Real estate investing is not nearly as complicated, financially burdensome, or time consuming as you might think. In fact, Its easy to add raw land, shopping centers, apartment complexes, and private homes to your portfolio without brokers, bankers, attorneys, and handymen on your payroll. Even better, the zero overhead approach allows you to blend your real estate investments into your securities portfolio for ease of management, income monitoring, diversification, and analysis.

I know you think that the entire real estate market is in a shambles, and that it is far too dangerous to get involved now, what with all the nasty uncertainty that has decimated property values. But where did the real damage take place, and why? Without having mega millions to work with, or a line of credit that goes around the block, you can have positions in various forms of Real Estate without accumulating debt, paying insurance, or leaving your PC--- and you can get it done on the cheap!

All of the basic types of real estate are available through CEFs (Closed End Funds) and REITs (Real Estate Investment Trusts), and both can be purchased in the same manner as any common stock. Additionally, you can own a piece of the action without the big commitment of time and resources. Finally, you can take advantage of changes in the real estate market cycle in precisely the same manner as you can deal with the volatility and fluctuations in the stock and fixed income securities markets.

CEFs and REITs are obviously safer investments than outright purchases of shopping plazas, condominiums, and private homes. They are also considerably less risky than owning the common stock of individual real estate companies. The size of the numbers may be less exciting, but the net income and capital gains potential are comparable on a percentage basis, and the turnover rate can be much more impressive. Both types of real estate based security belong in your investment portfolio--- but in which asset allocation bucket?

I've always included REITs and real estate CEFs in the income bucket of my portfolios because their primary purpose is to generate cash flow. And, as with any interest rate expectation (IRE) sensitive security, I expect prices to fluctuate with changing conditions in several areas: IRE, credit market conditions, economic cycles, stock market cycles, etc. After a huge rally in any market, investors need to be more selective than they generally are. Common sense isn't real common when it comes to investing.

All financial markets, all investment securities, and all economies are cyclical. Equities, real estate, gold, and pork bellies--- it doesn't matter. If you buy too high, you will only get lucky if you know how (not when) to sell, and if you have a plan for doing so. Up side selling disciplines are scarce in most investment strategies... pity, they work so well with bargain hunting during crashes.