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Discussion Starter · #1 ·
Good or bad? My wife and I's 401's are pretty much index funds which have done well. But what about some real estate?

Thing is, when you do a historical trend of a RE fund, they pretty track the market, so really what's the point?
 

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...and all those same types from LA that were doing this got evicted finally and moved to hemet where I am town went to chit fast.
Im an A1 tenant, owners love me to pieces Too bad I have a squatter in the other room happens over and over.
People are entitled pos these days. This ones almost 70 too its a disease I think.
Could get this place Im in 30k under market just cant qualify need more income.
I would NOT rent houses to anyone in todays day and age no way. Youd need a lawyer to run things (tenant landlord type) otherwise you will get screwed guaranteed.
In less than 2 mos this one has done many thousands in property damage not to mention not paying.
Gonna find the curb next week.
A certified caregiver of all things..someone you are supposed to trust your life, health and home to. Didnt see this one coming.
 

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Diversification is never a bad thing. While index funds offer an excellent diversified long term ride providing cheap access to " beta" or stock market risk , they are diversified only within the equity markets.

Additionally, as most indexes are market-cap weighed, you hold onto more and more of the winners. Which is a great thing when falling interest rates drive the overall market higher. The rich get richer! Seriously, it helps index funds outperform in bull markets, for sure.

Yet, as markets consolidate, OR if you seek a modicum of cash flow or income from the portfolio, they don't tend to hold up as well under those scenarios. For example, whereas a index's volatility actually helps returns under the " dollar cost average" scenario, that same volatility is going to provide the exact opposite mathematical adjustment under conditions of distribution or withdrawal. ( aka retirement)

Which is why your wife's time horizon is CRITICAL to the answer.

Notice I didnt say whether RE is good or bad yet, and I wont. as a pro, I KNOW I dont have a crystal ball. Yet, bear in mind, real estate valuations are subject to interest rate adjustments. so if rates adjust higher rapidly, RE will suffer, just like stocks will. Well, MOST stocks.

Broadly speaking Vince, you are referring to " alternative investments". RE is part of that mix. Alternatives to the pure straight "market beta" of an index portfolio is one way to look at it.

Again, with falling interest rates over my lifetime, its hard to divorce independent performance of RE v the market, in any time series study. Just as the old adage of bonds being diversifiers for stocks has lost temporary validity due to rates being driven so darn low.

Let me find you a good reference on Alternative Investments. ( PS its a huge part of what I handle professionally)

For a short list of areas I'd consider, RE, bank loan funds, infrastructure funds ( gas pipelines are my fav!). It will depend on what is available in her 401(k). I doubt you can dollar cost average into MLPX ( an ETF) in her 401(k) , for example.

Here's Vanguard's take : Alternative investments | Vanguard

not super big on investopedia yet: Alternative Real Estate Investments

AS an example of something we use, a floating rate loan fund with a 20-25% exposure to timber, held for cash flow. So totally alternative, both floating rate AND commodity -linked or "real asset" as the term is now.

Real Assets ( including RE) Real Asset: A Tangible Investment

HAPPY NEW YEAR!

( PS wife of Vinny may just consider parking some of those profits from her index funds elsewhere! we'll call her ' PRUDENCE' like the Beatles song ! :cool: )

PSS here is one I didnt hold long enough....but wouldn't add now due to its valuation ( we cal'c it to be closer to $25/shr ) . FOR EXAMPLE ONLY of a good REIT......that Real Estate Investment Trust, a individual stock.


Here is one of the few we still hold: ( a "paper real estate" company if you will)


And Lastly, one of my favorite alternative managers, again just as an FYI:

Brookfield | Canadienne, eh!? 🇨🇦
 

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I am not a pro Gene but I do know what goes up must go down not to mention I got caught in the 2007 housing crash. Interest rates are likely to go up to slow inflation which will drive the RE market down. Housing cost especially up here are out of control. I also remember the Silicon Valley crash in the 80’s and many owned houses that were half the value that they paid a year later.
 

