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Is it common or recommended for part of an investment strategy to include purchasing undeveloped residential-zoned land with a mortgage? I understand you'd be losing money on interest, but how reasonable would it be to add land to a portfolio after doing all the normal steps, ie maxing your 401k to employer match, maxing your Roth, having an emergency fund, etc etc.
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Jul 2, 2012 18:29
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Dreadite posted:Is it common or recommended for part of an investment strategy to include purchasing undeveloped residential-zoned land with a mortgage? Most people would suggest against real estate because it's very un-diversified. That said, a lot of successful people use real estate to lever their portfolio.
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Jul 2, 2012 18:49
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Dreadite posted:Is it common or recommended for part of an investment strategy to include purchasing undeveloped residential-zoned land with a mortgage? Financing undeveloped land is almost never a common investment strategy. If you've maxed out your tax-advantaged investment option for retirement (e.g. funded your 401k to max, not just employer match) you'd probably see better returns in a taxable investment account. If you really wanted to have real estate exposure, a REIT fund would give you that without having to guess if the land appreciation will outpace the interest+inflation. Not to mention that the rates on an investment mortgage will generally be higher than those for a home purchaser.
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Jul 2, 2012 20:31
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So I max out my Roth each year and I'm coming across a good 10-20k in the next few months and I'm not sure what to do with it. The only retirement I save is Roth because our company does not do 401k. I'm going to have another 20k-ish each coming year to invest and I'm at a loss. Originally I was saving up for a house, but with my relationship that isn't ever going to happen so I'd rather put this money somewhere profitable rather than spend it all on frivolous crap. That being said, I know *NOTHING* about investing for the future past "diversify so you don't get burned." What would be a good starting point or who would be some company I can talk to about managing investments to make sure I don't lose 60k+ over time by not knowing wtf I'm doing?
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Jul 6, 2012 17:51
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flyboi posted:So I max out my Roth each year and I'm coming across a good 10-20k in the next few months and I'm not sure what to do with it. The only retirement I save is Roth because our company does not do 401k. I'm going to have another 20k-ish each coming year to invest and I'm at a loss. Fundamentals The Four Pillars of Investing http://www.amazon.com/Four-Pillars-...o/dp/0071385290
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Jul 6, 2012 18:44
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Unormal posted:Fundamentals I honestly can't recommend this book enough. I came out of college knowing practically nothing about investing, and now I feel perfectly comfortable where my investments are. Feel free to kind of glaze through the first quarter or so of the book. The author spends a fair amount of time on math that helps establish his later theories, but having an absolute understanding of it isn't really necessary. The book seems to become a lot more practical (and less theoretical) once you're through the first quarter or so.
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Jul 7, 2012 21:27
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Dreadite posted:Is it common or recommended for part of an investment strategy to include purchasing undeveloped residential-zoned land with a mortgage? On top of what everyone else has mentioned: real estate has large transactional costs and is extremely illiquid. That means you have to make a bunch of appreciation before you can count yourself as even having broken-even, once you count in the costs... and unlike securities, you have a much harder time tracking value and choosing to sell quickly in the event of a plunge in value (which you shouldn't really be doing with your retirement portfolio anyway of course). Real estate also often has taxes and maintenance costs, and mortgaged structures typically require insurance as well. Wealthy real-estate moguls get that way by having favorable deals and lots of them, their hands in many many pies. Small-time folks like you and me buy property for a place to live and for intangible reasons, and if we want more real estate exposure in our portfolios we buy REITs.
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Jul 9, 2012 04:07
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Leperflesh posted:Wealthy real-estate moguls get that way by having favorable deals and lots of them, their hands in many many pies. Small-time folks like you and me buy property for a place to live and for intangible reasons, and if we want more real estate exposure in our portfolios we buy REITs. How much cash flow or working capital should one have to jump into the real estate business and own any number of houses less then 10? I wish somebody could convince my dad to put money into REITs if he wants to capitalize on the extreme all time low buy buy now! real estate prices. He's not wealthy or even rich but thinks the best investment one can make right now is in houses.
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Jul 9, 2012 16:02
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Kneel Before Zog posted:How much cash flow or working capital should one have to jump into the real estate business and own any number of houses less then 10? I wish somebody could convince my dad to put money into REITs if he wants to capitalize on the extreme all time low buy buy now! real estate prices. He's not wealthy or even rich but thinks the best investment one can make right now is in houses. If he's willing to realistically put in the work necessary to manage even a couple rental properties, it's not necessarily a bad idea even at the cost of diversification. The thing is, at that point it's not a passive investment (like the guy suggesting buying some land and waiting for the price to go up, or buying a REIT) - he'd be running a business with everything that entails. The analysis for that and how it factors into a portfolio generally can be rather different than for deciding where he wants to just park his money, but the short answer is that he would need to generate substantial cash flows independent of any expected appreciation to make up for the risk and effort that he would have to put into the properties. It would be fruitless to throw around concrete numbers with that little information, but think something along the lines of 30% ROE, if not higher, to make it worthwhile.
