need to take courses or something

Discussion in 'Finance, Investments, and Careers' started by BigRedRage, Apr 29, 2019.

  1. BigRedRage

    BigRedRage Reckless Contributor

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    So, I am at a point where I am saving heavily with the overall objective of waiting for some sort of housing correction before I dump money into real estate. The current home values are just too high and not worth the investment. At the same time, I feel like dumping all my money into my home could be a massive loss if the market corrects to as I do not really have the intention of staying in my house forever.

    So ultimately, I am at a point where I am just building and building savings and annually realistically, I am losing about 4% a year due to inflation. Now 4% on $10,000 is only $400 and long term, 4% of $100,000 is only 4 grand. I am filling the account at a much higher level than even 4k annually so while I am losing to inflation, I am still gaining steam.

    I looked at things like a CD but even a CD would only adjust my loss to 1% instead of 4% so it has some benefit but my money would also be locked up for 5 years.

    I also found high interest yield savings accounts a little over 2% therefor I would go from losing 4% annually to 2% annually so it is a little better and done with zero risk.

    So at this point I feel like I should do that or say screw it and go into stocks or bonds.

    Unfortunately, even with me being in finance and knowing a ton about finance, my experience is NOT in these sectors. So, even explanations I am given often come through a little confusing and big picture, taking a risk with the money scares the crap out of me. I like investing in real estate as I see it as a no risk market - if I buy at the right time. so for now, my strategy has been to simply build capital as fast as I can until that "right time" or better time comes along.

    I imagine there are courses around town that are done to review investing, bonds, stocks and more. I still think with full knowledge of stocks I still wouldn't enjoy the risk of them, especially because I do not have time to fully watch the market between work, 3 kids and etc. But then, paying someone to manage it when they could fail and lose money too just doesnt sound all that appealing. Losing $400 off each $10,000 I put away seems plenty safer.
     
  2. BigRedRage

    BigRedRage Reckless Contributor

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    I know several people are pretty invested in this. It seems that if I have the intention of using the money within 1-5 years, that I should not wrap it up in investments and I am really, really leaning toward just doing a HIY savings a over 2% instead of keeping it in my wells fargo at less than 1%. Then at least I am cutting the inflation rate loss from 4% to 2% and losing less money while I wait for the chance to pounce.

    Yeah? no?
     
  3. BigRedRage

    BigRedRage Reckless Contributor

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    I am even finding 2.4-2.5% yield accounts.
     
  4. azmike74

    azmike74 Registered

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    I don't want this to be seen as advice, but I would like to give you some things to consider that may help you make the best decision for you.

    First, you may be over-estimating inflation when you mention 4%. I think it is lower than that and if you could determine the true rate, it may ease your mind about how much your cash is "depreciating".

    Next, I tend to agree that if you want the cash within 5 years, you're best off keeping it as safe and liquid as possible. I've read about "laddering" cds. https://www.investopedia.com/terms/c/cd-ladder.asp I like the concept as it keeps some liquidity while providing a small, safe return on investment but it may not work for you as you have mentioned that you value access to the money should the real estate market drop. I suspect this won't be as liquid as you prefer.

    Maybe short-term municipal bonds are what you're looking for. To my knowledge, these are some of the safest investments an investor can make, but I am not educated enough to be able to inform you of any negatives associated with them. I assume that there will be tax implications based on how you buy and sell so you'd need to do some research in order to see if they would fit your plans.

    Good luck on whichever path you choose, and I hope to hear your decision and how it works out for you.
     
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  5. BigRedRage

    BigRedRage Reckless Contributor

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    It appears those can grow at 5% of tax free income where corporate bonds are 7% and not tax free. This seems like a good way to lock away money but still for a longer term as they do have to age prior to withdraw to avoid penalty.

    I have noticed that certain high yield savings have say, a 25k minimum where it might not be terrible to do a minimum about in HY savings and then allocate other funds into short term bonds.

    Good food for thought. thanks.
     
