How about the investment you can feel right at home with?
Scads of investment-advice books pour off the presses each month, and most of them have to do with making millions on real estate. No doubt you've seen their alluring titles: ''Hidden Fortunes,'' ''Nothing Down,'' ''How to Build a Real Estate Money Machine,'' ''How We Made a Million Dollars Recycling Great Old Houses.''
The reason such books are popular is that real estate is popular. Before most people consider buying a share of stock or a single government bond, they usually consider real estate.
To be sure, it typically takes a much bigger commitment (thousands or tens of thousands of dollars) to invest in real estate than in a stock or bond. And before you can complete the transaction you have to go through a lengthy process of house hunting, negotiating, qualifying for financing, and closing. Agents, bankers, lawyers, and other professionals are usually involved.
Still, other than a savings account, property is one of the most basic, easy-to-understand, practical investments you can make. It can be the most profitable, too. Quite simply, says James W. Christian, chief economist of the United States League of Savings Institutions, a house is still ''the only investment you can make that you can live in.''
Even books telling how to make millions off the stock market or gold or pork bellies usually include a caveat within the first three pages that says: ''Be sure you own life insurance and your own home before embarking on this venture.''
Your own home gives you (a)a place to live, (b)a tax break, and (c) the ability not only to beat inflation but to build wealth by upgrading your property, as long as you upgrade it the right way.
A real estate investment, however, is at its best in the kind of inflationary environment that the US experienced during the 1970s. In today's ''disinflationary'' environment - one that many economists, including Mr. Christian, expect to continue throughout most of the decade - real estate is not as sure-fire a winner.
Consequently, unlike the 1970s, the early '80s have not been particularly good times to buy a house. Interest rates have been high and appreciation of property low. Last year was better than the year before. This year will not be so good for home buyers, Mr. Christian says.
Banks and S&Ls are no longer quite so flush with cash as they were last year. What helped in '83 was the introduction of money-market deposit accounts, the now-discontinued practice of allowing brokered deposits, the popularity of adjustable-rate mortgages, and, above all, relatively moderate interest rates.
The story this year is tight credit and higher interest rates. That cuts into the housing market overall, prevents owners from ''trading up,'' and should act to keep many would-be buyers out of the market.
''The existing homeowner is locked in,'' says Christian, ''and the first-time buyer is locked out. The filtering process doesn't have a chance to work.''
If, however, you find you can handle the interest rates, then property remains a good long-term investment - as long as you do not speculate in undeveloped land, or buy lots in Florida or Colorado or Argentina sight unseen, and assuming that you maintain your property and that external conditions do not hurt values.
The biggest drawback to real estate as an investment is its very lack of portability. A share of AT&T can be sold anywhere in the country, via a stock exchange, to anyone who has the money. Not so with your property. Your pool of potential buyers can diminish or abruptly change character. Your city can be hit with unemployment. The neighborhood can deteriorate because of circumstances beyond your control: a zoning change, a new highway or factory nearby, a single incident of crime.
A good location, therefore, is the prime consideration with real estate.
But with a house, unlike common stock or gold, you usually have three options if selling it at the right price is difficult: You can rent it, you can hold the buyer's mortgage yourself, or you can simply wait until the market will bear a higher price. In most cases, demographic pressure (the baby-boom generation coming of age) and inflation (still near 5 percent for the past 12 months) make it inevitable that the price will rise.
If you decide to rent your property, you continue to derive the interest-deduction benefits from it (although you must pay taxes on the rental income), and any improvements you make can be depreciated. You do have more responsibility as a landlord, but you continue to own the house and therefore benefit from any long-term increase in its value.
By holding the mortgage note for the new owner, you can, in effect, be spreading your capital gain from the sale of the house into future years, thereby cutting down the tax bite. You'd save paying a real estate commission or any part of a loan origination fee. Since you would be very familiar with the house anyway, it would serve as excellent security for the loan. Usually you would offer an interest rate a point or so below the prevailing mortgage rate. That means you could lock in a very good interest rate for up to 30 years by financing the house yourself.