10 ways to make real money
1.) Health care stocks, now is a good time to buy stocks because health care spending is expected to increase as the population ages, individual companies like Abbott and Pfizer, or an exchange-traded fund like Health Care Select Sector SPDR. Risk level: Health care reform could change the game, also future losses from drug patent expirations.
2.) Oil drillers, now is a good time to buy shares of deepwater drillers and oil services firms even though there was a recent accident in the Gulf of Mexico because over the long term demand for deepwater drilling will remain high, individual companies like Transocean, or a collection of stocks in a fund like Oil Services HOLDRS. Risk level: Potential new liabilities to Transocean if acts of negligence are discovered.
3.) Sound Shore, the portfolio picked by these managers is mostly in three sectors, energy, financials, and tech, their philosophy is that if a stock is cheap enough it doesn't take much good news to spark a rally, big investments in Genzyme and Microsoft. Risk level: The entire portfolio could drag down with one or two bad picks, also the fund has only 40 stocks instead of the average 115.
4.) Rental properties, this is about becoming a landlord, the idea is to buy a place and rent it out for more than your mortgage payment in order to have a steady income stream with a good chance for appreciation in property values, seek out a location that was growing before the recession and one that has something to offer such as a university or developing industry, recommendation is to make sure monthly rental income covers your mortgage plus 20%, for example Melbourne, FL two-bedroom condos, or single-family homes in Modesto, CA. Risk level: All you need to wipe out your returns is one destructive renter or an overall decline in that location.
5.) Homebuilders, even though these stocks are way down from a peak in 2005 the long-term outlook is solid, individual companies like Lennar or KB Home, or a an exchage-traded fund like iShares Dow Jones US Home Construction. Risk level: If unemployments remains high it could take longer for constructions and profits to pick up again, also homebuilder prices are known for jumping around as monthly data reports are released.
6.) European exporters, their products are cheaper for foreigners to buy and they make up about 25% of the global stock market, individual companies such as Siemens from Germany, Total the oil giant from France, and pharmaceutical firm Roche. Risk level: Exporters' earnings could be lower in the future if the euro strengthens because European goods would be more expensive and as a result sales would slow down.
7.) Preferred stock, compare to Treasury yields to see this part-bond, part-equity hybrid is about 44% higher than usual, could yield about 7% even in a slow-growth economy, best to buy through a diversified fund such as the iShares S&P US Preferred Stock Index fund, or PowerShares Preferred. Risk level: The preferreds could lose more in price than they yield if the economy gets even worse than expected, also they are vulnerable to losses when rates rise because they are long-maturity securities.
8.) Third Avenue Real Estate Value, this is for commercial real estate and identifying bargains in distressed office, retail, and other space, instead of putting your money into traditional real estate investment trusts (REIT) you will want invest in mutual funds from Third Avenue Value because they are known for buying developers, both their stocks and their bonds, located all over the world. Risk level: The global downturn in real estate could dive even lower, and this is not a US REIT so you cannot rely on traditional REIT dividend income.
9.) Liberty Media Interactive, these guys are involved in QVC home shopping, Pro-Flowers, and Expedia among other things and are about to restructure the company (split off) to actually own these types of assets, buy stock now and you could get a big payoff after the restructuring is complete in 2011. Risk level: Future earnings could be lower if consumer spending in Europe experiences a significant slowdown.
10.) Utility stocks, compare to the ten-year treasury yield and see utility shares are paying better, select companies with dividends such as PPL from Pennsylvania or Exelon from Chicago, or select funds such as Franklin Utilities or Utilities Select Sector SPDR ETF. Risk level: Future profits could be smaller than expected if there is more infrastructure spending because of new environmental rules, also there is no guarantee that higher rate increases from utility companies will be approved by regulators.