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Jul 9, 2012 16:23
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Kneel Before Zog posted:How much cash flow or working capital should one have to jump into the real estate business and own any number of houses less then 10? I wish somebody could convince my dad to put money into REITs if he wants to capitalize on the extreme all time low buy buy now! real estate prices. He's not wealthy or even rich but thinks the best investment one can make right now is in houses. Very well could be, with the right price of course. The big thing is not to rely solely on appreciation, which got a lot of people into trouble. It's not free money though.
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Jul 9, 2012 22:54
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I'm in a very unusual situation where I was fortunate enough to graduate college with no debt and an emergency fund in place. My expenses are very low and I've started a decent job a month ago. Is there any legal reason why I couldn't max out my 401k and Roth IRA this year? My pre-tax earnings for the 5 months I will work this year will be about $30k, but because I have the emergency fund in place already and no immediate short-terms savings goals, I could contribute $17k to the 401k and $5k to the Roth with no huge financial burden. Would this be silly, or a good idea? This would make me get a pretty big tax refund, right? Right now I'm losing a little over 20% of each paycheck to taxes in various forms.
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Jul 12, 2012 19:58
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You probably want to adjust your withholdings, that's way too much. Did you put 1 or 2 in your box? You can go ahead and max it out I guess, but just how low are the expenses?
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Jul 12, 2012 20:13
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Harry posted:You probably want to adjust your withholdings, that's way too much. Did you put 1 or 2 in your box? I'm splitting the rent on a 1 bedroom apartment with my grad student girlfriend, I was incredibly happy as a broke-rear end college student and see no reason why I can't remain happy living the same lifestyle now that I'm working. Also, my emergency fund is $20k larger than it needs to be and now looks like a decent time to be dumping money into really long term investments. Yes, I put one deduction and I should have put a couple, I guess. I don't have any of the things it was asking about like dependents, etc. Edit: What else am I supposed to be doing with the money? A house? I just have it sitting around and don't want it to lose value to inflation.
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Jul 12, 2012 20:28
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Weinertron posted:
Your plan may place limitations on the percent of your salary you're allowed to contribute independent of the statutory limits. My company puts the limit at 70%, meaning if you earn $20,000 a year, under the plan rules you would only be able to contribute $14,000 rather than the legal limit of $17,000 in 2012. Your plan may be different. Other than that, I don't think there's any legal reason why you can't do it. I would just be sure to thoroughly question the wisdom of it. Are you sure your emergency fund is sufficient that you'd be okay with basically 75% of your gross income being tied up in investment accounts? I ran the numbers: to reach your goals working for only 5 months at that salary, you'd have to withhold 56% of your paycheck each period to max out the 401k. After taxes (assuming no state taxes at all), you would net $988 every two weeks. $500 of would be destined for the ROTH, leaving you with $488 leftover, or $976 a month. When you say your expenses are low, are they that low? edit: just a reminder that you'll be entitled to a pretty large refund if you don't mess with your withholding. bam thwok fucked around with this message at 20:52 on Jul 12, 2012 |
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Jul 12, 2012 20:45
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To be a bit of a contrarian, I'd say that while you should put money away in your 401(k) and likely can do what you're suggesting, maxing it probably isn't the best idea. The whole point of tax deferred savings vehicles is that they make sense if you'll be paying less taxes later in life vs. right now. Given your low income, and your desire to make your taxable income lower still, there's probably a happy medium of putting enough in your 401(k) to get your net income tax exposure so low that you can put the rest of the money in a long term investment and be better off. The lowest income tax bracket is 10%, and the lowest long term capital gains tax is 0% for the same bracket, so it might be worth taking the tax hit now instead of deferring it to later and paying more in the long run. Get the company match, max the roth, but then start looking at your 401k options and weighing what you reasonably think your future tax exposure is going to look like, because with numbers that low you might want to get that money out from under Uncle Sam sooner rather than later.
