Buy outright or invest?
Storybook Home
5 years ago
Buy out right
Invest
Featured Answer
Sort by:Oldest
Comments (35)
chiflipper
5 years agowmsimons85
5 years agoRelated Discussions
not paying off mortgage, but invest in what?
Comments (31)>>The recent run up in the market has put me in a mind to move money around, but attempting to time the market has always proven to be a losing proposition for me!!! Every time I have tried to time the market, I have lost money.... if I would have just stayed put, I'd be much better off today. Exactly. You are following (what it sounds like to me, so apologies if this isn't correct) the "herd" mentality and buying when it is popular (high) and then panic selling when the market falls. It's no different than buying a house at the top of the RE runup and then watching the RE 'bubble' burst on you (yeah, it happened to us in 1989, so I know how it feels!). Steady, reasoned investing with a diversified portfolio - which you are NOT doing by having only 2 funds in mind - gives better results over time. You will not gain hugely in hot stock years, but you will also not lose hugely in bad ones, such as the 27% drop in the S&P 500 from 2000-2002 and the dot-com implosion. Our retirement portfolio was 85% invested in the S&P 500 in 2000. Lost my job in the dot-com implosion and watched my husband's retirement savings lose a quarter of their value. My husband asked me what we should do. I told him the fundamentals were still in our favor, we're investing for the long term, and that the big stocks would recover first which is the historical norm. Within 18 months we had regained the losses and the portfolio has gained 11-22% annually since, BUT we are currently more aggressively diversified into international stocks on the advice of my ex-boss. He's an independent Certified Financial Planner who can pick and choose his customers because he's semi-retired and only takes referrals, no hard advertising for years now. What I learned from him that was a lot more important than any stock tip was to get my legal and financial house in order! This meant a customized Revocable Trust (we learned what NOT to have while trying to update my widowed MIL's outdated Trust!), new wills, power of attorney docs, durable healthcare POA updates (including the crucial HIPAA release which nobody ever tells you about, but legally a doctor can't even tell your spouse what's wrong with you, emergency or no, without it). I also finally consolidated all my previous employer 401k's into one IRA at a low-cost brokerage. I'd been meaning to do it for years, but kept putting it off. I finally got a first-hand lesson just before I left the CFP's employ - a widow signed on as a new client and her husband had left half a dozen 401k's scattered around at various tech companies. It was a paperwork NIGHTMARE to get them consolidated under the widow's name! So that was on my to-do list before I could start looking for work, LOL. You cannot "time" the market. Free advice is usually worth what you have paid for it. Heck, even a lot of paid advice often isn't worth it! As my ex-boss would tell people, "Hey, if I knew what the next hot stock would be, do you think I'd still be doing the CFP thing??!??" Mind you, he makes a very comfortable living; nothing outrageous and nouveau riche, just a good solid six-figure income plus he loves what he does, working with people and helping them secure a good financial future. Set up a regular investment program and diversify through mutual funds at a low-cost brokerage. At least 3 funds in different markets, preferably 5 as your portfolio grows. Check the 10 yr average returns because the 5 yr averages are now skewed - the 'dog years' of 2000-2001 have now fallen off the 5 yr average. For those who are saving for college, 529 plans are not counted in most college aid plans because the adult retains ownership, a child is merely the beneficiary and it can be changed at any time. However, 529 plans are only useful if your investment horizon is at least 10-15 years. A UTMA account can be transferred to a 529 plan but you will need to talk to your financial advisor or brokerage for full details....See MoreIs buying a house a bad investment in SW Michigan?