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The best investment advice I got and never listened to, was don’t get married. Rent it or use dating sites most women will give it up for free. And no kids, huge drain on resources. I wish I would have listened would be retired now at fifty, I quietly totalled things up and wow I spent a lot on wife and kids, with nothing to show for it. If to do over again, the two things I would do in a heart beat.
 

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The best investment advice I got and never listened to, was don’t get married. Rent it or use dating sites most women will give it up for free. And no kids, huge drain on resources. I wish I would have listened would be retired now at fifty, I quietly totalled things up and wow I spent a lot on wife and kids, with nothing to show for it. If to do over again, the two things I would do in a heart beat.
All I can say is if you look at your wife and children as only a financial burden then you missed the boat and indeed should have definitely never gotten married and added to the worlds population.
 

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RE Market is already slowing down (as in single family homes), but regardless of what you may think, price are not dropping. Commercial real estate (retail) taking a beating.
Downtown Philly is a good example, development under way are high rise apartments, narrow demographic of renters FWIW. Everything else under construction are distribution centers, millions and millions of sq ft warehousing/distribution.
 

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What floored me was the amount of recently built class A office space which was vacant in SLC. Massive oversupply. It was a Morgan Stanley branded complex in S Jordan. What maroons. ( MS was just a renter) So the RE market is not all ONE market for sure.

Bill, as a professional, and an educator, I was trying not to pontificate , but simply educate.

Many of these "alternative asset" trades are not undervalued anymore, that is for sure.

EG you cant buy timber yielding 5% anymore.


EG here's one of my favorites in RE. but LOOK at the yield? For most of my career it paid out 4-5%. NOW ITS 2.25%!!! that aint alot of room for error, eh!?

 

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DIGITAL META REALESTATE......... that's what Mrs Vinny needs in her portfolio! I jest but just saw this in the WSJ. IDK if you can view the video w/o a subscription, but here it goes....


PS, this is hard to do for me manually, but of the ETF's out there, if I overlay our stock valuation metrics over the ETF's holdings, any ETF holding gas transmission or mining shares ought do the trick, maybe better than straight RE.

And that IS my professional advice for Mrs Vinny, whom as Joe and Vinny will attest, I met at Cecil Cty Dragway years back while @ MCC show, and was STUNNINGLY IMPRESSED.

MLPX or XME may be one of those ETFs.

In individual stocks, I like specialty steel ( TMST) , ammunition ( VSTO) , fertilizers/ag ( FMC) and BHP ( miners of anything but iron ore, lithium or gold) as well as the aforementioned energy suppliers as providing an inflation-hedged equity allocation without being subject to already "inflated" valuations.

Everytime I think VSTO is overvalued, they report earning and Remington, Speer, CCI etc are absolutely KICKING ASS AND TAKING NAMES still. Our estimate of fair value is now $70-72/shr

INFLATE ME BABY! ( and no , even shareholders don't get first dibs on primers! )
 

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Vinny, et al may enjoy this write up from a fellow CFA....... I think he NAILS it!

 

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Discussion Starter · #13 ·
Thank you Gene for posting all of that info...I'm going to have to take some time going through it all.

But regarding those RE funds, even the Fidelity one that you linked, if you look at the long term performance data the S&P kills it over the long term. I guess it comes down to your retirement timeline. We're both 49 and wouldn't even need the 401k money as we both have pensions and SS coming so I feel its ok to be a little more aggressive but it would def suck if the market took a sh!t when I turn 60 and stays flat for ~10yrs.
 

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Hey here's a rule we teach our beginning students, for investments ALWAYS USE BOTH RISK AND RETURNS TO EVALUATE AN INVESTMENT> So while the S&P500 has delivered a HIGHER average return, the REIT index has delivered a more consistent return. The metric applies to high yield bonds vs stocks in fact. The term "beta" is used to define variance of returns - risk to a finance professional .

Just as your time horizon is KEY to any answer involving risk, or lack of predictability. Time washes it away. and 15+ years will do it entirely.

