No Such Thing As An Infinite Return

To the uninitiated, the myth of the infinite return on investment at first seems plausible.  After all, if you were able to acquire a profitable asset without investing any of your own money, the profit on that investment would be infinite relative to the magnitude of that investment, right?  Wrong.

The utter ridiculousness of the myth of the infinite return on investment becomes obvious when one reflects on the meaning of the word “infinite.”  First, think of all the money in the entire universe that exists, has ever existed, or ever will exist.  Got a number in your head for how much that might be?  There’s no telling how large that number is but one thing is for certain:  it’s less than infinity.  There is a finite amount of money in the universe.  It might be an astronomical number, but its still a finite one.  When you say you’ve achieved an infinite return on an investment, what you’re really saying is that you received all the money in the universe and then some.  Did you receive all the money in the universe on your last investment?  The $20 bill in my wallet right now says you didn’t.  Unless you are the only one in the universe with any money, you didn’t earn an infinite return.

Remember Middle School Algebra?

The formula to calculate return on investment is simple:  ROI = (gain from investment – cost of investment ) / cost of investment.  If you bought a stock for $100 and by the end of the year it was worth $110, your ROI = ($110 – $100) / $100 = 10%.  The zero-down-infinite-return proponents will say “well wait a minute, if my investment is $0, that’s an infinite return!”  Wrong.  Let’s run the numbers using the above example except this time, the “cost of investment” is assumed to be $0.

ROI = ($110 – $0) / $0 = ???

Do you see the problem with the equation above?  The more mathematically-inclined among you will immediately note there is a $0 in the denominator.  This poses a problem since in math, division by zero is illegal.  You simply cannot do it.  Ever.  For any reason.  Thus, the correct thing to say is that in this case, the return on investment is undefined.  You can’t calculate what the return is but one thing is for certain:  it is not infinite.

Don’t believe me when I say you can’t divide by zero?  Just ask the U.S. Navy.  In 1997, the U.S. Navy aircraft carrier USS Yorktown’s propulsion system ceased to operate, rendering one of the mightiest ships in the history of the world dead in the water.  The reason?  An error in the ship’s database caused the on-board computer to attempt to divide by zero, crashing the entire system.  The ship had to be towed into harbor.  If the U.S. Navy can’t even divide by zero without catastrophic results, you haven’t got a prayer.

But The Return Is Still Huge, Right?

Hopefully by now I’ve managed to convince you an infinite return on investment is possible.  “Fair enough,” you might say, “but the financial rewards on the transaction is still huge.”  Well, maybe.  But probably not.

Zero-down deals are quite rare, and they are never easy.  If there really were plenty of zero-down properties out there that would yield positive cash flow right from the very beginning, everybody would be doing it.  Obviously, it’s not that easy.  In fact, it’s extraordinarily difficult.  It takes a lot of time, research, and careful calculation to find these deals and after closing, there’s often a lot of work that needs to be done, since the vast majority of these properties are fixer-uppers.  The financial investment required might be zero, but the labor and time investment required is huge.  Once you take the value of your time into account (and the associated opportunity cost of not being able to do something else), the picture changes dramatically.

An Example Of The Time Costs Involved In Real Estate Investing

Continuing the example above, let’s assume you are able to buy a $100,000 property with no money down that at the end of the year appreciates 4%.  Furthermore, let’s be generous and assume the above property yields $100 per month in positive cash flow after expenses, or $1200 per year.  Overall, the property returns $5,200 over the course of the first year, most of it unrealized appreciation.

Let’s assume the investor in question earns $50,000 per year at her day job, which equates to about $25 per hour (assuming two weeks vacation) and let’s furthermore assume it takes approximately 50 hours of work to locate, research, and renovate the property.  I believe 50 hours of work is a very reasonable assumption when you take into account the time spent on MLS websites looking at listings, visiting properties, negotiating, dealing with lenders, arranging inspections, attending closing, and a weekend renovating.  Nobody who has ever bought a property would balk at the 50 hour figure.  All told, 50 hours x $25 per hour equals $1,250.  This is the amount of your actual initial investment, not $0.  In the end, this works out to a 316% return on investment, which is nice but hardly anywhere close to infinite.  Looked at from another perspective, you earned approximately $104/hr on this real estate deal, which is over four times the hourly rate from your day job.