Comments (15)As someone whose lived in the Midwest or Great Plains my whole life (not in areas like Chicago) I don't think I've ever lived anywhere where the average appreciation rate was more than 2-3%. A spike s would be 5 or 6% and would probably only have lasted a few years. Hence a home in many of these areas is not an investment like many of you all have gotten used to in places like DC, Dallas, or Ann Arbor MI , Austin TX etc. Its a long term investment of the type where you stay in the house till you retire where you hopefully have it paid off and it helps you in retirement. Much harder to do the trade up thing, make money or break even crowd. Berrian's market may be a little different because of its location but if as you say you won't be buying a "resort" home then you need to check what the average appreciation is, factor in property taxes, realtor fees, maintenance, higher utility bills. Chances are high that turning a house around in 4 years in that area is too short a time to do more than break even and more likely lose money. Then factor in, do I want my kids to live in a home for their high school years and some of the intangibles that make home ownership attractive regardless of the investment part. Then factor in the possibility of not being able to sell at all - personally I think there are still some houses selling out there but....they usually are in those "hot spots" that have something people are trying to get into .....you would need to be really careful to buy a house that has everything - i.e. good schools, not just "good location" but desirable location (backyard facing greenspace for example), energy efficient, well maintained, good size etc. for the primary market in the area, great price. If you have everything, especially great price, you may not get stuck. Well at least not forever. Truly well-maintained plus a rock bottom price are key....See MoreShould I Invest or Not???
Comments (25)Your home is not an investment. I agree with that. Home is where you live and if you break even at the end of your life, you have done well, IMHO. Most people do not have the discipline to be able to divert the money that they would have spent on their home and invest it 'wisely' to do better than what they would have done in their primary home. This is why it works for most Americans; it's a forced savings account for most people. Even so, you are at the mercy of the housing market and the timing of it. If you relied on cashing out of your home to retire in 2010, then you would be very sad. If you cashed out in 2006, then you would have looked very smart. The most difficult part of using primary residence as an investment is that it is not easily liquid AND you have to live somewhere after you sell. Unless you downsize significantly AND/OR move to a lower COLA, you may not be able to benefit from that paid off house. If you plan on living in a paid off house, you have to plan for the expenses associated with the house in retirement. Unfortunately, retired people can be in a situation where they are house rich but they cannot sustain the house with their retirement income because they did not plan well, ie taxes, insurance, maintenance, and utilities may be significantly more than the rent for a small apartment. Sometimes, the retirees struggle to hold onto their paid off house or the house degrades (and loses value) due to neglected maintenance. ANY investment can lose everything, including real estate. That is not a reason to NOT invest in real estate. There is risk in every investment strategy. bonds can lose value. stocks get delisted and go to 0 value. commodities are crap shoot, dependent on the whim of weather and natural disasters. (look at corn prices this year due to drought) gold and silver; hmmmm money market is not even keeping up with inflation these days. I am getting less than 1% return in my money market account. I have to have some cash laying about but geesh, this is rediculous... short of keeping it in treasury bonds, there is no guarantee. Most people want to do slightly better than the treasury bonds with 'minimal' 'moderate' or 'high' risk, however way they define their own risk level. There is NO safe investment. Real estate is one investment strategy one can use if one is educated and one wants to work at it. It is more difficult (work) than keeping it in the indexed funds and forgetting about it.... For many people in America, income producing real estate has done as well if not better than equities. I know nothing about Canadian RE because my particular RE investment strategies are so tied to the tax structure in America.... LauraHall, if you are interested in RE, read some books and really learn how to evaluate the numbers. Unfortunately, investments are all about numbers. Unless you can make sense of those numbers, you can't really evaluate your own position; this is for ALL investments. As I am raising my children, I am realizing that I have to educate my children how to do this even if they do not have a finance degree. This is not difficult math. But it is a way of thinking about numbers and not 'lying' to yourself about what the numbers mean. I wish you the best Laura. My best answer is to read and study enough to know how to evaluate your position.......See MoreRental Property as an investment
