By Rick Glaze

Rick Glaze

Q: Is real estate a good investment now, and do real estate investment trusts (REIT) make sense for a conservative investment?

A: Real estate can be a good diversification for portfolios, but it is not a surefire safe haven. Remember when there used to be savings and loans? The severe slump in the real estate market beginning around 1989 took down and eliminated that venerable financial sector. So real estate, like other investments, should be approached with careful thought.

Many people who are not interested in managing individual properties look upon REITs as a way to invest in institutional properties without the property management responsibilities. There are many more REITs available today, with more types of properties and locations than ever before. This gives investors a variety of choices, and usually the dividend yield is at least equivalent to that of bonds. REITs can have cycles in the market, and we find that from time to time they make a good investment.

REIT investments will be among the topics discussed at the next Glaze Capital Seminar series, June 11 at the Los Altos Golf and Country Club. Admission is free. For reservations, call 934-0920.

Q: My mutual fund had a four-star rating but now has dropped to two stars.

A: Many people have relied on the “star” rating system published by Morningstar Inc. to pick mutual funds.

Like all miracle cures, this one has proved to be an elixir with pain. The star system has been based on a fund’s performance compared to all other stock funds. So if Internet funds are skyrocketing and utility funds are not, the five-star rating goes to Internet funds and the utility funds and all others that are not skyrocketing are rated lower. Of course, this is just what investors do not need. They need to invest in a diversified way in a variety of areas.

If you have been relying solely on the star rating system, I suggest you take a second look.

Q: In March I saw that the stock market went up, but my portfolio stayed flat.

A: When referring to “the market,” most people mean the Dow Jones Industrial Average. This index comprises 30 large companies, many of which are household names. Since the index has only 30 stocks, many professionals believe that it does not adequately represent the whole market.

Remember, it is 30 of the largest companies. If your portfolio is more diversified, your performance may be different from “the market’s.”

Send your investment questions to the Town Crier.

Rick Glaze is president of Glaze Capital Management Inc. in Los Altos, and investment advisor to individuals.

For more information, logon to www.glazecapital.com.