Any interesting ways to diversify a portfolio?

[YTProphet]

Hi everyone,

I will be paying off my house as a Christmas present to myself this year. I realize there are different thoughts on paying the house off early (some think it's great, some think it's foolish given the interest rates and tax deduction, etc) but I've elected to pay it off for peace of mind. Not here to debate that. I'm interested in knowing if anyone's done anything interesting to diversify once they're done with the house.

Once it's paid off, I'll have a house worth about $400k, plus $250k in retirement accounts, $35k in cash, and $20k in vehicles. Income is about $200k/year in a middle cost of living area. I have about 20 years left until I want to retire.

I'l have a good bit extra to set aside each month but don't really want everything in the stock market. I like the idea of real estate and have done RE investing in the past, but now isn't a great time to have RE projects since I've got young kids that I need to focus on. I think REITs are out for me (I'm not a believer in them these days due to high fees and their constant need to do deals). Trying to think of some other interesting ways to diversify. Any thoughts on how to do that? Or is the answer "mutual funds are diversification"?

[zolotiyeruki]

Congrats on paying off the house!  I'm sure that'll feel awesome.

How much do you have stashed in a place that'll be accessible penalty-free if/when you retire early?  A lot of people put everything into tax-deferred accounts, and end up with not enough in taxable accounts and Roth contributions to tide them over while they build their Roth pipeline.  You might want to consider opening a taxable account and start building that up.

If you're at a stage in life where you're busy with kids, then investments that require your constant time and attention (e.g. real estate, franchising, etc) are probably not for you.  Once your kids are out of the house, you can pull money out of your taxable accounts and get more adventurous with it.

[Villanelle]

Buy an investment property (though, good luck finding a good one).  Owning real estate, especially leveraged real estate, is a way to diversify.  So you are giving up diversity and then asking how to diversify.  I know you said no to RE, but unless you want to take on a lot more risk, it's the other option. 

You cold also invest in a business, though that's fairly high risk and with only about $385k in investments it would likely take up a very large portion of your portfolio.

Microloans? Or just mini-loans?   I'm not sure if Lending Club is even still doing them, but if not you might be able to find someone else. Inherently risky, especially if you can't find a platform for diversifying with many small loans, but if you just want a Thing That isn't Equities, Bonds, or RE, it's an option. 

[BlueHouse]

Hi everyone,

I will be paying off my house as a Christmas present to myself this year. I realize there are different thoughts on paying the house off early (some think it's great, some think it's foolish given the interest rates and tax deduction, etc) but I've elected to pay it off for peace of mind. Not here to debate that. I'm interested in knowing if anyone's done anything interesting to diversify once they're done with the house.

Once it's paid off, I'll have a house worth about $400k, plus $250k in retirement accounts, $35k in cash, and $20k in vehicles. Income is about $200k/year in a middle cost of living area. I have about 20 years left until I want to retire.

I'l have a good bit extra to set aside each month but don't really want everything in the stock market. I like the idea of real estate and have done RE investing in the past, but now isn't a great time to have RE projects since I've got young kids that I need to focus on. I think REITs are out for me (I'm not a believer in them these days due to high fees and their constant need to do deals). Trying to think of some other interesting ways to diversify. Any thoughts on how to do that? Or is the answer "mutual funds are diversification"?

REmbember that the stock market is buying into other peoples' businesses and real estate, so there really isn't a better way to diversify IMO. 
I had a rental property, which I realized was so much more trouble and so much less profitable than just owning more equities.  So if I were you, I'd think about all the diversification you get in a broad index fund, then focus on maxing your pre-tax coffers, then your back-door roth, then post-tax account. 

I do get bored with just following the good advice though and twice in the past few years I've bought straight out stock in a company "for fun".  Amazon and Tesla.  Both doubled in value in the past year or two.  I find though that I really don't want to do the work in researching companies, so VTI and VTSAX are best for me for the overwhelming majority of my investments. 

[Tempname23]

My interesting way was to diversify was in REITs, some prefered some not.
It was interesting and I lost a good deal of equity through this Covid thing,
they have recovered some, but not nearly enough.

[Spicolli]

It would eat into the profits, but maybe RE with a property manager is the way to go if you don't have time to deal with landlord tasks. 

[YTProphet]

It would eat into the profits, but maybe RE with a property manager is the way to go if you don't have time to deal with landlord tasks.

Yeah, I've thought about that and I think it's kinda the way I have to go. I don't like REITs because they HAVE to do deals to survive. When you HAVE to do deals, you compromise on quality. Plus, REITs are loaded with fees from about a dozen different parties (banks, finance brokers, real estate brokers, the fund itself, title companies, environmental, etc, etc). I'd rather just own a small rental and have it managed and take out a low interest loan.

[yachi]

I've always had a mortgage on my house.  I had a rental house for a few years too.  I bought it with cash so I didn't have to worry about it meeting lending requirements, fixed it up and rented it.  I ran it with a property manager.  It was fine, although some things needed a lot of my involvement anyway.  It got flooded when the tenant left the property in winter and the pipes burst.  Once we repaired it we decided to sell it for the peace of mind. 
I don't understand paying off a mortgage for the peace of mind.  Mine is $955 per month, and taxes are $375 of that.  Any calculation I run puts me better off keeping it until I'm FIRE and need a reduced withdrawal rate.  The amount of cash it takes to pay it off would cover more than 90 months of payments (taxes included!), so I'm in no danger should I lose my job.

You'll end up paying a higher interest rate on a rental house than an owner-occupied property so don't forget to account for that.

[cool7hand]

My wife and I have been using Ray Dalio's All Seasons's (aka All Weather) Portfolio, which is designed for low volatility. Check it out with Dr. Google.

[Dicey]

Boring is beautiful.

[Fuzz]

There is syndicated real estate and some of the crowd funding sites, like yieldstreet or fundrise. Check out the forums on white coat investor. Boring is good, though. I've looked at those and stayed in a 3 fund portfolio.

[honeyfill]

There is a winery in Oregon selling preferred shares for 4.95 with a 4.44% dividend. The stock is presently selling for 5.65  on Nasdaq so there is a possibility of a quick profit. There is a limit of 11.5k per individual through the winery at that price.
To be honest , it is a really just a way to join a high end wine club but with the fun of saying you are a part owner of the winery.
Disclosures:
1. I just bought 350 shares this past weekend.
2. I won't say the name of the stock or winery but if you search for Oregon preferred stock you can figure it out.
3. I am not recommending anyone buy this stock, I just though it would be a fun change of pace to the serious suggestions in the rest of the topic thread!