What is the Best Investment - Stocks, Real Estate, Cash?

When discussing the best investment people used to debate stocks, bonds and occasionally real estate. But with nearly a 50% drop in stock prices and a large drop in real estate prices in some areas many people are sitting on their cash.

Sitting on the investing sidelines hoping to keep your cash may seem prudent, but it could have negative consequences. With the Fed pumping money into the economy as fast as they can, it is only a matter of time before inflation returns. Once that happens your cash will be worth less each day.

So, should you put all of your money back into the stock market? During the years following the market crash in 1929 the stock market lost 90% of its value. The climate for business remains poor and it's likely that companies will continue to fail in the coming year. It don't have a crystal ball but I don't see a quick stock market recovery.

Real estate prices are not falling uniformly - in some areas of the country they continue to rise. Real estate is a local phenomena. Housing prices may be crashing in LA and Pheonix but are rising steadily in many mid-western areas. Further, unlike stock prices, real estate almost never goes to zero value.

Real estate prices rise and fall much more slowly in response to changes in the market. The real estate market is not efficient and that gives you an opportunity to purchase it well below market value.

Owning rental property can give you many tax advantages that owning stocks cannot. You can also improve the value of your real estate investment whereas, there is little you can do to influence the value of your stock portfolio.

Finally, if we do have an inflationary period, real estate prices tent to rise quickly. Stock may fair poorly (remember the stagflation in the 1970's?). In fact, I think that it may be the administrations strategy to get the county out of the housing crisis by inflating the economy.

For more discussion on why real estate may be the best place to invest your money see this link:

What is the best investment?
Discussion on which is the best investment - Stocks or Real Estate