Today's NY Times announces that the era of treating home-ownership as a means to fortune is over. Reporter David Streitfeld quotes economists saying real estate will never again be the path to wealth it once was. But what Streitfeld doesn't say is what all of us Gen Y'ers should do if we ever hope to retire someday. So SW looked to local investor William Fleckenstein, one of the rare people who got rich off the recession, for advice. (Hint: That dream you have of playing the market then quitting your job at 40 to pursue your dream of making pottery? Give that up.)
Fleckenstein made money by being a pessimist. His Capitol Hill office contains a bear--a reference to his pre-recession strategy of betting that the stock market and real estate prices would go down rather than up. He also started renting a decade ago, so he remains untouched by the real estate collapse.
He agrees with the Times' conclusion that the days of real estate as a near-sure-thing investment are over. But as to how you should invest, that's a tougher question, he says.
Fleckenstein has some pointers about what not to do: don't buy real estate in the hopes it will make you rich and don't jump into investments du jour--currently treasury bonds.
And while he doesn't really believe you should just leave your money under your mattress, Fleckentstein is a fan of standard savings accounts and their teeny-tiny interest rates.
"One of the bad lessons of the last decade has been that markets will always be there to bail you out so you don't need a safety cushion," he says. "It makes sense to have some money in just plain savings."
As to how you might actually hope to retire some day, Fleckenstein says the best thing you can do is hire a professional to manage your cash (*cough* like him *cough*). "Nobody tries to practice medicine on themselves," he says. "There's this whole fallacy that's grown up that anyone can conquer Wall Street."
As to who you can trust, Fleckenstein says look for professional investors who survived the recession. "There's been so much carnage, people who navigated it well should stand out pretty dramatically."
Fleckenstein's advice is obviously self-serving, but then again, he came out on top at a time when everyone else hit financial bottom--so maybe trusting him isn't such a bad idea.