I’ve been around real estate since I was in high school and my mother first worked at the Montebello MLS. Over the years, I have seen several cycles in this industry. I’ve seen my Realtor® friends go from living in mansions to sleeping in their cars and vice versa. Today, we are experiencing one of the strongest real estate booms I have ever seen. While a large percentage of the country is struggling financially, many of us in real estate and financial services are making more money than ever. Most experts believe the market will remain strong through 2021, and while I don’t want to be a downer, now is a great time to start preparing for the future by diversifying your investments.
People who work in real estate generally invest their money in what they know, real estate. That makes perfect sense, but investing some money in the stock market might be a good way to hedge your money. If the real estate market slows, your commission income will probably go down, and if all of your savings is invested in real estate, you might get hit double hard. Between 2008 and 2012, Latinos lost 2/3 of their household wealth. This is what inspired us at NAHREP, to create the Hispanic Wealth Project. We learned from the last recession that the main reason Latinos got hit harder than anyone else is that we weren’t very diversified. Most Latinos who had money prior to 2008 had most of their money in their homes and their businesses. We all know that you don’t want to sell your home or investment property in a down market, and when the real estate market started to crash n 2008, Latinos had very few liquid assets to carry them through recession.
If you have been following the GameStop story, it is a lesson on how easily individual stocks can be manipulated. Hedge funds and investment banks have been artificially moving short term stock prices for years. Now, investment clubs who discuss stock picks on Reddit have demonstrated that they can do the same. It’s a reminder that trying to time the market and investing in individual stocks is risky. Even the most sophisticated experts sometimes get it wrong, but investing in index funds, value stocks (stocks that have paid dividends for decades), or a diversified strategy managed by a professional manager from a reputable firm, can help provide you with a safe and profitable long-term investment strategy.
I saw a cartoon a few years ago, of a real estate agent on his knees praying. The caption to the cartoon was “Please God give me just one more real estate boom. I promise not to blow it this time”. Like most good jokes, it’s funny because it’s true. Give that some thought this week.