San Diego Housing Market News and Analysis

maybe the best thing to do is dollar cost average into etfs in an extraordinarily broad range of stuff.

but i don't know.

Lack of responses suggests we don't know what the hell to do, either.

And yet even inaction is action. So you must do something

This is a very interesting question.

What role would gold and silver have?

Kind of agree to sdduuuude. I am in the same boat. For me, the sensible thing to do is to diversify in stocks/ RE / overseas investment. Whichever gains become fully realized, take it out and put it in another undervalued asset vehicle.

Keep it going. Money got to flow somewhere. We just need to sit tight and be there before it arrives.

I don't think this is a hard one to answer.

I would suggest a balanced portfolio of low cost index funds consisting of both domestic bonds and stocks & international stocks.

Your asset allocation into each of these classes should really be based on your age and risk tolerance.

The old rule of thumb is your age in bonds (percentage). Many of the large caps companies already have a big international exposure....so take that into consideration when considering your allocation to international funds.

Fidelity and Vanguard have excellent low cost funds index funds.

All in at this ratio today?

Or dollar cost average?

If latter over what time frame.

It's much easier to allocate as you go than to allocate everything on a single day. It feels a lot like market timing when it's all invested on one day.

Timing matters.

I'd say even if you think the allocation question is simple the when and how is not. Or it may be simple but still scary. Risk tolerance sounds abstract. I think the right question is would you start to feel reaaly upset if the Dow hit 5,000.

I've heard of people that are qualified getting loans for around 5.25% on investment properties in town with 15% down. If you get a condo in La Costa or somewhere for around $200k that rents for $1700 or so would that seem like a good scenario? Of course you have to figure some vacancy/repairs/management/taxes and all, but I think you'd still be cash flowing a bit no matter what.

Yes the value might go down, but I do think that rents are going to go up in my opinion. I mean...do rents ever go down in a community like North County San Diego? Or course it is better to get appreciation and cash flow, but can't you just let it cash flow until it does appreciate....of course not right around the corner, but if a 30k investment returns 6k a year...is'nt that a sound investment (I would think using the numbers above you could cash flow 500 a month)? Either way your making money from your money...just more some years than others right?

Am I missing something or not factoring in something that I should?

OK. Thank you all for the response.

paramount: yes, precious metal may play some roles as it is a hedge against inflation/deflation scenario. I don't know how though.

masayako: I don't know how diversification would help if they are somehow all correlated altogether.

simonbart: yes, low cost indexing works if you are happy with the returns. However, it is argued by Rich that value-based investing can out-perform your method.

sdsurfer: I don't really agree with your number on ROI but I agree with your points. If one can find an absolute return scenario that meets the standard, who cares if the value drops or not? I have not taken that into account and I should think more about it. There is pockets of values even in the most over-valued market, that can be exploited to an informed investor.

Now let's look at the issue from another angle. So we are saying that the policy makers have some enormous power in destroying the attractive of cash from a normal valuation point of view (I mean normally, you move money from over-valued assets to under-valued assets in your asset allocation, but currently I think cash is under-valued but policy makers are a threat to that asset class). In fact, US tax code & monetary policy have been rewarding debt accumulation and consumption, punishing savings and capital investment, as long as I can remember. You thought it would take a huge crisis such as the one we witnessed few years ago to change them, but they are still just kicking the can down the road.

So the question is, do they truly have that power? Wouldn't such policy come back to hurt themselves because at the end of the day, only savings and capital investment by entrepreneurs can save the day. The government's Keynesian policies encourage people to spend, or even take the initiative itself and start disposing huge public public spending–all this to get rid off the lack of demand and make businesses sell their products. But they destroyed savings in the process, forsake future higher productivity resulted from creative destructive in favor of selling products created at the current time that is not aligned to people's need.

So it is apparently folly. The question then becomes in the presence of a mad crowd, is it only sensible to join them to keep alive?

I'm fairly conservative and mid 40's. I'm old enough to have made every mistake in the book and young enough to recover. I used to aim for 1/3 Cash; 1/3 Property; 1/3 Stocks. I have tweaked things a bit based on throwing in inflation hedge and a play money allocation.

Here is where I am aiming (currently I'm too heavy in stocks and too light in RE)

30% Real Estate
30% Cash/short-term bonds
30% Stocks
5% Commodities (really just Gold)
5% Random (speculation, Stock timing, private business opportunities, stock options at work, etc)

Of the real estate ... some can be REITS, but most aimed at investment property (for tax efficiency)

Of the stocks ... at least 1/3 in foreign stocks, mostly large cap. The rest domestic.

If I really knew exactly what to do the 5% random would be a much larger chunk. But I have been around long enough that I don't know everything.

I wholeheartedly agree with you that being responsible seems to go unrewarded in a sense.

I guess I turn to real estate because I believe that although they can manipulate the RE market...it is to a lesser extent of the other markets. I truly get frustrated because I want to learn more about everything you mentioned above in order to make smart decisions with my money. However, when I read your post above it seems like you really know what your talking about and you end up with the same frustration because it does not make sense for them to do what they do.

Just like any other 33 year old I just want to provide for my family and get a decent return for my hard earned money so that one day I do not have to work so hard and can spend more time with my family as opposed to 80% of it working to provide for them.

Having a lot of family in Real Estate I was always amazed by how much my grandparents originally purchased property for, but when I talked to them about it they would always say, "that was a lot of money back then." So I figure I'm going to try and buy property the way they did and hope for the best.

I feel like a stock or any other investment can go down to $0 without me doing anything wrong except not selling it in time.

A home can always provide a roof over someones head and even with the uncertainty of going up and down...it is always worth a certain amount per month.

I have a lot of respect for a lot of the people that contribute to this blog. I appreciate you bringing up this topic and know there are smart people reading this and would like one of them to tell me I'm wrong and I should do something else with my money because I know leaving it in the bank is not what I intend to do.

Thank you in advance for your time.

Odds are you are never going to earn enough to spend more time w family. It's now or never.

Citation: cats in the cradle by Harry chapin

so true. tune always brings a tear.

That's pretty amazing Walter. I actually referenced that song just the other day when I was talking to my Mom while we were trying to coordinate a family trip and she was mad because I was going to miss dinner because I had to leave to drive up after work. It's crazy how a song can be so timeless and true no matter when it was written.

All in all I'm a very fortunate man already. I think I work less than some people.

Thanks for commenting Walter. I was on the fence if I would be able to drive up to visit my grandma after work today or later this week. Per your comment I'm going up today.

Now or never Man. So true. Thanks.