But wait, there’s more!  Rental properties don’t manage themselves.  Assuming it takes approximately 2 hours per month to manage your new property (24 hours per year), you’ve just added another $600 to your upfront investment, bringing your total to $1,850.  In the end, you get a 280% return on investment equating to just over $70/hr.  All in all, not a bad return, but it’s certainly nowhere near infinite.

An Investment Made For The Rich

Traditionally, real estate has been an asset class mostly restricted to the wealthy.  To this day, the costs involved in buying, selling, and leasing real estate can be prohibitively expensive, nevermind the difficulty of acquiring enough properties to be sufficiently diversified across both property types and geographical regions.  A portfolio like that would cost tens of millions of dollars in invested capital, an amount well outside the means of the middle class.

REITs For The Rest of Us

Fortunately, Congress saw fit to foster the proliferation of Real Estate Investment Trusts, or REITs, as a way for the middle class to participate in the benefits of real estate ownership.  REITs are required by law to pay out 90% of their net income as dividends to shareholders, and in return are allowed not to pay any corporate income taxes.  These securities routinely yield between two and three times more than the overall stock market, making them ideal for income investors.

REITs Vs Rental Properties

Income

The income return of REITs is relatively straight-forward to measure:  the Vanguard REIT Index (VGSIX) currently yields 5.81% (and is my REIT fund of choice).  The income potential on investment real estate, on the other hand, depends entirely on the specifics of each individual deal.  It’s difficult to generalize across all property types, but a reasonably-priced, responsibly-leveraged small residential income property (1-4 units) can yield between 8-12% on your invested capital.  However, during the go-go days of the real estate bubble, cash yields were often much lower and in some cases negative in many markets.

Winner: Rental Properties

Appreciation Potential

Since REITs are required by law to pay out 90% of their net income to investors as dividends, they aren’t able to retain much cash to grow their real estate portfolios.  Small individual investors, on the other hand, are free to re-invest 100% of their earnings back into income-generating properties.  On the other hands, large REITs are often able to borrow on much more favorable terms than small investors (once they exhaust owner-occupied financing opportunities) and have teams of professional analysts scouring the market for deals, an effort small investors just can’t match.  Overall, the appreciation potential of individual investment properties versus REIT portfolios is a toss-up.  It totally depends on local market conditions and which real estate sector is currently in favor:  commercial or residential.

Winner: Tie

Leverage

REITs typically carry loan-to-value ratios of between 50-70%, making them moderately leveraged by real estate standards.  By contrast, the norm for small investors is 80% and sometimes even 90% or higher for ultra-aggressive investors.  Sure, you could buy REITs on margin, thus bridging the leverage gap with direct real estate investment, but the interest rate on a margin account is likely to be significantly higher than a mortgage on an investment property.

Winner: Rental Properties

Safety

Rental properties are very expensive, and true diversification is far beyond the means of any middle-class real estate investors.  Additionally, individuals rarely have the opportunity to invest in non-residential real estate sectors such as industrial properties, hotels, shopping malls, and even large apartment complexes.  By contrast, a top-quality REIT mutual fund owning hundreds of REITs spanning tens of thousands of properties in every sector imaginable spanning the entire globe can be bought for as little as a few thousand dollars.  Direct control over small rental properties helps mitigate the risks of direct somewhat, but still fall far short of the safety promised by broad diversification.

Winner: REITs

Cost

Anybody who’s ever owned their own home knows real estate is expensive to buy, sell, and maintain.  By contrast, the Vanguard REIT Index charges a miserly 0.21% of assets, or many times less than the cost of direct real estate investment.  Closing costs alone would amount to more than 0.21% of any real estate deal you’d be likely to find, nevermind the costs of actually maintaining the thing and keeping it leased.

Winner: REITs by a mile

Effort Required

The ultimate goal of most investors is to be able to generate enough income from investments to be able to retire.  Thus, passive income is key.  Direct real estate investment, however, is not even remotely passive.  You have to find tenants, handle repairs, and keep track of accounting details.  If you own more than a few properties, the effort involved can easily turn into a full-time job.  Sure, you could hire a property manager to do the dirty work, but that would take a significant bite out of your profits and you’d probably lose some valuable tax benefits to boot.  REIT mutual funds, on the other hand, couldn’t require less effort.  Buy once and then cash your dividend checks until the day you die.

