Retirement / Financial advice

[hpeer]

I suck at financial planning and investing. I do pretty good with real estate. So I would feel better with my 401K money if it were in real estate.

I have enough in a 401K to buy another house/rental property, which I would like to do. I did talk to my financial adviser and tax planner and both agreed that it would be a pain to move my 401K money into a personally held real estate investment.

Does anyone have any experience with that kind of thing?

[sailorboy1]

Originally Posted by investdr

Read an article recently that stated you should be able to live comfortably on your $1k per month cruising.

well how about a link then as I can post a circular link back to CF saying you can do it on $500

[David M]

Originally Posted by hpeer

I suck at financial planning and investing. I do pretty good with real estate. So I would feel better with my 401K money if it were in real estate.

I have enough in a 401K to buy another house/rental property, which I would like to do. I did talk to my financial adviser and tax planner and both agreed that it would be a pain to move my 401K money into a personally held real estate investment.

Does anyone have any experience with that kind of thing?

You can purchase REIT's in your 401k as a low expense ratio ETF and not move money out of your 401k at all.

You have to be careful about moving money out of any retirement plan because there can be severe penalties.

[ssanzone]

the market is WAY more stable than the real estate market.

think about what the government has done in the last 8 years to keep the stock market stimulated compared to what they have done to protect the real estate market.

not that it is advisable... if you have 100K in a stock portfolio and find yourself needing liquid cash you can sell off shares of an individual stock to address your short term needs. i buy stock in apple b4 product announcements and sell after and in oil during presidential elections and sell after in the vein of buy low / sell high.

you want to take you 401k which is sure to be very diverse with near bankable returns and buy property? crazy!!!

what is the value of your current home today as opposed to 8 years ago compared to the value of your 401k today vs 8 years ago.

listen to your planners... and leave your 401K where it is.

if you are not comfortable with the market it is, most likely, cuz you dont understand...

would u ignore experienced sailors and sell you boat because you cant tie a bowline? you would learn... because you need to know and sailing is a passion not your livlihood.

listen to your financial planners!

buy a book!

-steve

[JPA Cate]

With reference to Tacoma Sailor's post # 13, where he commented that his friend's wife felt secure that she had a place to come "home" to, near their kids:

This is a common theme we hear amongst cruisers, maybe 50%, 60% of cruisers over 45 years old. Usually, I think this desire is actually for a fantasy: the mental picture is of a safe haven where the kids will 'take care of me' when I need it. In actuality, that is only a dream, and while it might work out, it also might not.

But not everyone is willing to live with an open ending.

How this applies to A64pilot and his good lady only they know. I think you all have given him good advice so far. It is not prudent to have a priveleged "conversation" on a forum.

Ann

[avb3]

Diversification is the key. There is no way anyone will hit the inclines of all the markets.

If you're approaching retirement, why would you want to be in a stock market that is at historical highs? P/E's are out of this world, and your buying near the top. A laddered bond portfolio, along with stable dividend paying stocks would make much more sense.

At least that is my perspective. One may want to get back into the stock market after the next long term correction, which we all know is coming. We just don't know when.

[onestepcsy37]

A64pilot, I don't want to quote your message here, so just a quick observation. Unlike a day trader, who flips stocks quickly, I look for great businesses with track records that are for some reason underpriced. BP stock crashed after the gulf oil spill. That's when I bought BP. It has nearly doubled since then AND pays quarterly dividends. Berkshire Hathaway had a unique buy opportunity a few years ago. I bought. No dividends but the price has more than doubled since I bought. And all from the convenience of my computer while I was having lunch.

Try that with real estate....

[onestepcsy37]

Avb3, good advice. When the market is low, like after the 2008 crash, buy high quality undervalued stocks. When the market starts coming down after long highs, sell the stock and preserve your gains in guaranteed investments like U.S. government bonds. Then repeat...

[Ex-Calif]

In the vein of buy when the Dow is low and sell when it is high...

Picking the individual stocks that will recover is hard. I am definitely not that smart or prescient.

The Dow is high. Soon is when I move Dow Fund money into bonds or other fixed income- rebalance. Slow down my percentage of Dow fund buy and wait for the correction. Probably not the mid-terms but definitely before the next Presidential Election.

