Land Banking

An article in the New York Times points out that many small investors are fleeing the stock market, with many putting those proceeds into bonds for safety.   Here is a partial reprint of that article.   Down below, I will add a comment -

“In Striking Shift, Small Investors Flee Stock Market
By GRAHAM BOWLEY
Published: August 21, 2010

Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.

So is the timing. After past recessions, ordinary investors have typically regained their enthusiasm for stocks, hoping to profit as the economy recovered. This time, even as corporate earnings have improved, Americans have become more guarded with their investments.

“At this stage in the economic cycle, $10 to $20 billion would normally be flowing into domestic equity funds” rather than the billions that are flowing out, said Brian K. Reid, chief economist of the investment institute. He added, “This is very unusual.”

The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.

It may take many years before it is clear whether this becomes a long-term shift in psychology. After technology and dot-com shares crashed in the early 2000s, for example, investors were quick to re-enter the stock market. Yet bigger economic calamities like the Great Depression affected people’s attitudes toward money for decades.

For now, though, mixed economic data is presenting a picture of an economy that is recovering feebly from recession.”

As investors fleet the market because of it’s volatility and the uncertainty of positive returns, the question arises, “Where can you put your retirement funds, your college funds, etc?”  I would suggest that the patient investor has one very good response which offers a much better return than bonds over time,  “Carefully selected land.”  Buy a parcel, or parcels, of land in the path of development and wait for the value to rise.  It may not be easy, but it IS simple.

I thought you might like this short video -

Real Housewives of DC – A lesson in Land Banking – Mary explains to Cat how her grandfather had the chance to buy land many years ago before the land was developed. All they can do is laugh at the realization of the missed Land Banking opportunity.

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