Overall Profit Potential

Overall, direct real estate investment has far greater profit potential than REITs due to higher amounts of leverage and lower borrowing costs;  however, it is also much riskier in many (if not most) cases.  With high returns comes high risk.  In the long run, REITs are unlikely to return more than they have in the past, which is about 10% per year since inception.  A properly-leveraged direct real estate investment program, on the other hand, could easily return 20-30% per year indefinitely as long as you were willing to put the work in.

Winner: Rental Properties, but with higher risk as well

The Choice Depends On You

It goes without saying that real estate belongs in every investor’s portfolio, but in the end the choice between REITs and direct real estate investment depends entirely on your individual needs and wants.  If you want to earn excess returns and retire a millionaire at a young age, direct real estate investment is probably the best choice for you.  If you just want to set it and forget it, however, REITs offer an ideal balance of return, risk, and required effort.  In the end, the choice will probably boil down to how much work you’re willing to do.  As always, hard work pays off.

Where To Learn More

The bookstore is the best place to learn the ins and outs investing in Real Estate and REITs.  Here are a few books I highly recommend.

• Investing in REITs: Real Estate Investment Trusts by Ralph Block
• Investing in Real Estate by Andrew McLean and Gary Eldred
• The No-Nonsense Real Estate Investor’s Kit: How You Can Double Your Income By Investing in Real Estate on a Part-Time Basis by Thomas Lucier
• Investing in Duplexes, Triplexes, and Quads: The Fastest and Safest Way to Real Estate Wealth by Larry Loftis

Sources:

** Domholf, Willam Who Rules America:  Wealth, Income, and Power.  September 2005

Money Management

As I wrote several months ago, mutual fund companies quite often make better investments than the majority of the funds they manage.  There are three primary tail-winds behind asset management companies:

1. By nature, asset management requires very little in the way of capital expenditures.  Therefore, companies are free to cut back to the bone in tough economic times without having to worry about service or investment results suffer all that much.
2. As the cost of buying and selling various securities via innovations such as ETFs, ETNs, mutual funds, etc continues to come down, the asset management industry will attract more and more of the public’s money.  Not only will they manage the investments of the ultra-rich, but of the lower-middle class as well.
3. Financial assets are becoming stickier and stickier.  Once you become a 401k provider of a corporate plan, you have a monopoly on all the assets in it.  In essence, you even don’t have to compete anymore.  The IRS penalty for early withdrawals is enough to keep most of the assets with your company.  This is a huge problem for investors, but a boon for fund companies.  Sadly, I don’t see this changing anytime soon.

In the end, it comes down to the fact that investing can be a complicated as you want it to be, and there is always a certain percentage of the population (large majority of it, really) that simply doesn’t want to bother learning how to do it on their own.  What’s more, the financial media goes to great lengths to convince the general public that it needs their services.  So long as that is true, owning a money-management firm is like owning a printing press.

Real Estate

It’s true that “they aren’t making any more land,” but that’s not the trend I’m concerned with here.  After all, there’s plenty of undeveloped land out there.  Probably 90% of the American west is sparsely populated, if at all.  So what makes real estate so valuable?  Location, location, location.  Desirable neighborhoods are desirable for a reason:  they are surrounded by fine dining, a great public park, good scenery, a vibrant social scene, etc.  What’s more, these desirable features may be difficult to recreate.  Top chefs won’t want to open a restaurant in the middle of nowhere.  Scenesters are loyal to their favorite bars.  Great scenery isn’t easily transported to a neighboring location.

Over time, public transportation is likely to become more and more important as fossil fuels begin to run out and oil becomes more and more expensive (I don’t believe for a second current oil prices will last).  In the next few decades, it will simply be too expensive to live far out of town and rely on gas-powered automobiles for transportation.  This will serve to make desirable locations even more desirable since public transit will likely only be built out to cover the most populous areas.  The saying would probably be more accurate if it said, “they aren’t making any more good land.”

