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Brad Tinnon

Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

If you watch HGTV, it seems like flipping properties and owning real estate is a sure way to make a profit. Charles Paikert of Financial Planning Magazine recently wrote an article titled How to Talk to Clients About Investing in Real Estate. Charles discusses the experience of real estate investor and financial advisor Michael Martin who says that “real estate is not for the faint of heart.” One of the important principles discussed in the article is that real estate shouldn’t be the only investment a person owns. It’s prudent to also own other asset classes. If you own real estate alone, many things could go wrong from location, illiquidity, and industries / companies in the city experiencing a downturn or exit. Be sure to read to the end of the article where it states that many advisors do not recommend investing in real estate through mutual funds or ETFs. I happen to disagree with this as owning real estate through this means has historically been very profitable over the long term without a lot of the headaches involved with owning physical real estate. This is not to say that owning physical real estate is bad. It’s just to show that there is more than one way to own real estate.

I wrap up this week with a very good article from Tom Allen and Mark Hebner titled How Accurate are JP Morgan’s Capital Market Assumptions. It seems as if people and companies (i.e. active managers) just can’t help themselves from making predictions. Every year, over the last 21 years, JP Morgan publishes their annual long term capital market assumptions giving investors so-called “guidance” on what they can expect the markets to do over the next 10 to 15 years. But just how successful has JP Morgan been at making predictions? The authors compared the predictions of JP Morgan to several major benchmarks going back to 2011. JP Morgan was only successful in 4 out of 42 predictions. In all fairness 2011 is not really enough time to ascertain success; however, surprisingly reports prior to 2011 could not be found. Hmmm, I wonder why??? This just goes to show that usually the ones making the predictions are the ones getting wealthy not the ones taking their advice. Additionally, this is yet another report that highlights the ineffectiveness of active management strategies.

Hope you enjoy!

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Brad E.S. Tinnon

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