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Jul 12, 2012 20:58
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Weinertron posted:I'm splitting the rent on a 1 bedroom apartment with my grad student girlfriend, I was incredibly happy as a broke-rear end college student and see no reason why I can't remain happy living the same lifestyle now that I'm working. Also, my emergency fund is $20k larger than it needs to be and now looks like a decent time to be dumping money into really long term investments. Set it to like 3, your tax liability is going to be super low. Tomserv0 has a point though, you're putting money into a 401k to avoid what's probably going to be 6-7% effective tax rate. You'll probably get a big refund just from the money you spent on school, if it wasn't through a scholarship. Just open a brokerage account and threw it in an index fund or something. Don't worry, you'll find ways to use the money as you get older.
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Jul 12, 2012 21:12
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Harry posted:Set it to like 3, your tax liability is going to be super low. Tomserv0 has a point though, you're putting money into a 401k to avoid what's probably going to be 6-7% effective tax rate. You'll probably get a big refund just from the money you spent on school, if it wasn't through a scholarship. Thank you, Harry and Tom Servo. I'll max the Roth, put a little more than employer match into 401k, and toss the rest into an index fund with either Vanguard or Charles Schwab. I wish I had a Roth 401k available so that I could build up a ton of free money when I'm older, but you guys are right that it doesn't make sense to do a traditional 401k heavily when I'm already in such a low tax bracket for 2012. I still want to keep 6 months expenses in a money market emergency fund, right? I'm just sad because of how little my Vanguard money market has been paying.
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Jul 12, 2012 21:33
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so I have a 401(k) with my company, and it is matched up to 6%. I went ahead and put 6% in there. My contribution I am able to put in a self-directed account, but the employer contributions must stay in five provided funds. For my contributions, I am gonna put them in the self directed account. The only thing is, I am restricted from buying certain energy stocks and minerals. Also I don't think I can put it in a lot of index funds. I can still buy ETFs though. Is it just about the same to put 10% of my money in the Vanguard S&P 500 ETF as it is to put it in the Vanguard S&P 500 index fund?
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Jul 13, 2012 08:10
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Celot posted:
Yes, to a degree. You will probably have to pay brokerage commissions when you buy the ETF (this depends on whether your account is actually with Vanguard). If you didn't have to pay commissions then it would almost always be better to own the ETF as the expense ratio will be smaller.
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Jul 13, 2012 15:08
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T0MSERV0 posted:To be a bit of a contrarian, I'd say that while you should put money away in your 401(k) and likely can do what you're suggesting, maxing it probably isn't the best idea. The whole point of tax deferred savings vehicles is that they make sense if you'll be paying less taxes later in life vs. right now. Given your low income, and your desire to make your taxable income lower still, there's probably a happy medium of putting enough in your 401(k) to get your net income tax exposure so low that you can put the rest of the money in a long term investment and be better off. The lowest income tax bracket is 10%, and the lowest long term capital gains tax is 0% for the same bracket, so it might be worth taking the tax hit now instead of deferring it to later and paying more in the long run. I just got the company 401(k) paperwork today, and holy crap it's good. They have vanguard target retirement funds and have a Roth 401(k) available. Would my very aggressive savings goals make more sense if I was putting it into a Roth 401(k)? It seems like while my current tax bracket is low and I'm happy living like a college student I should aim to max out my contributions from 2013 onward, as getting $22k into Roth accounts when I'm 22 makes me giddy. For this year I'll set some agressive but reasonable amount of salary aside like 25%. Edit: Am I right with my understanding of Roth retirement accounts that I'm putting in post tax dollars but I won't have to pay any tax at all on all the distributions? So if I potentially end up with a 95% Roth nest egg for retirement then I basically won't be paying income taxes when I'm old and retired? Twerk from Home fucked around with this message at 16:35 on Jul 13, 2012 |
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Jul 13, 2012 16:12
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Weinertron posted:I just got the company 401(k) paperwork today, and holy crap it's good. They have vanguard target retirement funds and have a Roth 401(k) available. Would my very aggressive savings goals make more sense if I was putting it into a Roth 401(k)? Roth versus conventional 401(k) is basically a question as to where you think your tax rate will be on withdrawal. I have no idea, so I just split half and half.
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Jul 13, 2012 16:51
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flowinprose posted:Yes, to a degree. You will probably have to pay brokerage commissions when you buy the ETF (this depends on whether your account is actually with Vanguard). If you didn't have to pay commissions then it would almost always be better to own the ETF as the expense ratio will be smaller. Most of the big brokerages will let you trade their personal ETFs commission free to a certain amount. I know Fidelity and Vanguard for certain do. For that reason I actually find ETFs preferable (having a lower ER) at least until your account is large enough that you can buy into the mutual funds with the really low ER.
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Jul 14, 2012 21:37
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The self directed account with Hewitt charges 12.25 per trade, so maybe a self directed account is worthless?
