Page 430 - How to Make Money in Stocks Trilogy

300 BE SMART FROM THE START

There will always be periodic, significant run-ups in gold stocks caused by
fears or panics brought about by potential problems in certain countries. A
few gold companies may also be in their own cycle, like Barrick Gold was in
the late 1980s and early 1990s. This type of commodity-oriented trading can
be an emotional and unstable game, so I suggest care and caution. Small
investments in such equities, however, can be very timely and reasonable at
certain points.

Should You Invest in Real Estate?
Yes, at the right time and in the right place. I am convinced that most peo-
ple should work toward being able to own a home by building a savings
account and investing in common stocks or a growth-stock mutual fund.
Home ownership has been a goal for most Americans. The ability over the
years to obtain long-term borrowed money with only a small or reasonable
down payment has created the leverage necessary to eventually make real
estate investments possible for most Americans.
Real estate is a popular investment vehicle because it is fairly easy to under-
stand and in certain areas can be highly profitable. About two-thirds of Amer-
ican families currently own their own homes. Time and leverage usually pay
off. However, this is not always the case. People can and do lose money in real
estate under many of the following realistic unfavorable conditions:

1. They make a poor initial selection by buying in an area that is slowly
deteriorating or is not growing, or the area in which they’ve owned prop-
erty for some time deteriorates.
2. They buy at inflated prices after several boom years and just before
severe setbacks in the economy or in the particular geographic area in
which they own real estate. This might occur if there are major industry
layoffs or if an aircraft, auto, or steel plant that is an important mainstay
of a local community closes.
3. They get themselves personally overextended, with real estate payments
and other debts that are beyond their means, or they get into inviting but
unwise variable-rate loans that could create difficult problems later, or
they take out and live off of home equity—borrowing, rather than paying
down their mortgage over time.
4. Their source of income is suddenly reduced by the loss of a job, or by an
increase in rental vacancies should they own rental property.
5. They are hit by fires, floods, tornadoes, earthquakes, or other acts of
nature.