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Subject:  Re: OT: KISS Date:  8/10/2002  6:22 PM
Author:  FoolMeOnce Number:  73417 of 882490

Daryl40 writes:
But there really is no way to avoid this. OK, so you do the heavy real estate thing...and what happens if real estate crashes and burns as has happened in the past?

The role that luck plays can be minimized however by avoiding the use of undiversified and highly volatile strategies such as are espoused on this board, during the accumulation stage. Real estate is capable of delivering comparable returns as equities with much less volatility and with a strong income component. Real estate debacles are few and highly localized. Stock market bears are common, expected and affect all investors. There have been very long (>10 year) periods when stocks have returned zilch. I am not aware of even two consecutive years when the average U.S home resale price has declined. The risk is obviously less and the role that luck plays is minimized.

Or what if Congress changes tax laws drastically, like they did in 1986, and killed a whole generation of real estate investors over night, who had properties based on the old tax system that became worth MUCH less under the new tax system?

The 1986 tax law changes had little effect on the small residential properties that I recommend since these can can be marketed to owner occupants. In my market, some of the largest gains due to appreciation I have ever seen, occurred from 1986 to 1990.

Only pointing out that reducing exposure to stocks increases exposure to other "luck" based items. In the end, much of life is based on luck. There's not much we can do about it except crawl under a rock. And a lizard might bite you there!

Agreed. There will always be some element of luck and risk involved. So why go looking for trouble by relying exclusively on the most risky, volatile asset available?


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