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My BF is a little older and smarter than me and he comes from a wealthy family, but his investing strategy doesn't make sense. He is doing well, but I've been reading about investing a lot and his strategies seem to not make sense.
1, He stopped contributing to his 401K and IRA, because he wants to focus on "hard assets." This means he misses out on an employer match of 5%.
Would it not make sense to see putting in at least 5% as doubling your money with the match and he should do it? Also aren't stocks the best for long term gains?
When I bring this up, he says that these online assets are more vulnerable to hackers and online attacks than people realize.
I don't know.
2, He does have 3 small homes all paid off - no mortgage on any. We live together in one and the other two he rents. This doesn't seem bad at all.
But...
3, He has lots of gold and silver coins and a few other coins. His dad has bought him a gold coin every Christmas and a handful of silver coins every year of his life. He has added to this pile of coins.
I don't get the attraction to collecting coins, because most of the coins are just the same tyes over and over again.
He has enough coins to buy another small home. His collection he says is literally worth over $150K, plus he has some money in the bank.
Well...coins just sit there and do nothing. Shouldn't he buy another home, which means rent income? (Or at least when Covid-19 stops)
When I bring this up it is clear that he has an emotional attachment to his coins, they are like a pet...and he says that home prices are in a bubble and will drop and coin prices are about to take off due to the government's money policies...so he can't quite ever sell them so are they really of value if you can't sell them for a small home to rent out and get income?
He says he will just build up more cash to buy his next rental and never sell his coins.
Am I looking at this wrong?
I am not trying to be critical of him, he is doing great, but every article I read online says he is going about things wrong.
Any insights?
He doesn't want anything tied up in 'virtual reality" as the computers could easily get hacked and it would almost end the world. He's smart. He invests in the tangible. 3 homes means he always has somewhere to live 150K he has barter opportunities. Gold goes up and down anyhow so he can always cash it in if he wanted to.
The 5% match? that seems like something he should do. Just consider it a good gamble maybe. Withdraw it earlier.
Hopefully one of his homes can be a homestead for him to become self sustaining if needed. If so, he's set. Grow his own food, raise cattle, etc..
Your boyfriend sounds smart, and given his results I wouldn't be too critical. Keep in mind most of the stuff you read online in the world of finance that you mentioned is not necessarily reliable information. So called "experts" in the field of finance are often on the other side of trades, and sometimes are purposely trying to put misinformation and disinformation out there. Bottom line is don't believe every article you read online.
We are heading into very interesting times. Hard assets will be key going forward. You can look at my calls on here and the results speak for themselves, but I do expect gold and silver to take a major hit going into the later part of 2020 into 2021. We are going to have the biggest deflationary bust since The Great Depression during this time frame and the dollar will be king. Stocks will take a massive hit during this time period as well.
Looking beyond this bust 2-3 years into the future, gold and silver will do very well because we will start to experience significant inflation. I agree with your boyfriend about home prices now. Buying now would be a terrible idea. Real estate has a lag and you will see much lower prices going into the later part of 2020 into 2021.
Your boyfriend is definitely on the right tracks with things.......
I will add to this, don't think of his gold and silver as "just coins." These hard assets are going to be a means to store your purchasing power as we enter a major inflationary cycle starting within the next 2-3 years. The dollar is going to take a major hit during this time-frame.
You sound pretty similar to him and your feedback makes me feel better.
Quote:
Originally Posted by FiveLoaves
Pay your Credit Card balance in full every month.
Thanks for the reply. We have ZERO credit card debt!
He hates debt and has zero debt not even a single mortgage on his three houses.
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Originally Posted by BeerGeek40
Rule number 1, and I've said this for all the years I've been here - is to live below your means.
I bought a very modest house and paid it off 7 years ago.
…..
The employer match is a very important item. Tell him to continue to contribute. But he may want to go more conservative with his holdings in his account.
He is extremely frugal and has bought all modest homes.
I will tell try to convince him to do the employer match even though he wants to do hard assets.
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Originally Posted by BigCityDreamer
The #1 rule of investing is: Do what works for you.
So, if he is doing great, then that pretty much says it all.
That is fair.
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Originally Posted by SaraR.
He doesn't want anything tied up in 'virtual reality" as the computers could easily get hacked and it would almost end the world. He's smart. He invests in the tangible. 3 homes means he always has somewhere to live 150K he has barter opportunities. Gold goes up and down anyhow so he can always cash it in if he wanted to.
The 5% match? that seems like something he should do. Just consider it a good gamble maybe. Withdraw it earlier.
Hopefully one of his homes can be a homestead for him to become self sustaining if needed. If so, he's set. Grow his own food, raise cattle, etc..
He is in computer security and thinks that there could be an attack on financial systems soon and it could be successful. I don't know though. But I will pester him a bit more on the 5% match.
