- Produce high yields
- Risk management & protect downside
- Historical performance
To wrap up our series on the economy we’d like to offer some concluding words.
The Federal Reserve initiated its first round of Quantitative Easing (QE) in November 2008. Since then, the Fed has used monetary policy to force interest rates down to 200-year lows.
While the Fed’s monetary stimulus hasn’t done much for stimulating the Main Street economy – it has been extremely successful in elevating asset prices.
When interest rates are excessively low, it drives investors to take unsound risks in their “reach for yield” – and that explains why real estate, stock, and bond prices are at or near record levels.
Most people seem to have become very comfortable with the belief that interest rates aren’t going higher anytime soon – and they are therefore still comfortable buying (or holding onto) investment assets at today’s artificially inflated prices.
Asset prices, however, cannot be artificially stimulated to sky-high levels indefinitely – which mean that someday they will return back to earth again.
Markets rise and markets fall – and whether you invest in real estate, stocks, bonds, or any other investment asset, managing risk and developing a sense of when to buy and sell will always generate the highest long-term returns.