There I sat, poised at my computer; ready to write how new residential sales are a key economic indicator for individual investors.
I was ready to report the facts. U.S. Census Bureau estimated 350,000 new single-family houses sold in June 2012. I was going to remind you that data was seasonally adjusted at an annual rate, the survey was based on a sample of houses selected from building permits, and a “sale” was defined as a deposit received in escrow or a written agreement signed, and these activities can occur prior to a permit being issued.
I was also going to let you know the Department of Housing and Urban Development (HUD) partially funded the report. And, I was going to tell you the US Department of Commerce and HUD would revise their estimates next month and it realty takes about three months before we can identify a trend.
Then it occurred. A question floated in one ear and out the other. WHO CARES? People who really care are news conglomerates and reporters, municipalities and taxing agencies, contractors, Realtors®, and people buying a new home. However, the rest of us have other matters on our mind.
We can summarize our personal economic indicators in relationship with real estate in few questions. How much should I save to buy a home? Is now a good time to stop renting and saving to make a down payment on a house? Should we buy land, improved property, or build a new house? Should we continue to live in our current home? How much real estate should be hold in a diversified portfolio? These are fundamental questions for individual investors. These questions have personal and unique answers tailored to individual circumstances.
Here is some general investment advice. Seek the counsel of a qualified financial professional who has a fiduciary responsibility to you – they are legally required to place your interests first. Generally, it comes down to cash flow, life-style, and asset allocation. It may be prudent to invest in a global real estate securities portfolio through a no-load mutual fund designed to achieve long-term capital appreciation. The portfolio should invest in a broad range of securities. This includes U.S. and non-U.S. companies in the real estate industry with a focus on real estate investment trusts (REIT) or entities like REITs. Furthermore, the portfolio should invest in securities of developed and emerging market countries. Individual investors with a “normal” tolerance to risk could invest 0.50% to 1.00% of a diversified portfolio in global real estate securities. Keep in mind, investments in our securities portfolio adapt to new information quickly. We buy low and sell high based on personal investment policy. Remember, risk and rewards are related. The markets work. Keep costs low. Seek prudent counsel.
Chris Bryant is an American financial advisor.