Last weekend I read an excellent article in The Economist about the failure of traditional economic theory to handle and manage the modern economy in it’s advance state. The failure seems to be in 2 areas namely,
It’s interesting to note that Ferguson seem to be implying that real estate investment is not a good alternative. He cites the works of Yale professor Robert Shiller which states that the value of real estate did not really rise dramatically when observed over a long period and when taken as an aggregate. Of course this may not be true for individual examples especially if one did not invest in places like California, Florida and Phoenix where most of the crises in mortgages occurred. The conclusion seems to be that real estate may not be a good investment when considering other options like stocks. One should only invest in real estate if one knows what one is doing.
Buying a house for living is another thing and I think one should own the house that one is living in. But to treat it like an investment, for instance, borrowing against rising equity may not be a good move. For instance, re-mortgaging ones’ loan does not remove the loan but increases it although one can make the argument that the extra money can be used to pay off credit card debt and used in other investments like the stock market. But at the end of the day this plan does not solve the root of the problem I think which is living beyond one’s means and living a materialistic lifestyle. I guess that is the main problem now where people may really need spiritual literacy instead of financial literacy.
I guess it goes back to the original investment vehicle of buying stocks. I guess real estate can be used if one earns rental income which can be looked upon as having one’s own business. But stocks seems to provide the more reliable return although the recent decline places doubt on this move. Here is where a new branch of economics comes into play the so-called behavioral finance. So I guess the best option is to invest in ETFs or mutual funds instead of stock picking if one is not an expert like Warren Buffet. Rounding out the picture I guess is one’s spiritual literacy. So the best investment advice maybe: to live simply (i.e. don’t overspend), live within your means, live in your own modest house and invest in ETFs or mutual funds.
The best investment solution of course is to own one’s business so there is a separate source of income aside from one’s job. Robert Kiyosaki’s advise leans towards buying real estate to rent to others or sold once the real estate value increases. But some forecast that property values will remain stagnant or will not increase in coming years unlike in the past. The Japan scenario is the frequently cited example. So my remaining strategy is to be a writer so I could try to earn money by writing books that hopefully earn money. I think I may have reached the stage that my journal writing and blogging have settled the issues of developing the proper writer’s psychology. Of course, blogging serves both goals of practicing creative writing and as a psychological outlet. Perhaps blogging maybe a bridge towards the next writing stage.
Initially I was driven to write to settle my thoughts, express myself and to handle stress. I never thought of writing in a structured way towards a creative output like a novel. It was a mystical experience (ha ha) at times and that I really did not develop a proper writing craft. So writing as a psychological release has now been distinguished from the craft of creative writing. I guess the psychological release can be addressed by other means which I have learned and practice like mind-mapping or visual thinking (to clarify and settle thoughts), tai-chi and exercise (to handle stress), and Toastmaster (to express oneself). So what is left is maybe a writing experience that can be leveraged towards the process of writing as a craft. I think this maybe the best chance to earn an alternative source of income.