Comments (30)We have a rental property at a ski resort in Colorado (townhome 1/2 duplex with a nice yard) that our DD manages for us. We bought it because we sold some timber land here and did a tax free exchange. It made sense for us because DD has experience in property management and her DH can fix anything. It's 2 blocks from our ski house where DD and her husband live full time and is in a relatively high end area and that commands pretty high rent. Although the neighborhood zoning allows short term vacation rentals, we prefer long-term, and DD checks out prospective tenants thoroughly. Our last tenants were just for 10 months while they were building a home, but we knew that coming in and we were immediately able to re-lease. We are not planning on selling anytime soon, but a recent sale of a slightly smaller place across the street, indicates that it's worth about $100,000 more than we bought it for 3 years ago and the rent account has a healty balance, despite having done some significant updates (new kitchen appliances and granite last year and new deck this year). We hire out lawn work and snow plowing. No HOA dues or mortgag, so those only ongoing costs other than property taxes and insurance. So far so good. For the first eight years we owned the ski house, we also rented out its basement apartment, but when we lost the 'best tenant ever' who stayed for six years, we decided to take over basement ourselves rather than risk a bad tenant in our own house. We just redid it completly and use it for extra guests. We will probably sell this house in the next year or so, so the new owner can decide whether to rent it out or not, but it will be a bonus because at current rentals even this 600 sq. ft. apt, would rent very quickly at about $1,000 - 1,200 per month. We did have a bad experience with a tenant in a rental condo we once had and grew frustrated for a while. Luckily prices skyrocketed by 50% in the year we owned it, so it turned out to be a really nice investment nonetheless....See MoreUser
5 years agoAnglophilia
5 years agoBruce in Northern Virginia
5 years agoToronto Veterinarian
5 years agojmm1837
5 years agoCaroline Hamilton
5 years agojmm1837
5 years agoworthy
5 years agolast modified: 5 years agoUser
5 years agosandk
5 years agoDavid Cary
5 years agoB Carey
5 years agoStorybook Home
5 years agoB Carey
5 years agoStorybook Home
5 years agoB Carey
5 years agoBT
5 years agoUser
5 years agojmm1837
5 years agoMrs Pete
5 years agolast modified: 5 years agoToronto Veterinarian
5 years agolast modified: 5 years agostrategery
5 years agoB Carey
5 years agoToronto Veterinarian
5 years agoLyndee Lee
5 years agoB Carey
5 years agojmm1837
5 years agoToronto Veterinarian
5 years agoB Carey
5 years agolast modified: 5 years agoToronto Veterinarian
5 years agoMrs Pete
5 years agolast modified: 5 years agoSebastian Grey
4 years agolast modified: 4 years ago
Related Stories
LATEST NEWS FOR PROFESSIONALSShould You Invest in a Separate Studio Space?
Here are 4 things to consider before buying or renting a dedicated studio or storefront space for your business
Full StoryFEEL-GOOD HOMESimple Pleasures: 10 Ideas for a Buy-Less Month
Save money without feeling pinched by taking advantage of free resources and your own ingenuity
Full StoryFURNITUREHow to Buy a Quality Sofa That Will Last
Learn about foam versus feathers, seat depth, springs, fabric and more for a couch that will work for years to come
Full StoryMOST POPULAR9 Reasons to Buy a Painting
No print or poster can rival the power of an original painting, chosen by you, for where you live
Full StoryARTLet's Put a Price on Art: Your Guide to Art Costs and Buying
We paint you a picture of what affects an artwork's price — plus a little-known way to take home what you love when it's beyond your budget
Full StoryKITCHEN DESIGNSmart Investments in Kitchen Cabinetry — a Realtor's Advice
Get expert info on what cabinet features are worth the money, for both you and potential buyers of your home
Full StoryFEEL-GOOD HOMEEssential Bedroom Pieces You’ll Want to Invest In
A bedding pro gives her top 3 bedding must-haves to help you get a better night’s sleep
Full StoryKITCHEN DESIGNA Cook’s 6 Tips for Buying Kitchen Appliances
An avid home chef answers tricky questions about choosing the right oven, stovetop, vent hood and more
Full StoryFURNITUREYour Essential Sofa Buying Guide
Here’s what to consider when looking for a quality sofa that will last
Full StoryARTCollect With Confidence: An Art-Buying Guide for Beginners
Don't let a lack of knowledge or limited funds keep you from the joy of owning art. This guide will put you on the collector's path
Full Story
Mrs Pete