When the correction comes raise the Dow buy. That's about as complicated as it gets for me. I always miss the peak so I don't maximize the growth but long term the US economy and the 100 stocks that make up the Dow will recover. If they don't then well we are all investing in the wrong country!

[a64pilot]

I understand the dollar cost averaging thing, and believe avb3 is right, it's inflated and will eventually correct, just as housing did, one reason I don't want in.
Sounds silly, but when everyone thinks X is a good investment, it no longer is.
Real Estate on the other hand has corrected and is no longer on a high, land around here, and by land I mean 100+ acre just land you grow trees on is selling for close to the same price it did thirty or so years ago, of course it was inflated thirty or so years ago.
I have never figured out "neighborhoods" and lot pricing, in the right neighborhood, a .5 acre lot may go for 100K, but you can buy 20 acres right across the street for that amount?
Plus I think to get the wife out cruising, she has to have a home to come back to, just isn't prepared psychologically to give that sense of security up.

Ann I don't understand what you mean by having a conversation on a forum isn't proper, have I said something I shouldn't?
PM me please if I need guidence, I'd appreciate it especially if I'm inadvertently going somewhere I shouldn't.

[Finistere]

Simple rule to live by.

You should be worth more at the end of the year than at the start, adjust your expenses accordingly.


Sent from my iPad using Cruisers Sailing Forum

[socaldmax]

Originally Posted by Prairie Chicken

I think this is the issue some of you are referring to about a "rigged market". It's an interesting read, but I don't think it affects too many of us here. Or maybe just a few

Canadian Brad Katsuyama profiled in new book 'Flash Boys' about 'rigged' stock market allegations | CTV News

That is just a teaser for his book. There was a lot more to it, covered by 60 Minutes, you can see it on their website. Essentially, every brokerage house on Wall St had to send their trades through the same section of fiber optic cable to the stock exchanges in NJ. These trades were intercepted and the "flash boys" bought the stock milliseconds before, and resold milliseconds later at a slight profit on every single share. The amount of money stolen from all of the investors totaled hundreds of millions per day, possibly tens of billions per yr.

Is the U.S. stock market rigged? - CBS News


Here is Robert Kiyosaki quoting John Bogle of Vanguard Mutual funds explaining how mutual funds rip you off, I mean work. It's only 2:43, but the pertinent part starts at 1:30. This is the kind of honesty very, very few FPs will tell you because they're hoping to get you to invest in what they're selling.

https://www.youtube.com/watch?v=TlWOCvjQveg

[olaf hart]

Interesting thread, thanks guys.
I am in Oz so the tax details vary, but the investment strategies are the same.

[socaldmax]

Originally Posted by Ann T. Cate

With reference to Tacoma Sailor's post # 13, where he commented that his friend's wife felt secure that she had a place to come "home" to, near their kids:

This is a common theme we hear amongst cruisers, maybe 50%, 60% of cruisers over 45 years old. Usually, I think this desire is actually for a fantasy: the mental picture is of a safe haven where the kids will 'take care of me' when I need it. In actuality, that is only a dream, and while it might work out, it also might not.

But not everyone is willing to live with an open ending.

How this applies to A64pilot and his good lady only they know. I think you all have given him good advice so far. It is not prudent to have a priveleged "conversation" on a forum.

Ann

What is a priveleged (sic) "conversation"? I don't want to make any assumptions about what you mean.

[TacomaSailor]

"First off, what you're describing is how you are basically trading your own funds. You're not doing what I did. I invested in a mutual fund (Magellan was the highest rated at the time) and concentrated on my work, and let them invest my money. They lost 66% of it in 2000, and when I cashed the rest of it out in 2012, it was still sitting at exactly $40K, no net gain since 2000. That was my experience, you can believe it or not.

Secondly, in your previous post you did admit that the stock market crashes of 2000 and 2008 hit you very hard, so hard that your wife went back to work. I'm sure you spent a great deal of time managing your funds after each of those crashes to recoup your losses. In essence, you were investing your own stocks, by selecting different funds. That's contrary to what most people do with mutual funds. People just dump their money in and let the fund manager handle the trades. "

I'm afraid the statements above show the general publics mis-understanding of “mutual funds” and contain many incorrect and erroneous statements.

