Make This Easy Trade to Profit from Stalled Real Estate Prices


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ETFS, OPTIONS, REAL ESTATE

Investing has come a long way from the days when it was just a simple choice between stocks and bonds. Typically your portfolio consisted of some mix of stocks and bonds (60%/40% stock/bonds was a pretty standard mix – and still is in some cases) with the only decision being how much to change the weighting based on market conditions.

That’s not to say that investors always avoided complex choices. There were always plenty of stocks to choose from if you didn’t want to buy an index fund.  Investors could get into the details of optimal diversification between a basket of stocks. (Bonds were pretty much restricted to Treasury securities.)

But it’s clearly a different world today. The adoption and widespread success of ETFs has made it extremely easy to invest in a variety of asset classes. These days, it’s more of a decision on what asset classes to invest in (and how to weight them) rather than what individual assets to buy.

For all intents and purposes, it’s just as easy to buy emerging market government bonds as it is to buy large cap US stocks. Plus, ETFs make investing in areas like commodities and real estate much simpler (REITs also serve a similar purpose for real estate investors).

Still, despite the multitude of choices for exchange traded real estate products, it is one area where plenty of investors still like to own the actual assets – that is, they like to buy houses and condos and rent them out. Frankly, I don’t understand it. Why go through the trouble of buying homes (cumbersome at best) and then manage the properties or pay someone to manage them for you (expensive and/or time consuming)?

Personally, I’m happy to invest in an ETF or REIT and let someone else do all the work. But, I get that property investment is a popular way to diverse asset classes. I understand that many investors prefer to navigate the real estate market rather than the stock market.

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