No bad time for balanced funds

But investing in real estate requires big commitment

Q. Dear Rick: I have two questions. The first is, do you think balanced funds should only be included in portfolios of people who are near or in retirement? And second, how do you fit in, from a risk standpoint, investment real estate when looking at your portfolio? — Donna from Braintree

A. Donna: Regarding balanced funds, I think they can be appropriate for anyone’s investment portfolio, depending on the situation. Balanced funds, of course, are mutual funds that include stocks, but also include a good portion of less risky investments, such as Treasury bonds and other lowrisk bonds, cash and cash equivalents.

Balanced funds make an excellent part of investors’ portfolios if they tend to be risk-averse, if they have a large portion of more aggressive investments in their portfolio and, as you noted, when someone needs to make their portfolio much less aggressive — such as when entering or in retirement.

As for your second question, while investment real estate can be an excellent portion of someone’s investment portfolio, it’s not for the faint of heart. And it definitely should be considered a more aggressive portion of your portfolio. Here are some tips:

• Don’t invest in real estate unless you have the time to give toward finding, buying and managing the property you buy. And don’t assume you’ll be able to find a management office/agent to manage it for you. Unless you own scores of properties, you won’t — or, at least, you won’t find one who’s worth the money you pay them.

• Before you invest in real estate, talk to others who have to get an idea of how difficult and time-consuming it can be. Frankly, if your regular job consumes more than 40 hours per week, you want to think very long and very hard before investing in real estate.

• Don’t do it on a shoestring. Just as in your personal life, you will need a separate emergency fund for your real-estate investments, for those times when unexpected repairs, non-paying tenants or other problems arise, which, I guarantee, will.

• If you do invest in real estate, start small. Start with a two- to four-family property, both because they’re easier to handle and because acquiring financing for them is much easier.

• Finally, consider purchasing a two- to fourfamily property that you also plan to live in. If you’re a first-time homebuyer, it gives you the opportunity to both purchase your first primary residence and your first investment property in one fell swoop, and see how you like it.