It is a lot easier to buy a stock than it is to sell. The reason, when you strip away everything else, comes down to emotion and psychology. If we have a stock that is losing value, we do not want to sell because we lose money. But then if a stock is rising in value we hate to sell.

I have owned quite a few stocks that have appreciated in value. One example is a pipeline that has increased 150 percent from the market bottom in March of 2009. Pipelines tend to be conservative, “sleepy,” investments; during bullish times these are less attractive because they are typically lower yielding. When the market is bearish, however, the public flocks to investments like these because they are dependable and relatively stable.

No one wants to sell something that is working, but I have advised clients to do just that. I hear things like, “Why are you selling that?” “Why would you sell my best performer?” “Are you crazy?” Good decisions often go against the grain of what the public thinks should happen. So, while it may seem like a good idea to hold onto a stock that has appreciated so greatly, and has not decreased in value, now is the time to sell.

The particular stock that I referred to above is getting toppy. It is reaching highs that are not sustainable, and a decrease is likely. Could it continue to rise in value? Sure, it could. But it is more likely that it will begin to correct itself and settle at a lower value. When it does it takes your profits with it. A big gain is inevitably followed by a stagnant period and usually a decline. Take your profits and move on.

One of my rules is do your own research, and I would like to use the hot emerging market country of Brazil as a study example. People are drawn to investments based on headlines and then forget about the facts required to make sound follow up decisions.

If you want to invest in a country, you must get a better sense of where the country is, where it is going, what its people are doing, and the progress they are making. There is more to a country than its most recent market closing. Factors like the birth rate, infrastructure, and health care are influential. How many new millionaires are there in that country? Is the GDP growing? Are the people eating more meat? Are companies paying dividends or are they still in a stage where they are prospecting?

Knowing that credit and consumption is on the rise in Brazil; that there are now 210 televisions per 1000 people and 429 computers per 1000 people; and that a national pension system has been instituted can be helpful. Despite all of the above it is worth knowing that 90 percent of the country is jungle. It is very difficult to access. Transport is difficult along the coast, which has a very poor system of roads, and the river system does not lend itself to inter-city travel.

We tend to lump emerging markets together and Brazil, Russia, India, and China are traditionally classified in the same basket. But, if you take a moment to think about it, why would Brazil and Russia be in a basket together, any more than Canada and Australia would be? Another issue with emerging markets in general is that in your quest to diversify, you are not simply duplicating what you can get in Canada. Brazil is largely commodity based. They are strong in metals, food, and energy – all things that investors can find in Canada.

According to the Organization for Economic Co-Operation and Development, the market value of retirement savings fell by over $4 trillion during the great recession of 2008. Millions of investors all over the world scrambled to find a safe haven for their money. Traditionally, the safe haven has been bonds. Those who have decades of investing ahead are often advised to invest aggressively, while those closer to retirement or who have very low risk tolerance are guided towards bonds. Despite the conventional wisdom of this strategy, investors would do well to beware the risky aspects of bonds.

There is the general perception that bonds are safe; they are a stalwart soldier of the market that will help protect money even when stocks decline. Canadian bonds are currently considered to be about the safest in the world, but your portfolio may contain many other types of international bonds with different standards. The global market for bonds is many times larger than the market for stocks. A lack of control or oversight by banks, governments and institutions is always lurking.

Bonds are only guaranteed if they are held to maturity. They are usually purchased for portfolio balance or as an income producer. Either way, people are looking for stability.  However the increase in demand for bonds since the 2008 crash has been overwhelming, and many feel the next bubble will be US bonds. This is certainly a risk factor that investors need to be aware of.

And finally it is also important to remember that inflation plays a role in the value of your bond at maturity. Say, for instance, you purchase a $100 bond that is guaranteed to mature in 20 years. But in 20 years, that $100 will be worth less than it is now because of inflation.

I’ve spoken before about the idea of homes as investments.  In this market, we have woken up from the American – and Canadian – dream of home ownership as a source of wealth.  A home is where the heart is, but it’s not necessarily where the money is.  That being said, real estate can be a great investment.  Recently, I sat down with Bob McKean, owner and broker of record of Re/Max in Kingston, Ontario to hear what he has to say about investing in property.

Question:  Diversification is important in anyone’s portfolio, and my economic planning model also calls for part of that overall portfolio to be invested in real estate.  You’ve been very successful on both the business end and the personal end, having owned income-producing properties.  What real estate strategy have you used over your career to build wealth?

Answer: I invested in my first investment property, a triplex, in 1973, re-financed and added more down payment. I bought several others in the next 5 years, including a 10-unit that I still own, and a 7-unit which I owned for 7 years. I sold it and bought a residential and commercial property, which I still own.  Over the next few years, I also bought several single family residentials, which I rented out.  I bought real estate in Dallas, Texas and in Edmonton. I realized that it was better to own properties closer to home where I could keep an eye on them.

Question: Part of your strategy has also meant helping other people build wealth.  Could you explain that?

Answer: I used to manage about 100 units for other clients.  I would sell them a property and then manage it for a number of years and those clients have all since sold their investments.

I have many clients who I have sold investment properties to that have been very successful in building their investment portfolio.  I have always put my clients’ interest ahead of mine and hence they have made some great investment.  I sometimes think,” I should have bought that for myself!”  I have been very lucky with my own investments, though, and I cannot complain.

Question: Is there an average age at which people tend to invest in real estate?

Answer:  I have had clients who in mid-age invested, and I have had clients in their twenties.  I had a client who, at age 25, bought a triplex, lived in one unit and rented out the other two.  She has done extremely well with this property.  She has since moved out, got married, bought their own home and still own the investment.

Question: What is the most important factor in real estate investment success?

Answer: My strategy has also always been and always will be – do not get over extended and only buy what you can afford.  Many people get way over extended, and if and when the interest rates change or they have some vacancy, they get into trouble.

Question:  Can you give us a few tips for managing rental properties effectively and avoiding overextension?

Answer: Always set at least 10% of your gross income aside for general maintenance and up keep.  Many years you will only spend 3% or 4% but then you need a new furnace, a new roof (major capital items) Where do you get the money?

When buying, allow at least 5% for property management.  Even though you may want to manage yourself, there may be a time when you want a manager and you have yourself so highly financed that you have no place to move.

Don’t buy something that has no chance of making a profit within the next 3 years.

Also, I have always thought one should have some diversification.  I have always had stock, mutual fund investments, and, of course, real estate.

Question: In this economy, do you still think real estate is a good investment?

Answer: I personally feel if you follow those ideas and be careful what you buy, you will be very successful investing in real estate.

As always, diversify your portfolio, research any market you are considering entering, and invest carefully.  You won’t get anywhere unless you play the game, but you have to remember your helmet.