  6. BigRedRage

    BigRedRage Reckless Contributor

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    it looks like we have been 2.1% or less inflation the last 4 years so at least locking my emergency fund into one of these accounts will keep pace or exceed inflation for the most part until it is needed or not.

    upload_2019-4-29_14-38-59.png
     
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  7. dscher

    dscher Registered

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    Imo. I think real estate would most definitely be a good place to be once the next recession/depression hits. Personally I would play it just like 2008/2009 and wait till that year after and that was pretty rock bottom for prices, at least for the az market. I work with technical analysis and I'm nervous about what the charts are signaling for the next crisis. But we shall see if the fed comes to the rescue once again with some easy money.. then the real inflation will pick up. I think physical gold could also be a great hedge against inflation and the dollar. The charts also looks promising long term. Bonds can also be a great place for safety. Munis will get you the lowest return but with less risk. I personally believe the charts right now for long term bonds and short to intermediate term bonds look just as good as Gold. Those two would be my recommendations until our economy and markets have stabilized. Stocks, even with the recent run up are screaming over bought and have alot of uncertainty right now..I would NOT throw big money at this current market place.. but this is Jmo. Good luck.
     
  8. crisper57

    crisper57 Open the Roof!

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    I am like you. Have a finance background but not in stocks and bonds. Found this series of free tutorials on the subject and was able to incorporate it into my own knowledge base to confidently start managing my own financial assets. There is lots to unpack in this, but it has been an invaluable resource. And I'm like you, I don't have time to watch the markets all the time. The beauty of investing like Warren Buffett, is that you put in a lot of work up front, but you do so with the idea that you are never going to sell the asset. Set it and then do not watch the daily swings. I've done this for three years and I've had returns slightly better than investing in a S&P ETF or large cap mutual fund. No telling how I'll do when a downturn comes, but for now, it seems to work.



    https://www.theinvestorspodcast.com/warren-buffett-investment-strategy/
     
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  9. BigRedRage

    BigRedRage Reckless Contributor

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    Much appreciated. This will be something good to come back to for a drive to mexico or something, throw on the podcast and make my 4 hour drive seem much shorter.
     
  10. dscher

    dscher Registered

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  11. Folster

    Folster The system doesn't work.

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    You should check out a couple ultra short term bond ETFs. Two that I like are GSY from Invesco, formerly Guggenheim and MINT from Pimco.

    Both are yielding slightly more than the risk free rate and online savings accounts.

    The downside is that they are not FDIC insured. However, they are well diversified, very short term so not negatively impacted by rising interest rates, and they are actively managed.

    They're management fees are a little high, .25% and .42% respectively, but they have good track records.
     
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  12. Yuma

    Yuma I NEED a job!

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    Just some food for thought on the real estate front. We would need quite a big recession to bring housing prices down in Phoenix right now. I just read a report that says we are the fastest growing area in the nation, period. More people are moving here than any other place in the nation. That's a high demand on the housing market. Have you been noticing prices climbing steadily overall since the last recession?

    We are due for a correction in the stock market, etc. The bond market has been signaling that we should be having a correction. The last big 1.5 trillion tax cut let a lot of corporations buy back stock at record levels. That had to keep the market afloat somewhat.

    I am just not sure our real estate market will suffer that much during a correction, since I am not sure where people will move to for jobs from the Phoenix area. Last recession I knew people that moved to North Dakota for the natural gas jobs. Every recession is different. My rambling point, is I hate to see you eventually buy at a higher price down the road while waiting for a real estate correction that doesn't come. If you feel you are going to move after buying a house that soon, maybe buying a house in general is not the right move for you.
     
  13. dscher

    dscher Registered

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    Exactly. This is spot on. Imo. Bond market gets it right way more often then the stock market. They are the ones screaming recession right now and the ones to be paying attention to.

    The only thing I'll disagree with is this only being a correction. I believe we are in the beginning phases of a secular bear market. Like the dot com bubble..but only more pronounced. This will be the everything bubble. Because every sector of the global economy will be hit hard. Imo.
     
  14. BigRedRage

    BigRedRage Reckless Contributor

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    The market is already out of investment potential, I expect it to slide 100%. We will see though. With investors already backing out, home sales should already be sliding in the demand arena.

    I already own a home. This is investing, not personal pleasure.
     
  15. Yuma

    Yuma I NEED a job!

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    Lots of new home construction in Laveen, AZ. They seem like they are selling. When we were looking there was not that much on the market. Especially on the lower end.
     

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