Here is a brief description of mutual funds.

There are thousands of funds each of them have different goals, objectives, and intended consumers.

Fund objectives vary widely and wildly. Those objectives cover the spectrum of low to high on the following measures

- risk to capital
- income potential
- appreciation potential
- tax status
- speculative to fundamentals
- locale (municipal, state, federal, worldwide) of investment
- maximize beta
- minimize alpha

... and so forth!

Each mutual fund is intended for a particular type of investor and is ranked on each of the measures shown above.

Magellan may have been "highest" on one measure but low on many others. Depending on what were your objectives – Magellan might not have been the correct fund for you.

Fidelity Magellan Mutual fund (FMAGX) is a Large Growth Core Value fund as described by Morningstar but their risk chart does show a significant portion of the FMAGX is the highest risk category. Additionally, a 15-year history shows that FMAGX loses 15% more in value during a market downturn than does the average mutual fund with the same objectives.

Twenty five years ago I invested a great deal of money in FMAGX but it's management and performance changed. As we approached retirement we had less and less money in FMAGX. Now, I do not put any money into the FMAGX fund that I will need to spend during the next five years. It is a long term growth fund and you must be willing to let your money sit there during bad times in order for it to grow again.

FMAGX has shown the following gains – the number shown is the value on September 10, 2014 of a $10,000 investment made in the FMAGX fund on September 10 of the following years:

1994 $42,042 ($10,000 invested in FMAGX in 1994 would be worth $42K today)
2000 $13,375
2004 $18,074
2009 $18,246 (put $10k in FMAGX as the market rebounds - it is work $18k today!)
2013 $12,217

Those are rather nice returns, especially the 87% gain during the last 10-years and the 2nd worst economic downturn in US History.

$10,000 invested in FMAGX on 01/01/2000 would have been worth $9,172 on January 1, 2001. That is a big loss but it is not the 66% loss quoted above.

It is true that $10,000 invested in FMAGX in September 2000 would have been worth only $4,629 in September 2008 but would have rebounded to $9,600 in February 2011 and $10,000 in June 2013.

The bottom line is – You cannot just invest and forget in most mutual funds. Each fund has a particular objective and as your life situation changes the funds you invest in must change.

There are many “target year” funds that might allow you to invest and forget. For example, you know you will need some funds in 2017 so you invest in a fund that manage their investments to diminish risk and maintain more capital preservation as it approaches the target year. Many retirement planners suggest you use “target year” funds that mature in three to five year increments beginning with your anticipated retirement year.

My retirement funds, which provide much of our day-to-day cash) are invested in funds that preserve initial capital and generate income. Those funds will not grow as much or as fast but will minimize losses during economic downturns.

PIMCO Total Return (PTTRX) is a favorite of mine. A $10,000 investment in early 2000 would have been worth the following in September of each year.

2004 $14,808
2008 $17,337
2012 $25,944
2014 $26,459

PTTRX is slow and steady – I give up any hope for big growth but I know that the money will be there when I need it. I am always pretty sure I will not have to sell at a loss if I have an unexpected need for more cash than normal.

PTTRX only lost about 2% of it’s value during the worst of the 2008 crash.

We do not need to touch my wife's funds for another six to eight years so she uses more aggressive and risky funds such as Fidelity ContraFund (FCNTX). It soars and it crashes but over a period of five or more years it makes a lot of money.

A $10,000 FCNTX nvestment in early 2000 would have been worth the following in September of each year.

2004 $12,610 (it lost a lot in 2000 - 2001)
2008 $16,860 (it eventually went down to $11,733 late in 2008)
2012 $23,193
2014 $33,928

PTTRX held it's value during two bear markets but now FCNTX is about 25% ahead on total return since 2000. Take a risk - lose a lot if you have to sell or gain a lot if you can ride out the down turns.

We only spend about 20 hours every year or 18-months on our investment choices. That seems like a reasonable investment of time for peace of mind.

Sorry for the long dissertation but I just want people to understand that a little effort spent doing an annual mutual fund review, and careful matching of your investment objectives to mutual fund objective will yield happier retirees.