The 10% return is an average, not a guarantee.
Nor does the oft-quoted 9.6% return factor in inflation, or the ravages of rising prices and cost of living increases. Therefore, even if investors get 9.6% annual returns, due to inflation, they don’t see their purchasing power increase by that much. It’s possible, though, to adjust the market’s long-term returns for inflation. When that’s done, you can see that stocks have delivered an average annual return of 6.2%, IFA.com says.
“The 10% return is not guaranteed by any means. In fact, stocks are so volatile it’s likely you could be down 10% or much more in the short-term before you could enjoy long-term 10% returns,” Kranz says.
Nevertheless, real estate can be just as risky. What if you buy the wrong property or lease to the wrong tenants?
There is risk involved in all investments, but you can substantially reduce the risk involved with real estate. When you invest with HomeUnion you have a greater degree of control over your investments than when you invest in the stock market, especially if you are investing in mutual funds like those featured by most 401Ks.
HomeUnion’s goal is to reduce risk for its investors as much as possible. Its online platform matches your investing goals and interests with specific properties in markets with statistically lower risk for residential real estate investors. By working with brokers and management professionals who know how get the best deals on property and how to attract and retain quality tenants, you have a big advantage over most other investors.
Finally, with real estate, you make the decisions, not a fund manager you have never met. You don’t need to be an expert to determine if a property is in a market with strong economy that’s creating a demand for housing. With a little research, you are the one who decides if a property is an attractive asset for your investment dollars.