Many people are not aware and are not told about the options that they may have with a 401k rollover. You see Bank of America, Charles Schwab and several other large investment firms starting to really advertise for clients to utilize 401k rollovers, with one catch they are not truly self-directed because they limit what you can roll your money into. One of the main investments that is usually not spoken about is real estate.
There is the constant argument of which investment is better for your 401k rollover, land or stocks? While stocks are easy to buy and sell, easy to track, and companies are required to release information, real estate has many other advantages. The most important being that they cant make more land, Dubai excluded. The general public as a whole are more comfortable with stocks because that is what they are told to do. Stocks however can become worthless and essentially lose all of it's value, think Bear Stearns, Lehman Brothers, or all the dot-com companies.
As a whole, Professor Jeremy Siegel of the University Of Pennsylvania's Wharton School of Business says that stocks show an average gain of seven percent a year when data are controlled for inflation. This average works when looking at many stocks over many years. It may or may not work for any individual stock; it doesn't work for three lousy decades in our memory-the 1930's, 1970's and this one.
There are several investors who have of course blown this average out of the water and there are some who have lost it all investing in stocks. The alternative with real estate is transparency. Each deal requires several levels of checks and balances, and precautionary measures that the investor can take. While the past year has shown ever the largest companies can ultimately become worthless, real estate will still have some value regardless of any economic downturn. You may not be able to sell or may have to hold the property longer but you will never receive a notice that your investment is gone and you have nothing.
Farm value in current dollars averaged $2,160 per acre nationwide on January 1, 2007, up from $974 in 1998, a 13.5 percent average annual gain according to the U.S. Department of Agriculture. Cropland during that period rose from $1,340 to $2,700; pasture rose from $489 to $1,116. That is just raw land.
A range of properties, from rental houses to apartment buildings to parking lots, can provide a constant stream of income that will build IRA wealth. Many people think they don't have the money to purchase income producing property simply because they lack savings. However by utilizing you IRA and doing a 401k rollover there several profitable purchases that can be easily financed.
The most important factor when investing in real estate is that it can appreciate as well as have positive cash flow. Consider this, you purchase a parking lot that is generating a 12 percent return on your investment annually, including your positive cash flow. Then 10 years down the line as the city grows an parking becomes more scarce you sell the property and not only have you been collecting the income for 10 year you will earn the appreciation on the property as well.
All in all 401k rollovers allow you to invest in stocks, land, businesses, rentals, cattle, etc. My advice is to not put all of your eggs in one basket and invest in the simple model of diversification. Sounds simple yet the large majority always seems to turn a deaf ear to it.
