Sadly, it looks like the party is coming to an end, so don’t wait until it’s too late to consider alternative investments like real estate. Experts agree that the stock market is going to experience a correction, and it’s likely to be sooner than later, which means right now is the best time to make a smart real estate investment to provide ongoing income, essential portfolio diversification and a hedge against inflation. With the Dow stubbornly holding ground at well above 24,000, top analysts are recommending investors reevaluate and reallocate their holdings asap to avoid getting caught up and losing big in the coming downturn.
Stock Market Correction Predictions 2018
“I think we’re due for a correction and we may well have that in 2018”, shared The Leuthold Group’s Chief Investment Strategies Jim Paulson in a December CNBC interview. “I think you’ll want to be prepared for a little more difficulty in 2018”.
Paulson recommends reallocating your mix between stocks and bonds, but also says its essential to rebalance some sector exposures, which is where real estate investment comes in. Expanding to include investment property in your portfolio can also provide ongoing tax-deferred income for those who buy real estate with IRA accounts, but regardless of how and where you invest, real estate offers a level of security that just can’t be matched by traditional stocks and bonds.
Factors that could cause a major stock market slide:
- Narrowing of Bond Yield Curve
- Stretched US Equity Valuations
- Tax Legislation Proves Ineffective
- Unwinding of Massive Federal Reserve Balance Sheet
- Announcement of a New Fed Chief
- US Dollar Reverses to the Upside
- Leading Economic Indicators Continue to Hit Extremes
The Vanguard Group agrees with Paulson that a stock market slump is imminent, with research indicating that there is at least a 70 percent chance of a big correction. In fact, analysts say the trade-off between stocks and bonds – indeed even stocks and cash – is not looking nearly as strong as it did earlier in this current bull market, which followed the financial crash.
“There is always the risk of a correction in stocks, but the Vanguard research shows that the current possibility is 30 percent higher than what has been typical over the past six decades”, wrote CNBC. “According to Vanguard’s chief economist Joe Davis, investors need to be prepared for a significant downturn”.
Real Estate vs Stock Market Investment
When you consider that having a 10 percent negative return in the US stock market in a calendar year [within a five-year forward period] has happened 40 percent of the time since 1960, it’s easy to see why analysts do not expect current rates of return, which have exceeded even most bullish forecasts from 2010, to continue into the long term. So, how does real estate investing stack up?
“[Real estate] provides a potential inflation hedge for both your rental income and sale of the property”, wrote U.S. News & World Report.
Here’s how it works: Since rental rates and home prices will both rise with inflation, but your mortgage payments will not increase, real estate investment offers a substantial benefit over time. In addition, investment properties are either actual brick-and-mortar investments or raw land, which is naturally limited in quantity, giving real estate investing another distinct edge over intangible assets like stocks, bonds and mutual funds.
“With the right property, neighborhood location and cash reserves, investing in real estate can be a great option”, wrote U.S. News & World Report. “Many investors are drawn to the ongoing payments of rental income, and as a long-term strategy, the ultimate sale of the property can fund a large portion of their retirement”.
Regardless of how you’re currently invested, veteran forecaster Marc Faber wants you to remember one thing: Just because a market has gone up doesn’t mean it will continue to go up. In recent months Faber has called for equities to correct by at least 40 percent, which would make Black Monday when both the S&P 500 and DJIA crashed more than 20 percent in October 1987, pale by comparison.
Add this to the fact that Vanguard is telling investors not to expect more than 4-6 percent returns from stocks in the next five years (a liberal estimate by some accounts), and it’s easy to see why pulling in 8-14 percent returns with real estate is looking really good right now.
As I like to remind potential buyers who come to Investment Properties Mexico, investing in vacation rental properties provides income for your retirement that you can rely on. Yes, you also have excellent appreciation, but our clients are buying investment properties that provide income for their retirement that can also be used as a vacation home to enjoy with friends and family.
Do you have questions about real estate investing versus the stock market? Post them in the comments!
Read Your 401k Will Suffer Over the Next 10 Years – Here’s What You Can Do About It and learn more about what experts are predicting for the stock market and why real estate investing offers a great alternative investment opportunity!