Need some investment advice, what good plan?

[ezbtr]

Just starting to get my finances (divorce, CS etc) together, have a 6% matching 401K at job and some small savings - I need to pay off some OLD bills as well. I'm going to refi again to get old debts down need to payoff truck maybe 30K all together, whats next best step? Boy would I like to be able to buy a modest house here! (N. CA.)Thanks, Heinz

 

[Drowned Rat]

Re: Need some investment advice, what good plan?

Sounds like you've got it all worked out. If you're looking to put more money into savings, up your 401k contribution. Tax deferred money at compound interest is still the best deal going. Look at IRA's only after you max out your 401k.

 

[RubberFrog]

Re: Need some investment advice, what good plan?

Max your 401k and work on paying down old debt. There is no point in investing in an 8-9% market when you're paying CC debt or high interest consumer loans.

 

[RubberFrog]

Re: Need some investment advice, what good plan?

Also, be sure to reevaluate your 401k diversity and growth strategy. Stay away from bonds and other "lend" type investments with low returns.

Rolling debt into the house often sounds good, but can some times be a dangerous cycle where you roll short term debt into long term debt only to repeat the cycle in five years. Despite everyday "wisdom," housing returns only 3-4% annually over the long term. It's better to minimize your exposure to real estate.

 

[JB]

Re: Need some investment advice, what good plan?

I don't disagree with the suggestions above, but they overlook raw land in the right place.

We bought The Hideout in 1990 for about $60K. It is now worth about $600K. You do the math. One caveat: Real estate is not liquid. You can't just withdraw what you might need or want. Refin is a deep hole with home prices so volatile. It is like borrowing money to buy equities.

 

[OldMercsRule]

Re: Need some investment advice, what good plan?

I can't give investment advice, as I'm no longer registered. N' big brother could crush me for giving advice over the internet without the total inteview with a full disclosure of all pertinate factors I always required prior to any advice in me past life as an investment professional. That said: JB is looking in the rear view mirror, (and he is very right about the trip over the last 17 years in many parts of the Country). He also had some very valid points in a post about his very impressive investment philosophy several months ago, and I would never second guess someone as sucessful as he seems to be. That said: I really really like Rubber's advice on this thread!! JR

 

[RubberFrog]

Re: Need some investment advice, what good plan?

Raw land can be good if you're in a future growth area. Land tends to go up while the building goes down. If I were putting money into real estate simply to sit on it, I would by land (without a building).

 

[OldMercsRule]

Re: Need some investment advice, what good plan?

Raw land can be good if you're in a future growth area. Land tends to go up while the building goes down. If I were putting money into real estate simply to sit on it, I would by land (without a building).

Totally agree with the factual basis of this statement. The next seventeen years are likely going to be very different then the last seventeen years. Raw land investments are the most risky investments one can make in real estate, and if ya hit it right, the biggist returns!!!

That relationship holds for most things one can invest in: higher risk (if properly taken): higher potential reward!! That said: developed property does require mantenence and insurance but can generate rental income which pays the freight BIG GOVERNMENT exerts on all land, ('cept reservations et al).

RR island was purchased many moons ago by my Mom and Dad, the value is hard to tell these days and I would hate to speculate, but it is substantial, with only a couple of 'cabins' with two gravity septic systems on it, so it is still primarily: raw land. The taxes in 1956 were less then $1.00 and I hammered the County in 1993, (at a cost of over $10,000 in attorney fees alone) or the taxes would be north of $20,000 per year today. I don't have shore power or shore water, n' they have not built a bridge yet so I figure they are chargin' for the air I breath.

Therein lies the problem with raw land: you pay Big Government 'rent' fer the privledge of ownin' it. Usually on 'developed' land someone pays you to stay there. That also makes it easier to value developed land, (as commercial or multi res), is valued as a function of the net cash flow. My $.02 JR ps: One more after thought: JB is in Texas, (a rather large place that is MUCH bigger then most states the rest of us live in and has a much lower tax appitite, (in many areas of the huge state relative to other states). If ya live in a very Liberal area near the water (like I and many of us do), any hard asset the local Liberals can tax is very VERY vulnerable to the problems I mentioned with RR island. Bottom line: part of JB's investment philosophy I found sooo impresive was his intentional choice of locations for some of the reasons I just stated.

 

[RubberFrog]

Re: Need some investment advice, what good plan?

"Raw land can be good if you're in a future growth area.

Totally agree with the factual basis of this statement. The next seventeen years are likely going to be very different then the last seventeen years. Raw land investments are the most risky investments one can make in real estate, and if ya hit it right, the biggist returns!!!

I couldn't agree with you more. I have should have put more emphasis on the hypothetical "future growth area." I hold no raw land in my portfolio and I do not recommend it to others. I am exposed to some real estate via a mutual fund that maintains real estate holdings. All of its investments are commercial and look strong. You've gotta mix in a little risk here and there....

 

[RubberFrog]

Re: Need some investment advice, what good plan?

Commodities are also something to consider. They make a nice hedge against falling real estate and stock prices. But it's tough to know when to buy them. I like to hold a few commodities through the back end of a growth cycle and into the beginning of a recession. I think we're approaching the back end of the current growth cycle now. It's not over yet... but the idea is to make your move in advance.

 

[OldMercsRule]

Re: Need some investment advice, what good plan?

Commodities are also something to consider. They make a nice hedge against falling real estate and stock prices. But it's tough to know when to buy them. I like to hold a few commodities through the back end of a growth cycle and into the beginning of a recession. I think we're approaching the back end of the current growth cycle now. It's not over yet... but the idea is to make your move in advance.

Spot on Rubber, anyone who underestimates yer intelect jus' 'cause yer flatulant n' very funny is in fer a big surprize. Generally 'commoods' head south, (n' you can profit from the short side) when the world's economy peaks in past economic cycles. The world is so tied together now, (that is why I stated it that way), rather in terms of the just the USA. With China keepin' their currency artificially low and buying a large part of our t-bills, notes n' bonds that is the BIG DEAL to keep yer eyeballs on, (from an investment perspective: and VERY SPECIFICALLY: COULD HAVE A VERY LARGE AND SUDDEN IMPACT ON COMMOD PRICES, especially commods the USA cornsumes like: oil), and well as the pending HUGE demographic peak I have mentioned here from time to time. There is only one real choice in the world as far as currency for the bulk of transactions, and that allows us to make very stupid political decisions or non-decisions about Social Security and irrational nanny state politically driven transfer payments n' welfare programs we could not make if our credit were not soooooo good. That all said: as anyone reading Rubber's post should see by readin' n' ponderin' with at least one brain cell: a carefully hedged diversified portfolio with some spikes, (over emphasis in certian sweet spots) in areas of opportunity fer the real bang fer yer buck. If yer situation is a bit more modest then Rubber's the 401k/debt advice he gave is priceless. JR

 

[RubberFrog]

Re: Need some investment advice, what good plan?

Aww shucks... yer sweet.