Arguments Against 401ks

• Tax Rates Will Rise - A tax break today doesn’t seem like such a good deal anymore if you end up having to pay a much higher rate upon withdrawal. With a $10 trillion national debt, continuing budget deficits, and staggeringly large entitlement obligations for Social Security and Medicare, many if not most observers predict the U.S. government will have no choice but to raise taxes significantly in the future. After all, we can only live off borrowed money for so long. If taxes are raised significantly in the future, the scales tip more in favor of paying taxes now rather than later. A Roth IRA would be the most obvious alternative.
• You Owe Income Tax On All Gains – In a 401k, there is no such thing as a capital gain: it is all considered regular income by the IRS and thus taxed at the highest possible rates. For some asset classes that throw off a lot of taxable income such as corporate bonds or REITs, this is fine since relatively little of their long-term return comes from capital gains. For low-cost index funds, growth stock mutual funds, and other low-turnover, equity-based investment strategies, however, this is a significant disadvantage. Since practically all of an index fund’s return comes in the form of long-term capital gains, the value of the tax deferral is minimized: these funds would be very tax-efficient anyway. “But you still start with more money in the beginning because you save on taxes,” you might say. This is true, but that isn’t necessarily enough to overcome the twin disadvantages of high-cost, low-quality investment choices prevalent in most 401k plans. Lazy Man And Money does the math here.
• 401ks Have Expensive, Sub-par Investment Options – On average, I have found this to be true. Sure, some larger companies administer their 401k plans through Vanguard or one of the other top mutual fund companies and offer low-cost, high-quality investment options to their employees but in my experience, this is rare. I have never in my life had a decent 401k plan, in fact. Many contend it’s better to forgo the tax deferral in favor of superior investment options, and this is certainly sometimes the case.

What’s The Alternative?

The three points above are all valid reasons to skip the 401k, depending on your individual circumstances. You should do your own homework to determine if a 401k is right for you. If it’s not, what’s the alternative?

• Pay Down Debt – Paying down all your high-interest debt is an excellent alternative to investing in a 401k.
• Invest In A Roth IRA – If you qualify, a Roth IRA is a great destination for your investment dollars. You can open an account anywhere you like and withdrawals are completely tax-free.
• Invest In A Taxable Account – No tax advantages, but at least you have full control over your investment options and can withdraw your money at any time for any reason
• Real Estate – If you know what you’re doing, an investment in real estate can pay huge dividends even in today’s market.

Well what if, like me, you just don’t want to wait that long? Of course, I’m not going to do anything foolish like invest all my savings in penny stocks or the lottery in some desperate effort to strike it rich overnight, but I don’t want to wait 40 years, either. Instead, say my desired time horizon to accumulate $1 million is 15 years (yes, I know $1 million won’t buy as much in 15 years) and I only have $10,000 to start. If I am able to invest an additional $1,000 every month, I would require a 20% annual compound return to reach my goal in 15 years. That’s ambitious, but not impossible. Now, where can I get that 20% per year?

Real Estate

Real estate is down and out right now, but that only serves to make it more attractive as an asset class. Direct ownership of residential and commercial real estate still holds outstanding long-term profit potential, even in this market if you buy correctly and take on a reasonable amount of leverage (70-80% LTV max). Not only do you get modest appreciation (don’t count on it), but you can also get cash-on-cash yields in the 12-14% range, not to mention loads of tax benefits. Nobody knows what the real estate market will do over the next few years, but 15 years from now a properly-bought and maintained piece of property should be worth quite a bit more than it is today. Put it all together and 20-25% annual returns are well within reach. Get lucky, and you could top 30%. All this in an investment you have partial control over.

Your Own Small Business

This is a topic I plan to write on in the near future: everybody ought to start their own home-based small business, if only for the tax benefits. But the benefits go well beyond taxes. Just where do you think you’re going to get that extra $1,000 per month to invest? You’re going to start your own business. It could be an internet business. It could be a homemade arts and crafts business. It could be a lawn-care business or anything else your heart desires. Now this doesn’t have to be something you do full-time, although you may want to eventually make that transition, but it is imperative that you save and reinvest all your earnings from your side business. You aren’t doing this to buy an HD TV, after all, you’re doing it to achieve financial security while you’re still young enough to enjoy it. If your business takes off, 20% per year is actually a very conservative estimate and you will have no trouble reaching $1 million on time. If not, you’ve still got a little extra cash to invest every month. Over time, that seed money will multiply many times over even if you earn much less than 20% on it. And guess what? Even after you reach that $1 million goal, you can continue doing your side business part-time as long as you want, so you won’t even have to rely on your nest egg to support yourself. In fact, hopefully you had so much fun achieving your goal you’ll decide to go for $2 million, $3 million, or more.

Be Warren Buffett

This is where evil scientists have a distinct advantage. If you were to invent some sort of personality-switching ray where you could put your mind in Warren Buffett’s body, that may be the path to go. Kinda like the 74 different versions of that Freaky Friday movie, except with rich people rather than little girls. On second thought, Warren Buffett is getting kinda old so scratch that. Maybe Justin Timberlake is a better bet. At least he can dance.

