Salient to Investors:

Matthew C. Klein writes:

The Wall Street Journal reports that well-to-do young Americans prefer to invest into “safe” luxury real estate rather than “risky” equities.  The article could have been written in 2002 or 2003 before the housing bubble and bust.

$100 invested at the market peak in October 2007, reinvesting all dividends, would now be worth $123, while the Case-Shiller index of US home prices is still more than 25 percent below the peak reached in mid-2006.

Individual luxury properties might have done a lot better than the aggregate stock market, of course. They might also have done much worse. And past performance is no guarantee of future results. If anything, the reverse is true. In general, it isn’t smart to put all of your savings into a single product, whether it’s your home, or gold bullion, or the stock of an individual company.

The benefits from diversifying in a range of assets that rise over time but don’t move together over shorter periods are so well-known that they were discussed thousands of years ago by Talmudic rabbis.

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