Is it better to fund a 401K plan or invest in real estate given the low prices in the housing market at this time?

Hello I:

Do you think we're at the bottom in real estate?? If so, then buying some might be good. If we're NOT at the bottom, buying some wouldn't be so good.

excon

If your empoyer provides a match to your 401(k) investment, then it's a no-brainer -- invest in the 401(k), but realize that you are doing it for the long term - that is, this is investment for your retirement.

As ebaines said, if you get an employer match, fund the 401k to the extent of the matching contribution.

Beyond that the choice between real estate and stocks depends on the investors knowledge in each arena. You can make money in both; you can lose money in both. Right now both are risky. So decide which one you feel you know best, do some research, and make prudent investments. If your research doesn't reveal something you feel comfortable with perhaps CDs would be a better alternative. The yields are pitiful at this point in time. But a 2% gain is better than a loss.

I agree with EBaines, but would add that the main reason to add real estate to your portfolio is diversification. I would suggest 40% in stock mutual funds, 40% in paid for real estate, and 20% in bonds. Both are good; you just don't want all your eggs in one basket.