Friday, December 11, 2009

Gold Isn’t the Only Way to Protect Your Nest Egg

Remember back in 1980 when inflation almost hit 15%?
Retirees on fixed incomes felt it the most. Imagine what it was like to have your food, electricity and prescription costs going up each month while your pension, Social Security and interest income stayed the same. The inflation numbers are pretty mild now. But as our Federal deficit continues to swell to historic highs, many investors fear that the inflationary times of the 1980s are coming back. And that could help explain why gold has been on a run … up almost 30% this year. Now the gold bulls are screaming: “I told you so!” However, as often happens when everyone thinks that something is a great idea, a buying frenzy might be evolving in gold ... I’m not saying you shouldn’t own gold. What I am saying is that if you’re one of the 76 million boomers on the verge of retiring, you might want to consider another way to protect your next egg from what is sure to be skyrocketing prices during your retirement years. Real estate has taken a bloody beating over the past three years. In fact, U.S. homeowners have lost about $5.9 trillion since the housing market’s peak in March 2006. And foreclosures continue to rise. But there are pockets in the U.S. that are starting to stabilize. You can see the numbers for yourself by clicking here. Meanwhile, other parts of the world are already seeing property values turn around. In China, prices are soaring! So much so that Chinese investors are lining up for buying tours in the U.S. to take advantage of real estate deals here. Even London is starting to see a comeback. Developers can’t keep up with the demand for small, single-family homes. There are other hot markets, too: Israel’s residential real estate went up 13.7% in the third quarter. Singapore’s jumped 15% at the same time. Now you’re probably not going to travel to Shanghai, London or Tel Aviv to get your piece of what could be the next global real estate boom. But you can buy stocks in some of the companies that are involved in these markets. These could include developers, real estate agencies and home builders. Mutual funds and exchange traded funds (ETFs) specializing in these areas can be a great way to go too. The point I want to make is that gold is not the only way to protect your retirement portfolio from runaway inflation. And real estate could offer some of the best bargains we’ve seen in a long time. Best wishes, George

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