I'm hardly surprised that a trailer dweller like yourself treats the OBVIOUS as if it were rocket science.
How the wealthy allocate investment
- Thread starter The Dude
- Start date
I'm hardly surprised that a trailer dweller like yourself treats the OBVIOUS as if it were rocket science.
Frank Booth
New member
The statistics about what wealthy people hold in assets is misleading because it doesn't account for how people made their money to begin with. For example, if someone made their money as a movie star, they are unlikely to buy an apartment complex.
There are many different ways to make money in real estate, you have obviously seen too many commercials about flipping houses (dumbest thing ever to do) and think that is what it is all about. I will leave you and Toppy to your delusions of grandeur, because you don't know anybody
My friend, this was a thread about how the wealthy allocate assets, not how the middle-class over-leverage real estate loans. You are spot on in questions "how" people made their money to begin with, and I somewhat addressed that previously - those who are wealthy have most of their "wealth" in some form of equity in an ongoing business. I believe the majority of the "low millionaires" are small business owners, as that is perhaps the purest form of equity (and one of the most illiquid). Somewhere higher on the list would be Partnered professionals (lawyers, consultants, doctors, etc.) who own a tangible part and claim to an income stream of a private business, and can "cash out" their share for some "serious coin". Higher still would be business executives, who are commonly paid in giant blocks of stock options as incentive-based compensation - another form of acquiring "equity". The key here is that most millionaires (who did not inherit) get so via equity-based compensation of some sort, and grow that excess wealth quite larger by investing (to be honest, after $300K, most people live a similar lifestyle).
At some point, your acquired equity grows quite large, and if not bound to a retirement vehicle, it begins the exponential climb of compounding interest. If there is anything I can convey to you, it is that when your pool of "money" gets that large, you need to diversify your investments. It is not a bad slogan from a ScottTrade newsletter, it is simply math aimed at reducing variance and controlling diversifiable risk. I could walk you through the math, but it would be easier if we just nodded and said "it works".
Which is the whole point about real-estate. Let us be frank - 75% of the people in real estate are there because they could leverage access to capital far beyond what their income or net worth would ordinarily permit. Nearly anyone with a pick-up truck, a hammer, a keen eye for main street, and perhaps with a downtrodden real-estate agent friend or two can play that "game". It is a singular investment class, especially when we are talking about low-end residential or commercial properties. REITs and plenty of other investment vehicles "own apartment complexes", bundle them as an investment, manage cap rates, predicted returns, and often sell for the property gains. I have a small part of my money in such investments - and I leave it at that.
If I had $100, though, tossing that all into a claim towards inbound apartment rents would not make mathematical sense - I would probably want to put at least $60 or so into a claim on actual corporate profits from companies that make things. Perhaps I would want to be a creditor to some of their loans (hence fixed income). Toss is some commodities, government debt, cash, wacky side investments - that is how I would want to spend my $100.
But if I only had $5, and a bank would lend me $95 only on the condition that I buy a house or condo, I really do not have a choice, do I? I am a dude with $5 playing in a world of people with $100. If you are wealthy, you do have a choice. That is why less than 20% of the wealth I mentioned is parked in real-estate. It has nothing to do with being a movie star, it has everything to do with if you actually have wealth to invest or if you are borrowing that wealth and making up the difference with manual labor. I don't know many executives who take time off from work to install rain gutters on their investments to get that extra 1% return. Generally in life, you make more money with your head than your back.
Still reliving the third grade I see. Moron.
MAGA MAN
Let's go Brandon!
U going gay again, what a surprise.
Do you ever go by preacher
Leonthecat
Racism Watchdog
Right is a compulsive liar and very childish.
Frank Booth
New member
Mott,
I think your strategies are excellent - realistic and prudent for your goals. Always take the free money from a company - it is part of your compensation. Pay your mortgage and take the IRA tax advantages. And remember, free investment advice is what it is worth - so take everything online with a grain of salt.
To give a very simple answer, I would, over time, try to invest in some low-fee, non-IRA vehicle that is roughly 70% equities and 30% fixed income (of those equities, I'd put about 5-10% in REITs - it is like real-estate done by smart people). Pick it yourself. Don't pay some 2.5 GPA student to manage it for you. Re-balance it about 4 times a year, but don't EVER become some day-trader moron gunning on your own (lest you become part of what those in the IB world call "the stupid money). Understand what your funds are invested in, but don't try and get too "clever"- so many trillions are made taking money away from the "clever" each year.
What does this mean? Invest as much as you can in it over time, continually put money in good times and bad, don't touch it, don't pay unnecessary fees. Let time do the rest. You will be tickled pink where it takes you in 10 years, and you might actually find yourself at a "next level" shortly thereafter (accredited investor status, which "unlocks" some pretty cool opportunities).
