Wednesday, April 15, 2009

When to Get Back in the Game

Posted by: Chris Shanks
Investment Analyst

Chris is responsible for analyzing, valuing and marketing properties for the NAI Alliance Investments Team. He is also involved in the disposition and acquisition of investment properties for clients.

Many investors across the asset spectrum have found themselves, and their money, on the sidelines of the financial game. Most of these investors currently have a healthy percentage of their wealth in cash, money market accounts, or CDs. These little to no interest earning assets, while safe, won’t provide their owners with the long term returns they should hope to realize. I can understand why many of them withdrew their money from the market, however I believe in passive management as well as the long term hold approach to assets. Trying to time the bottom, or any point in a market, is a futile affair; to use a popular term, “It is like trying to catch a fallen dagger”. No one knows when the “bottom” will be reached, but the sooner we show confidence in our economy, by getting dollars into circulation, the sooner we’ll pull out of this trough.
There are more deals now than ever in a wide variety of asset classes that present great opportunities for investors. Many high quality assets have seen their values unfairly pulled down by the declining market and economic conditions. There are those assets that are arguably performing just as well as they were two (2) or three (3) years ago as they are now. High quality real estate properties that previously would have sold at a 6.50% cap rate are now trading at least 100 – 150 basis points above that number. While these properties may not see cap rates that low for a long period of time, if ever, they are still being unfairly discounted and represent a good long term position for many investors. 2009 should at least bring more lookers into the market, there are deals out there the only matter is identifying them.

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