This week’s Barrons has an article about investing in global real estate (In Real Estate, It’s Time to Go Global”) in which five mutual funds were suggested:

I’ve been interested in learning more about real estate funds and REITs ever since I made my purchase of the US-based REIT ICF some months ago and then divested of it after receiving advice from readers and realizing I was buying something I really didn’t understand. One reader more knowledgable than I recommended looking internationally instead.

The funny thing is that of the 5 mutual funds listed in the article, only three are really available to me as an individual investor. KIRAX is open to institutional investors only (and its sister funds KIRBX and KIRCX are available for redemptions only), as is IGLAX, and none of our 401(k) plans list these as an option. NGREX carries a transaction fee at Schwab. It’s also worth noting that many of these carry up to a 4.5-5.75% front load fee depending on your broker.

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Toward the end of December, I received some questions from readers asking about how to calculate average returns on investment portfolios using Excel. In previous posts on this site, you can read about using CAGR, Excel’s XIRR function, and simple averages, but they all come with one big warning, which is that your previous average performance may not necessarily be a good way to set your expectations about your future performance.

In other words, let’s say that you did your calculations of your return over some number of years and found out that you averaged a 5% annual return. That doesn’t necessarily mean that you should expect a 5% return next year. I thought it might be worth delving a little further into the potential pitfalls of using averages.

Let’s say we have three hypothetical portfolios and data on their performances over a 10-year period. Suppose that in each one, we started off with $100 to invest and ended after 10 years with $110.

Using CAGR to calculate their returns, we find that all three portfolios averaged 0.958% over the 10 years. Paltry performance, but hey, this is for illustration purposes only!

Even though we know that all three portfolios all averaged the same 1% return, the key point is that we don’t know what went on between the 10 years merely by looking at the 1% figure.

Take a look at the data and graphs below, and you’ll see three porftolios that behaved very differently indeed (click image below to enlarge):

(Note: the graphs above were generated using BonaVista Microcharts, an Excel add-in)

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Each week’s issue of Barron’s usually includes an interview with a fund manager or expert toward the end of the issue. Last week’s issue (dated September 18, 2006) featured an interview with Rudolph-Riad Younes (subscription required), co-manager of the Julius Baer International Equity Fund (symbol: BJBIX for Class A shares).

I’ve been interested in a while now in putting more money in investments outside the US market, so I read the article with a great deal of interest. Mr. Younes doesn’t seem to suffer from the rah-rah-there’s-money-to-be-made-here-there-everywhere kind of attitude that you sometimes find in interviews with fund managers.

His point of view appears grounded and he states some commonly held beliefs about the state of the current US economy, including that China and Asia are allowing the rest of the world “very low credit and very low interest rates”, that inflation should include housing and energy, that wage inflation isn’t here because people are “[using] their houses as ATMs”. All pretty standard stuff, but surprisingly not comments you hear nearly as often on typical talk US talk shows like CNN and CNBC.

His fund has performed well, and so I wanted to find out which stocks he recommended. They are the following:

Hmm. Can you guess what my reaction was?

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A couple of days ago, I decided to “invest-by-putting-a-toe-in-the-water” and bought some shares of Loomis Sayles Bond Fund (retail class, symbol LSBRX). To be honest with you, investing in bonds and bond funds are still a mystery to me, despite knowing how bonds work in theory.

Unless you have plenty of money (and time) to invest, buying individual bonds can be tricky. Instead, in order to obtain diversification within bonds, most investors choose to buy bond funds. As a complete newbie to bond investing, I definitely fell into this category. The purpose of many bond funds is to provide current income (in the form of dividend payouts), though some also aim for capital appreciation. The prospectus for LSBRX stated that it had both of these goals in mind.

Here’s the process I went through in deciding whether or not to invest in LSBRX:

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Welcome to this week’s Carnival of Investing! We had several entries this week, which I’ve grouped into the categories below. (If you’re a contributor and would rather your article appear in a different category, feel free to let me know.)

Thank you to everyone who submitted a post. If your post did not appear, either I didn’t receive it, or it wasn’t directly related to investing. Next week’s carnival will be hosted by Free Money Finance. To learn about hosting, submission requirements, or to peruse archives, be sure to visit the Carnival of Investing’s home at MyMoneyBlog.

Enjoy!

Stocks and Bonds

My 1st Million at 33 has written a very nice introduction to investing in natural resources.

Stock Market Beat goes through a detailed example of accounts receivables monitoring related to Par Pharmaceutical’s earnings restatement.

JeffSHoward explains the drawbacks and benefits of buying individual bonds vs. bond funds.

InvestorGeeks teaches us the process he went through to hunt and find a tenbagger in the form of AERT.

The Daily Bacon presents an elegant, chart-filled discussion comparing the volatility of small-cap against larger-cap stocks, along with some explanations of their drivers.

Financial Options summarizes financial events, earnings, and news releases coming up this week.

Trader’s Narrative asks if having an unusually high ratio of gainers to decliners marks an upcoming bull run.

Real Estate

“D”igital Breakfast has written a very informative post about what you can do if your house is in foreclosure.

Debt Free presents the benefits and considerations you must face when deciding whether to pay your mortgage off early.

It’s Just Money asks how accurate is Zillow?

Journey to Financial Freedom shares 3 formulas for investment success in real estate.

Foreign Investments

China Law Blog is highly skeptical of China’s new accounting laws, and tells us why, point-by-point.

Nubricks Property Blog highlights Bulgaria as a potential place to invest in property.

Frugal Wisdom from Wenchypoo’s Warehouse talks about some regions in the world that might make for good investment in the future.

General Investment Advice

Thinking About Money speculates on the future of the dollar and its economic impact should it fall.

Investing the Middle Way discusses portfolio rebalancing in his continuing series on asset allocation.

Abnormal Returns discusses the potential benefits from investing in funds run by privately-held firms as mentioned in two recent publications.

My Money Blog reviews the book All About Asset Allocation.

Get Rich Slowly reviews the book Rule #1 by Phil Town.

Free Money Finance discusses how much of your 401(k) should be invested in your company stock.

Pragmatic Finance reminds us the benefits of starting to invest early with a Roth IRA.

Blueprint for Financial Prosperity reminds us it’s better to be conservative than wrong when it comes to bubbles.

Young and Broke discusses financial phobia.

Daily Dose of Optimism wonders what recent, ironic posts in the media mean for the commodities market.

Investing World Today describes the basic steps of investing and money.

Tick Marks tells us that day traders are still around.