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Jul 15, 2012 03:03
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So I'm screwing around on Vangaurd. I filled up my IRA for this year, but I'm wondering if I left my money in the right fund. I have a ROTH IRA, and the goal is to primarily play it safe in case I need to withdraw principal down the road because of some catastrophe. I just placed it in LifeStrategy conservative growth VSCGX. The fund isn't doing anything terrible, but I'm still wondering if that's the best way to go. Is there a fund that doesn't do anything exciting like plunging horribly when the economy tanks; but more like the often talked about Tortoise in the Tortoise and the Hare,a kind of Tortoise fund. I was looking at the Long-Term investment fund VWESX, but it has those bond maturity dates that I know nothing about even after reading the wiki links that were posted prior. Notably, the graph that Vanguard has shows a relatively small death plunge back in 2008, which in perhaps my ignorant view, seems to be something to I want, or to avoid all together. There's also GNMA, VFIIX, which appears to be tortoise-like, in that it doesn't go up or down ever and I'll probably be able to get my money out in an emergency, but since there will be nothing else there, I'd probably have to close the account. There's also Lifestrategy Income fund VASIX, which appears to be doing somewhat better over the past few years than conservative growth, it also appears to be lower risk. Are any of these even close to a good idea? I'd like to put the money in to the long-term investment fund simply because I'm being dazzled by the numbers, but I know nothing about bonds. My plan is basically to transfer the money to VASIX at the moment, since it appears to do consistently better, nothing stellar, but is lower risk. I have funds in Wellington VWELX, I could just put them there, but I'd like to spread it out a bit so I'm not running on only one horse. Any thoughts?
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Jul 15, 2012 08:23
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Torpor posted:Is there a fund that doesn't do anything exciting like plunging horribly when the economy tanks; but more like the often talked about Tortoise in the Tortoise and the Hare,a kind of Tortoise fund. Also, why are you putting emergency funds into an IRA?
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Jul 15, 2012 16:53
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I'd be surprised if you can find anything that didn't crash in 2008.
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Jul 15, 2012 17:25
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If you want literally no volatility you want a money market fund. However, you are going to lose money to inflation in such a low risk vehicle.
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Jul 15, 2012 17:29
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Unormal posted:If you want literally no volatility you want a money market fund. However, you are going to lose money to inflation in such a low risk vehicle. Yeah I have a tiny bit of money in a money market fund, which brings up a good point, that I should remove that money from the money market fund, since it'd be more useful if I turned it into cash and hid it under my matress. As for why I'm putting emergency money into an IRA, I'm not, I have many months of cash sitting in the bank as my savings for a rainy day. The thing is, since I'm not a fortune teller, I'd like to put my money for retirement in a place that, should worse come to worse, it isn't completely inaccessible. With a Roth IRA you can withdraw after, what, 5 years, the amount you placed in and pay tax on it. At least thats the plan. Call it a secondary, "oh poo poo" savings/retirement account, or perhaps auxiliary savings. My thinking is that that bit of money should be doing it's job, making money, but that when I need it, probably when the market is down and I'm out of the job, I would need that money. If the money is tied to something volatile, then at that moment, my money would be bleeding to death horribly; so I want an IRA fund that makes modest gains, but more importantly doesn't fail horribly right when I need to hit the oh poo poo button.
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Jul 16, 2012 03:31
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I'm no expert, but it seems to me like you need to let go of looking at your retirement savings as short-term. You should look for long-term growth, and just accept the fact that short-term fluctuations mean you're going to lose some money if worse comes to worst and you have to pull money out of your retirement account. If you have a diversified portfolio it's not just going to crash leaving you pennies on the dollar, I'm certainly not suggesting you just throw it all in a growth fund. Basically, think of it as a very significant fee you're paying out of your long-term gains to have the ability to withdraw it at any point without eating much losses.
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Jul 16, 2012 05:10
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Are there any good index ETFs traded in CAD? I am trying to avoid conversion rates. Any downsides of buying those?
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Jul 16, 2012 23:16
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Should i still buy ETFs every pay period if its only like $400 and the trade costs $12.25?
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Jul 17, 2012 15:37
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Celot posted:Should i still buy ETFs every pay period if its only like $400 and the trade costs $12.25? ~$300 in fees on $9,600 of investments each year is pretty debilitating, since your portfolio would have to grow more than 3% annually just for you to break even, let alone earn a return.