As an investor, we've been enjoying lots of good risk of late. LOTS. Not much bad risk. You cant have one without the other. We as investors dont define risk as " std deviations in monthly rates of return", we define it as losing money! But understand that risk has two heads, or sides.

BTW, using historical average rate of return is also silly, as money never grows "arithmetically" but geometrically. Anyone who knows math knows that. Yet, everyone used arithmetical average , making crude estimates of what real performance " might have been"! So using both returns and risk (as measured by the standard deviation of returns) is the only way to compare two investments. If everyone published the "geometric" mean of investment results, it would reflect how actual money grew, given compounding's intolerance of negative results. So geometric means incorporate risk and are better for comparative purpoes.

There is a small possibility that the markets run into one heckuva headwind over the intermediate term, so nothing wrong with dialing risk down temporarily. Maybe read that last article and see if it makes sense. Lots of goofy stuff going on. Lots of innovation too, but I harken an old Wall Street adage " BUY THE RUMOR, SELL THE NEWS!"

Also, you might as well get some real estate info right from the horses's "petootie"! www.nareit.com

And to be fair, the traditional inflation alterantive: GOLD World Gold Council | The Authority on Gold

It bothers the heck out of my intellect that these young brash know it alls are calling for bitcoin in 401ks when we cant even buy gold . More blind leading the blind. anyway.....

Diversification is always good!!. Only time it doesnt work is under "black swan" events where everyone goes to cash! My motto is " cash is queen"! King is the risk taker.

GOOD LUCK!
 

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Discussion Starter · #15 ·
Thanks Gene - Mrs. V appreciates the insight!
 

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I;ve probably given her "paralysis by analysis" , but you and she are welcome! HAPPY NEW YEAR!
 

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The justification of investments depends, first of all, on whether you invest the last million. Profitability is always a risk payment. I do not consider real estate a justified investment in the short term. And we must remember that any person has only asset the number of hours he has left to live. And if you want to live this time well, it's better to buy a house or an apartment in a good place here and now. However, if you are not versed in real estate, I advise you to turn to Mortgage Advice Cardiff. It is not worth buying an asset that has not been verified.
 

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Hey, most publicly trade RE is ALOT cheaper than when this post started, so sometimes time horizon is conditional upon your in price, eh? Valuations "justify" ALOT in the investment world that doesn't seem "justifiable". First or last million.

For example, to my mind's eye, current valuations justify owning chip stocks. Even for the short term. SOXX and XSD are the vehicles.
 

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REITS can generate very nice income + capital gains in the long run holding, if:

1) One is patient and buys when they are hammered good

2) Offers diversification across a broad based asset type (residential, commercial, cell towers, storage facilities etc).

3) No gutter, boiler, painting after tenants move out, and tenants not paying rent (very common in NY), and they can sit there, and milk it for at least 2 years before you evict them. Some pour cement down your toilet and flush it as a thank you (read F U)

4) REITS are interest rate sensitive, and do move like long bonds.

I am partial to Vanguard funds as they are true no load/hidden load - and have served me well in the past 45 or so years.

Ex: VGSLX = Vanguard RE fund admiral fund. Has 80 billion in assets across a broad spectrum of holdings. It yielded 12% in 2008 and if you held it until the peak of 2021, it was up 4 times = (400%). Very nice

It yields about 3.5% now

Patience and entry point are the key, as when we sell, we sell whatever the bid is at the time.

Disclaimer: I am not a financial advisor, and the above are my personal opinions based on personal observation and experience and are posted as a reply to this thread

Alex
 

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I am a portfolio manager - disclaimer! Here is a fund we use ( as well as Vanguard's REIT ETF) and I ONLY post this to show how sensitive REITs are to interest rates, as Alex postis. Here is the data on ticker FRIFX from Fidelity, a whopping -17% drop this year. Yet, at this price, take a look at that yield. 6.5% not so bad.

FRIFX - Fidelity ® Real Estate Income Fund | Fidelity Investments
 
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