WASHINGTON (Reuters) ? The woman at the cocktail party was adamant. ?Real estate is where the money is,? she said. ?We have given up on stocks.?

She went on to say she and her husband had decided not to invest in stocks, but instead were buying a piece of undeveloped property as an investment.

I was feeling a little bit queasy, and not just because of the hors d?oeuvres. I was wishing she had said this five years ago, when stocks were in nosebleed territory and real estate was flat, instead of last week, after that five-year run up in property prices. It sounded like she was suffering from a case of ?rear view mirror investing syndrome?.

You know the symptoms. Rear view investors were stockpiling gold in 1980, loading up on junk bonds a few years later, and buying tech stocks in 1999. They never believe those disclaimers that say ?past performance is no guarantee of future returns?. They buy high and they sell low.

Now they?re investing in real estate. Maybe that?s not terrible. Property is property, and they really aren?t making any more of it. Even if there?s ?froth? in the real estate market, as Alan Greenspan said recently, and prices fall, people who overpay for property still will own land. And that cocktail party couple bought on a golf course in a boom town; if they hold it long enough they?ll probably do just fine.

But, do you really need to be told that you?re a little late to the real estate party? That the smart money has been there and is moving on? That once an asset has moved up 170 percent in five years, it is a lot harder to buy in and make money on it?

That?s not to say that you shouldn?t own real estate. You might still want to buy right now if you?re looking for a first house, or have all your other investment categories covered, or really covet that lake house you know you?ll enjoy.

But if it?s a lucrative investment you want, your timing might be off. Don?t be a rear-view mirror investor. Instead, try a forward looking approach.

Stay diversified. A long term portfolio should always have some stocks, some bonds and some real estate. If you want to get fancy, it should also have foreign stocks and small and large company stocks. At least a portion of your portfolio will always be in the right place at the right time.

Vanguard Investments reviewed hypothetical portfolios over rolling five-year periods from March 1995 through January, 2005. A tech-heavy portfolio averaged 6.62 percent returns but had one five-year period when it lost 11.27 percent. (It was, by the way, the most recent five years.) A diversified stock portfolio lost 3.91 percent during its worst five years, but averaged 6.56 percent annual returns. The balanced portfolio of stocks and bonds? It never had a five-year loss, and averaged 6.65 percent a year over the entire period.

Be a little bit contrarian. If everyone is talking up stocks, buy bonds. If everyone is dumping stocks, buy them. Right now, that might mean buying large-cap stocks. They were the basis of the 1990s bull market, but have languished ever since. Economists at T. Rowe Price see them as ?poised to regain market leadership,? according to a company newsletter.

James Paulsen, chief investment strategist at Wells Capital Management, agrees. ?I think stocks have a lot to say for them in this environment,? he said in a recent interview.

Be careful about narrow slices of the market. Investors who try to time their purchases and sales of specific sectors ? selling health care stocks and buying oil stocks, for example ? are among the most frequent practitioners of ?rear-view mirror investing?. One way to avoid this is to avoid choosing sectors at all, and simply invest in broad-based stock funds. As an alternative, just buy the sectors that have been most ?unloved,? suggests Morningstar Mutual Funds analyst Russel Kinnel. ?Stock-fund categories with the greatest outflows usually beat the most popular categories during the next three years,? he found.

The most ?unloved? sectors have been technology, financials and utilities, according to his report.