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Jul 17, 2012 16:36
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I'm looking to open a taxable investment account, as I'm 22 and might want or need this money when I'm 40-50. This is savings beyond standard retirement savings, and my IRA and 401k are both in Vanguard Target Retirement funds. I know that the Vanguard TR funds are very heavily weighted towards US equities, so the last thing I need is more domestic equities. I don't know much about personal investing, and don't want it to be a huge chore to actively manage this stuff, so I'm looking for an index fund. Where should I be looking to diversify to if the majority of my retirement savings are in US equities? I'm incredibly risk-insensitive right now, and anything that I toss into this fund will be in there for at least 10 years before I even think about taking any out. I like the look of the Vanguard Admiral shares quite a bit as a way to keep expenses as low as possible, both on putting money in and expense ratio. The ones that catch my eye are VTIAX, VTMGX, VWILX, and VFWAX but I'm having a very hard time telling the difference between these. Should I be looking at things other than equities given my situation?
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Jul 17, 2012 17:18
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Weinertron posted:I'm looking to open a taxable investment account, as I'm 22 and might want or need this money when I'm 40-50. This is savings beyond standard retirement savings, and my IRA and 401k are both in Vanguard Target Retirement funds. If what you want is global diversification, it's going to be hard to go wrong with VFWAX. I wouldn't (don't) go higher than global market weighting of US vs ex-US, personally. I personally mix in a little VFSVX, but it honestly won't make a very big difference. If anything, it will cost, since it's ER is a fraction higher than VFWAX.
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Jul 17, 2012 17:24
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Exergy posted:Are there any good index ETFs traded in CAD? I am trying to avoid conversion rates. Any downsides of buying those? Obviously your canada equity and canadian bonds can be done with canadian ETFs like XIC, XIU, XSB, and CLF. As for american/overseas equity, I personally go with US dollar funds for a couple of reasons. For one, the vanguard funds have amazingly low expense ratios which make up somewhat for the conversation fees. Secondly, most of the american/international equity funds you can get in CAD are hedged against currency fluctuations, which is actually likely to be slightly bad for long-term investing. http://www.canadiancapitalist.com/comparing-currency-hedged-and-unhedged-holdings/ quote:Should i still buy ETFs every pay period if its only like $400 and the trade costs $12.25? Why not just put that money in a savings account and contribute it 1-2 times per year?
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Jul 18, 2012 18:47
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DuckConference posted:Obviously your canada equity and canadian bonds can be done with canadian ETFs like XIC, XIU, XSB, and CLF. As for american/overseas equity, I personally go with US dollar funds for a couple of reasons. For one, the vanguard funds have amazingly low expense ratios which make up somewhat for the conversation fees. Secondly, most of the american/international equity funds you can get in CAD are hedged against currency fluctuations, which is actually likely to be slightly bad for long-term investing. Great response, thank you. I will stick to Vanguard, just didn't like 2% of currency exchange commission, but as a one-time transaction I can live with it, especially since it is compensated by tax savings via RRSP. Edit: Wow, this link is good. Just read about Norbert's gambit, this is exactly what I was looking for and it looks like Questrade can do this. Exergy fucked around with this message at 23:12 on Jul 18, 2012 |
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Jul 18, 2012 20:13
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Torpor posted:Yeah I have a tiny bit of money in a money market fund, which brings up a good point, that I should remove that money from the money market fund, since it'd be more useful if I turned it into cash and hid it under my matress. One of the most important rules of investing that is explained very well in The 4 Pillars of Investment is the relationship between risk and return. Essentially, if you aren't willing to watch your funds drop occasionally in the short term, they have no chance of rising high in the long-term. If you want something with no volatility, odds are it will barely keep up with inflation.
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Jul 19, 2012 00:10
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Question for those with experience using Vanguard. Opening a basic taxable account at Vanguard and they only options I get are Retirement, General Savings, and College. I'm assuming that "General Savings" is what they consider their basic taxable account, am I correct? Seems like really dumb wording on their homepage.
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Jul 19, 2012 03:38
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Niwrad posted:Question for those with experience using Vanguard. Opening a basic taxable account at Vanguard and they only options I get are Retirement, General Savings, and College. I'm assuming that "General Savings" is what they consider their basic taxable account, am I correct? Seems like really dumb wording on their homepage. e: I have a taxable account there, and I must have selected this option, and everything has worked as I have expected. gvibes fucked around with this message at 19:40 on Jul 19, 2012 |
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Jul 19, 2012 19:36
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gvibes posted:Pretty sure that's right (at least, none of the other options make sense). This is right. Though be careful; the follow-up question to the account type will ask you to select what type of investments you are going to put in the account. If you select mutual funds, you will not be able to use that account to buy other asset types like stocks, ETFs, etc. I found this out the hard way, and have been too lazy to deal with it.
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Jul 19, 2012 19:48
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