Author Topic: New to Investing  (Read 2081 times)

Cessna172

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New to Investing
« on: June 01, 2017, 11:37:02 AM »
My wife and I have been following Mr. Money Mustache for a long time now. We have a small business and twenty rental houses. She just finished grad school and will be starting at a good job soon. During the recession we avoided the stock market and invested the money from our small business into rental houses. Now that market prices are higher we have been on the sidelines paying off debt and realize that is was a mistake to avoid the market and keep our savings in the bank. We currently have no debt and have saved up a fair amount of money. We have been making IRA contributions over the last several years and are looking into setting up a 401k plan for the small business to invest tax free. Do we wait for the market to bottom out? Put our savings into the Vanguard 500 fund? Currently even our IRA contributions are not invested.

WildJager

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Re: New to Investing
« Reply #1 on: June 01, 2017, 02:29:42 PM »
Invest now, as no one knows what the market will do in the future.  You said it yourself, you missed market returns because you had a feeling that the market was high.  This is a long term game.

Let me put this in another perspective.  When you buy your rentals, do you check the value of them every day or month?  Or even year?  That's easy to do with stocks, less easy to do with real estate.  However, the effect is the same.  As long as the trend line goes up over time (is it has with the S&P 500 or total market) you'll be fine.  Don't worry about the short term gain or loss, focus on the long term horizon and put your mind at ease.

Check out "A random walk down wallstreet" from your local library, and read jcollins' stock series online to build a decent baseline knowledge of investing.

SeattleCPA

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Re: New to Investing
« Reply #2 on: June 01, 2017, 03:47:04 PM »
You might also be interested in a free, downloadable copy of the Thirteen Word Retirement Plan... it's gotten some great reviews.

http://evergreensmallbusiness.com/the-thirteen-word-retirement-plan/


EdwardMM

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Re: New to Investing
« Reply #3 on: June 01, 2017, 08:04:32 PM »
My wife and I have been following Mr. Money Mustache for a long time now. We have a small business and twenty rental houses. She just finished grad school and will be starting at a good job soon. During the recession we avoided the stock market and invested the money from our small business into rental houses. Now that market prices are higher we have been on the sidelines paying off debt and realize that is was a mistake to avoid the market and keep our savings in the bank. We currently have no debt and have saved up a fair amount of money. We have been making IRA contributions over the last several years and are looking into setting up a 401k plan for the small business to invest tax free. Do we wait for the market to bottom out? Put our savings into the Vanguard 500 fund? Currently even our IRA contributions are not invested.

TWENTY rental houses is pretty darn good if you are cash positive in them on a monthly basis. Do you self-manage the properties?

Before I would advise investing I'd be asking a lot of questions about the debt load you're carrying on those homes - how many mortgages / what's the aggregate LTV, etc. Are you in a position where you could absorb a real estate downturn without being forced into bankruptcy?  We have an acquaintance who was buying and managing properties all the way up to 2008 when the market fell out. She was working in vacation rentals and the floor fell out of both prices and rents and forced them into foreclosure on many properties. They essentially lost their shirts and were rebuilding from scratch even in 2017.  Given that you have 20 and a small business, I'm assuming you're pretty darn savvy as the average person isn't making those decisions.

In terms of investing - I tend to agree with the other advice. Who knows where exactly the top is. CAPE (just one metric you can look up) is high, but it's not nearly as high as it was in the dotcom bubble. The market could go up another 10-20 percent and could stay there for a long time. Or it could crash tomorrow.

Since you already have the infrastructure set up for real estate management (you must with twenty properties), you also should consider what return you can get by expanding that rental business - but that's all a numbers game and I understand diversification may be in order.

ChpBstrd

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Re: New to Investing
« Reply #4 on: June 02, 2017, 04:11:47 PM »
Instead of a regular 401(k) like the rest of us, you as a small business owner can set up a SEP or self-employed 401(k). That way. You can shelter up to $54k(!) of income instead of a measly $18k like us cubicle monkeys.

https://www.fidelity.com/viewpoints/retirement-plan-small-business

A lot of ppl on this board have achieved FIRE with less than 20 rental houses plus a small business. You might be FI already.

EdwardMM is right that you need to look at the ROI of those rent houses. It may be more or it may be less than what one might expect from the markets (6-10%). If it's close, consider holding them.

Another missing piece is your objective. Focus on the business? Shift to passive investments and retire? Grow wealth as fast as possible? Etc...