Author Topic: Path forward  (Read 554 times)

Boll weevil

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Path forward
« on: November 08, 2017, 11:04:01 PM »
Mathematically I'm on the cusp of FI (at least before taxes and health care), but think Iím 7-12 years away from my goal for RE (which is probably more than Iíll actually need)

Currently all of my holdings are in stocks and index funds.

Going forward, I think I'll have ~$25K-$30K/year out of salary to invest.

The first question is what to do with it?

One end of the spectrum is to continue what I'm doing and pour the money into index funds and the occasional stock. The other end of the spectrum is to get into real estate, most likely rentals with mortgages.  Since I'm considering the investments to sit on a spectrum, I could try to do some combination of the 2, which probably wouldn't work as well on the real estate side.

The second question is timing the change if I decide to make one. Options are:
* Now/soon (which seems arbitrary)
* Significant birthday (next one coming up for me is age 40... there'd be a compulsive satisfaction in using a nice round number, but it's pretty much as arbitrary as the previous bullet)
* Start at set net worth (I don't have $1M yet but expect to be there in 3-4 years. At that point I could become an accredited investor, which would provide more options for what I could invest in)
* Never (i.e. continue what I'm doing and stay entirely in stocks and index funds)

At the moment I'm leaning towards real-estate because one of my main concerns is income streams... I don't see the stocks and index funds growing to the point where I can live on the distributions alone.

On the other hand, my temperament is probably not a great match to the real-estate industry and I am already doing fairly well with the index funds. And if I'm this close to FI, I'm not sure it makes a lot of sense to take out a bunch of loans, even if I hope to have the tenants pay them off.

Thoughts? Thanks.

Retire-Canada

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Re: Path forward
« Reply #1 on: November 09, 2017, 07:13:40 AM »
At the moment I'm leaning towards real-estate because one of my main concerns is income streams... I don't see the stocks and index funds growing to the point where I can live on the distributions alone.

If you are on the cusp of FI now and won't retire for 7-8 years you will likely have FI x 2 without adding to your investments by the time you do retire. You are not required to live off only the distributions from your investments. If you are down around a 2%-3% WR by the time you retire you are in historically never failed territory with very little to worry about.

On the RE front the first and most important question is do you really want to manage real rental properties? It's not a casual endeavour so make sure it's actually something you want to spend your time on...and more specifically something you want to spend your time on if your investments more than meet your financial needs.

You could always buy REITs to get passive real estate exposure without the management requirement.

Regarding when to change investment courses it doesn't matter. Today, your birthday, Valentine's Day...whatever floats your boat. It's an arbitrary choice no matter what you pick.