Although this article from CNN seems to want to talk about retirement, what it really underscores is the philosophy the modern American adopts towards investing.  And what is the generalized American investment strategy?  It goes like this; don't take risks, save, and keep equity in your house.

The problem I see here is that this strategy is only being compared to its antithesis of taking risks, not saving and destroying the equity in your home.  Yes, compared to that strategy, it is far superior.

The sub-headline of this article reads, "You can now see that real estate isn't a sure bet."  The author goes on to say that the recent housing market increase was just as superficial as the tech boom and that the current rises in energy stocks and precious metals are soon to bust like these previous examples.  Whether or not his prediction is correct is irrelevant.  To me, the bigger issue is, why doesn't he talk about those that made a killing in the tech boom, a killing in the housing market increase and those that stand to make a killing in energy stocks and precious metals?

All investments involve taking risks.  And while the general notion that there is an inverse relationship between the return on your investment and the assuredness of that return is true, authentic investors spend their time searching for ways to maximize their return while minimizing their risk.  If you bought a house for top dollar last year as an investment and plan on selling it this year, you'll probably agree with the author's positions that real estate is too risky.  However, if you bought that same house at a 30% discount, not only would you be fine, but you'd probably be looking at all of those other schmucks who bought at the top of the market looking for one who will sell their home to you at a deep discount too.

But consider this.  Buying a home at a 30% or more discount doesn't happen by accident, just like Warren Buffett's choice to buy a company for billions of dollars is not dependent on chance.  An investor learns the parameters in which their investment is going to be affected by and makes a calculated risk based off of their assessment.

Playing it safe by giving your money to someone else to manage while remaining ignorant of the ways in which it is being handled is no longer a viable option.  Today's retirees who are seeing 25% losses in their retirement funds can attest to this.  Safety comes from taking calculated risks.  There is no time like the present to illustrate how important it is to acquire and maintain a healthy investment education.

-beasley

Real Estate | Financial | Economy | Investing