For beginners, the best way to become a better investor is to learn the basics of investing. Morningstar, a popular mutual fund and stock resource company, offers a variety of short courses in their learning center on everything from stocks, mutual funds, bonds, and portfolio construction. Investors could do worse than complete a few of these.

Read The Investment Classics

Many successful individual investors start by reading the so-called investment classics. These are books written by some of the professions wealthiest and most successful investors. A few I recommend are Common Sense on Mutual Funds by John Bogle, The Intelligent Investor by Benjamin Graham, Common Stocks And Uncommon Profits by Phil Fisher, Unconventional Success by David F. Swenson, and The Intelligent Asset Allocator by William Bernstein. Reading these five books will make you more knowledgeable than many professional financial advisors and will certainly make you a better investor.

Educate Yourself About Various Asset Classes

Successful investors need to know the risk/return characteristics of several different asset classes, not just stocks and bonds. Other important asset classes include real estate, commodities and cash, all of which may have a place in your portfolio. You should have a pretty good idea of how these asset classes fit into your portfolio after reading the investment classics above; Unconventional Success has a particularly good treatment of the major asset classes. You might also want to check out my articles on various asset classes and asset allocation.

Determine Your Risk Tolerance

Knowing how much risk you can handle is essential to being successful as an investor. You are likely to panic and abandon your investment plan at the worst possible moment if you unwittingly take too much risk. Know thyself.

Be Inquisitive

By now, you should be more or less comfortable with managing your own investments, but there’s a seemingly infinite amount of information out there. Intelligent students never stop learning. Interested the mathematics of modern portfolio theory? Google it and learn. The world is your oyster.

Like any good portfolio, the managers of the Permanent Portfolio don’t attempt to predict future returns of various asset classes.  Rather, they maintain a fixed allocation diversified broadly between uncorrelated asset classes.  According to the fund manager, the Permanent Portfolio’s target allocation consists of:

• 20% – Gold
• 5% – Silver
• 10% – Swiss Franc Assets (government bonds, interest-bearing accounts, etc)
• 15% – US and Foreign Real Estate and Natural Resource Stocks
• 15% – Aggressive Growth Stocks (high beta, fast growers)
• 35% – US Treasury Bills, Bonds, Notes, and other dollar-denominated assets

Over the decade ending March 31, 2008, the fund returned 9.38% per year before taxes with a standard deviation just under 7%.  This compares quite favorably with the overall US stock market’s 5% return and standard deviation upwards of 9%.  Viewing the fund’s 10 year chart, it’s clear the fund did not participate in the great bull market of the late 90′s and the resulting bust.  In fact, most of its out-performance can be attributed to its stable performance after the tech bust and the recent gold and commodities bull market.

Although quite tax-efficient (it’s managed with an eye towards tax efficiency), the expense ratio is a somewhat pricey 1.11% so I wouldn’t want to allocate the majority of my portfolio to it.  On the other hand, its low correlation with stocks and bonds make it a good diversifier.  Furthermore, the fund is an excellent hedge against inflation and adverse geo-political events.  I could easily see allocating 10-20% of my portfolio to the fund.

“The use of various financial instruments…such as margin…to increase the potential return of an investment.”

Employing leverage, also known as Other People’s Money by pop-finance books such as Rich Dad Poor Dad (note:  While I’m not a huge fan of RDPD overall, author Robert Kiyosaki does a good job of discussing the benefits of leverage), is the easily the quickest road to riches.  Borrowing money to purchase investment real estate, start a small business, or buy a large position in the next Microsoft (good luck with that!) are all examples of leverage.  If things go your way, you can make a lot of money very quickly.  But leverage doesn’t necessarily refer only to financial instruments.  You can also leverage your skills (write software to automate a tedious process), other people (hire an employee to do marketing for your business), and leverage your time (delegate non-core responsibilities to others).  Of course, leverage cuts both ways as those who purchased bubble real estate with little or nothing down can personally attest.  While inexperienced investors should avoid leverage due to the risks involved, there are situations where borrowing to purchase an investment can make good sense.  To that end, here are three rules of leveraged investing.