Legion Troll
A fine upstanding poster
How's his PE?
canceled.2021.1
#AMERICAISDEAD
Actually I don't necessarily disagree with you. I started with modest means and my first foray into real estate started with buying a duplex and renting out the other side which essentially paid my mortgage for me allowing me to live rent free. Actually worked out pretty well. Eventually, I moved out of that and rented out both sides. Over time, I invested more and more here and there. It really isn't that complicated and I have made my share of mistakes, but I have learned that there are three key elements to being successful.
1) Is knowing the cap rate of the property in question (you already mentioned that)
2) Knowing that you make your money on real estate when you buy, not when you sell
3) Knowing that there are many different ways to structure a deal that don't involve banks. For example, I am a big fan of owner financing. The key is understanding the needs of the seller.
I don't say that stocks aren't a great investment, lots of money can be made there. However, my particular problem is the tropes that are passed along to unsuspecting folks in the public. The first is the notion that "the stock market averages 10% a year". My problem with that particular slogan is that it implies that there is safety in stock and that you can't go wrong if you just buy it and hold it. Yes, the number is accurate, but it doesn't take into account an individuals particular horizon. It matters when you buy and when you sell. Which gets me to my next problem with the so called professionals and their "buy and hold" advice. I am not advocating trying to time every gyration of the market, but there is never anything wrong with taking a profit.
Of course I guess everyone could do what The Dude does and make 10,000 trades a year. Of course that is what he claims. I know it isn't true, but he is prone to exaggeration
canceled.2021.1
#AMERICAISDEAD
Ahhh the set it and forget it approach.
You know it is kind of funny. If all people have to do is put their money into SPY and sit on it, why is there even a need for financial advisors? Seems like a pointless career to me
MAGA MAN
Let's go Brandon!
What
canceled.2021.1
#AMERICAISDEAD
He should just get a job with Chevron and walk away with a hefty pension. Be honest that is how you built any wealth you may have. Don't get me wrong, there is nothing wrong with it. Just be honest about it and stop passing yourself off as some Warren Buffett of JPP
Tell us again how you make 10,000 trades a year
canceled.2021.1
#AMERICAISDEAD
Oh and for the record, I agree with just buying SPY and that's it. This whole thing of buying midcaps and small caps and international funds is bullshit in my opinion. I laugh when people call that diversification. It isn't. Diversification is buying different asset classes. As mentioned before buying REITS is a great way of investing in real estate.
What I advocate is learning a little bit about the market and volatility and don't be afraid to take money off of the table if you think the market is taking a shit. You don't have to time it perfectly. But you don't have to give away profits either. Kinda like you are doing right now with your oil stocks. Too bad so sad for you.
First off for threedorks benefit
Spy is the symbol for the s&p 500 etf
You are basically investing in the 500 biggest companies. Fee are way cheaper than mutual funds.
75 percent of professional money managers can't beat it.
So
As for me, I was very lucky to have engineers like you make so much. That is true
I did however invest 20 percent for over 25 years.
Probably half in chevron, now Exxon.
I managed money for several accountants in the late 90's for 5 years. They made 25 percent average annualized over 5 years. I stopped and cut them checks before the y2k ish crash. (They though I knew it was coming). But I stopped due to being a SAP project team leader in Houston.
Since retiring this year is the first I haven't made more in stocks than my final year salary.
Spy is the symbol for the s&p 500 etf
You are basically investing in the 500 biggest companies. Fee are way cheaper than mutual funds.
75 percent of professional money managers can't beat it.
So
As for me, I was very lucky to have engineers like you make so much. That is true
I did however invest 20 percent for over 25 years.
Probably half in chevron, now Exxon.
I managed money for several accountants in the late 90's for 5 years. They made 25 percent average annualized over 5 years. I stopped and cut them checks before the y2k ish crash. (They though I knew it was coming). But I stopped due to being a SAP project team leader in Houston.
Since retiring this year is the first I haven't made more in stocks than my final year salary.
canceled.2021.1
#AMERICAISDEAD
It is posts like these that do Threedee a disservice. Bragging about the 25% annualized return at the end of the 90s isn't a realistic comparison. You really didn't have to know much back then to make money in the market. Everyone looked like a genius in 1998.
Mott the Hoople
Sweet Jane
That would describe me and the misses. We could definitely afford a larger home and nicer cars but there's only the two of us and our condo is cozy and quite nice and we live less than 5 miles from work. With me commuting to work about half the year I'm only driving about 3 to 4,000 miles/year. In total we both drive less than 10,000 miles per year combined. So I don't see any reason to spend a lot of money on our cars. I own two subcompacts. One is paid off and the other will be paid off next year. In fact my bicycle has more resale value than my 2006 Ford Focus. However, that Focus only has 95,000 miles on it and is in great shape and will probably last me a long time.
I have to admit though....Ford is going to start selling the Focus RS in the US this year and I'm seriously considering pulling the trigger on one.
Mott the Hoople
Sweet Jane
Well you're one of those socialist on the government tit so I'd tell you to max out on your companies 401K match before doing anything else but that don't apply in your situation, does it?