1. Never Accept Negative Cash Flow – When borrowing for investment purposes, it is paramount the current income from that investment is sufficient to completely pay your current borrowing costs.  This applies whether you’re borrowing to buy investment real estate, government bonds, or a dividend-paying stock.  Never purchase an investment on margin that doesn’t pay for itself month-by-month.
2. Diversify, Diversify, Diversify – This is a situation where even relatively modest amounts of volatility can ruin you if you’re not careful.  Never use leverage to buy an investment that will comprise more than 5-10% of your total net worth.  I realize with larger investments that require a lot of capital such as real estate this will be difficult to manage at first, but you should always strive for greater diversification.  You may only be able to afford one investment property at first, but don’t stop there.  Continue expanding (prudently, of course) until you own multiple rentals along with a sizeable stock and bond portfolio.  Diversification is much easier with stocks:  just buy a broadly-diversified ETF or two.
3. Don’t Expect Miracles – While leverage can certainly enhance your returns significantly, it’s not a get-rich-quick scheme.  It will still take years of sustained effort to amass anything close to a fortune.  If your expectations are too high, it’s more likely you’ll get impatient and take on too much leverage, increasing your chances of disaster.

It’s easy to see the allure of a passive income strategy.  After you’ve achieved a certain level of passive income, you no longer have to fear losing your job or falling on hard times because barring a complete economic collapse, your dividend and interest payments will keep rolling in.  The results are sometimes dramatic.  ND at Living Off Dividends, for example, brought in $2,667 in passive income in March, 2008.  While admittedly not all of that income is completely passive (I hesitate to call blogging income “passive”), it’s impressive nonetheless.  If you live in Manhattan that may be nothing special, but where I live $2,667 would completely take care of my living expenses with a bit left over at the end of the month.  With that kind of cash, I could travel the world at will.  Perhaps I would take on contract work every once in a while if I needed to save up for a large purchase, but for the most part my working days would be over.

So why haven’t I been an income investor in the past?  The main reason is I didn’t have the capital necessary to build a portfolio large enough to provide a reasonable income, but after a few years working and saving that’s beginning to change.  While I couldn’t come close to completely replacing my income passively, I could probably generate around $500-600 per month by shifting my emphasis from total return to income generation.  While not great, $500 per month is a pretty solid start and I feel confident I could break $2000 within a few years. 

And yet, I’ve decided not to go that route for the time being.  For starters, income-focused strategies by necessity tend to sacrifice long-term return for current income, especially after taxes are taken into account.  That’s perfectly fine if you’re generating $10,000 per month; at that level of income, you probably already have a portfolio large and diversified enough to handle whatever the market throws at you with ease.  But at my stage in my investing career (I’m only 26), I feel my energy would be better spent maximizing my income elsewhere and building my own business.  To be sure, I will make every effort to grow my passive income, but it will come from web projects, real estate, and other business ventures for now, not from portfolio income.  My stock portfolio will continue to be invested for maximum growth of capital.  Besides, it’s simple enough to sell my index funds and redeploy my capital into income-focused investments if and when I ever choose to go down that path.  It’s also possible I may choose to use a hybrid strategy in the future, where I invest say 25% of my portfolio for current income and the rest for long-term growth of capital.

What is your strategy for quitting your day job, if you have one?

Recessions Make Buying A Home More Affordable

Recessions are usually great times to buy real estate.  Not only do real estate prices often go down during a recession, but mortgage rates typically trend lower as mortgage lenders compete with each other to attract scarce homebuyers.  If you already own your own home, why not pick up a rental property or two amid the current market turmoil?

Recessions Encourage Retailers To Discount Consumer Goods

When money is tight, people buy less.  It’s no surprise, then, that retail stores tend to offer tempting discounts on all kinds of consumer goods to entice consumers to their stores.  In need of a new car?  Wait until the economy hits rock bottom and you should be able to walk off the lot with all kinds of discounts, favorable financing terms, and dealer incentives.

Cheap Airfare And Hotel Deals

The middle of a recession is an ideal time to take the family to Disney World.  Not only will you be able to find cheap airfare and reasonable hotel rates, you won’t have to deal with hoards of people like you would when business is booming.

Stocks Go On Sale

It’s been said stocks are the only thing in the world people only want to buy when they’re expensive and avoid when they’re on sale.  But being an Intelligent Investor, you don’t think like that.  You kick your savings into overdrive during recessions in order to buy more when prices are low.  Over the long term, the disciplined investor who keeps buying during a bear market will reap enormous rewards.