If your 5% equaled 1000 and the match subsequently was 1000 so long as it vest immediately you could take it all out, pay 25-45% tax whatever your federal bracket is plus the 10% penalty and still come out ahead withdrawing 1100-1500 vs the 750-900 you would have received after tax on just your 1000
He just sounds like one of those old school guys who doesnt trust the government or financial systems. Keep in mind that all those gold coins could be stolen, and people would literally kill to steal those. I've never broken a law, but I would even consider stealing $150k worth of cold coins if given the opportunity and thought I could get away with it. Word spreads. Ask him to provide real life statistics that support that his investments in online brokerages could be hacked and stolen. I've never heard of it happening, or at least its rare. I would think its insured and the brokerage would be liable anyways. And it is stupid to not take advantage of employer match 401k. No way gold coins and hard assets will equal the returns he's losing from that. And home are not an investment. They have carrying costs and only increase in value at the rate of inflation.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,088 posts, read 7,562,936 times
Reputation: 9835
JMO,
Mostly correct most of the time is good enough in most cases.
Wrong in a minority of situations is permissible.
The matching is a small issue. It's not going to amount to much in his/your total asset base.
There are a lot of strategies to get from here to there.
Your BF rather put faith and believes his allocation & investments are good risks vs the Market of securities. The 5% match isn't much in the scheme of things.
Every investment as risk. Whether one investment risk is better than another investment risk is relative to the beholder.
disclaimer:
At one time we held Gold, physical bars. It took a long time to make money, but it did make money but not as much as being in the securities Market. We no longer hold gold or other precious metals.
We at one time held MFs. They did very well, until they didn't and we were looking at an abyss at the eve of retirement.
We hold deferred GLWB annuities instead. We may not make as much money as MFs but we sure wont lose either.
We also have rentals, about 40% of our income. Low leveraged.
We maintain relative small trading accounts & actively trade. I am down considerably YTD( I do the trading). The trading asset is an asset we can lose completely.
We are retired, live below our means and will be unfazed if the Market declines a whole lot more. And if the Market tanks, we will be the rich guys.
He stopped contributing to his 401K and IRA, because he wants to focus on "hard assets." This means he misses out on an employer match of 5%.
That is dumb.
Quote:
Originally Posted by QuakerBaker
Would it not make sense to see putting in at least 5% as doubling your money with the match and he should do it? Also aren't stocks the best for long term gains?
Yes to both.
Quote:
Originally Posted by QuakerBaker
When I bring this up, he says that these online assets are more vulnerable to hackers and online attacks than people realize.
He's incorrect.
Quote:
Originally Posted by QuakerBaker
He has lots of gold and silver coins and a few other coins. His dad has bought him a gold coin every Christmas and a handful of silver coins every year of his life.
Most likely, his father never reported nor paid the gift tax. Thus, the father was transferring assets to the son without consuming part of the lifetime gift tax exclusion. If that was what the father did, that's tax fraud.
But it happens.
Quote:
Originally Posted by QuakerBaker
Well...coins just sit there and do nothing.
That is correct. But they are a separate asset class and as a small part of a portfolio they can make sense.
Quote:
Originally Posted by QuakerBaker
Shouldn't he buy another home, which means rent income? (Or at least when Covid-19 stops)
That's a simple question with a very complicated answer. You have to look at his overall portfolio. It is possible that owning another house means he has too large a percentage of his total portfolio in real estate, which would be a bad thing.
Moreover, when you own rental property, you are operating a business with everything that entails and implies. Operating a business is frequently more risky than passively owning stock in a corporation that owns & operates rental property.
Quote:
Originally Posted by QuakerBaker
he says that home prices are in a bubble and will drop and coin prices are about to take off due to the government's money policies...
No one knows the future. It is exceedingly difficult to make such predictions with any accuracy in the best of times, and these are not the best of times.
Quote:
Originally Posted by QuakerBaker
Any insights?
From your comments, it seems he thinks he is doing things to control his risk; he seems to think a concentrated portfolio in precious metal and rental property is less risky than a portfolio balanced among several asset classes.
I doubt there is much you can do to change his mind on this. From my perspective, he is incurring more risk than he thinks he is. Perhaps encourage him to buy some tax-free municipal bonds to add to the portfolio.
JMO,
Mostly correct most of the time is good enough in most cases.
Wrong in a minority of situations is permissible.
The matching is a small issue. It's not going to amount to much in his/your total asset base.
There are a lot of strategies to get from here to there.
Your BF rather put faith and believes his allocation & investments are good risks vs the Market of securities. The 5% match isn't much in the scheme of things.
Every investment as risk. Whether one investment risk is better than another investment risk is relative to the beholder.
How would one determine that the match is a small issue and would not amount to much? The match and it’s growth in both my wife and I’d cases is what I would consider a substantial amount of money. I believe the matching totals 16,000 a year or so annually for us
Decades ago, my father sold his house in the United States and used the proceeds from the sale to buy several acres of land in a village of a Third World country. Everybody at that time told my father that doing this was very risky and he was absolutely nuts. Not a single person that he talked to thought it was a good idea.
Today, the value of the land has increased by many times. My father has made a small fortune off of it.
The moral of the story is - You have to invest in what YOU believe in and not pay attention to what others are saying. You can't be successful if you don't believe in your investment.
Decades ago, my father sold his house in the United States and used the proceeds from the sale to buy several acres of land in a village of a Third World country. Everybody at that time told my father that doing this was very risky and he was absolutely nuts. Not a single person that he talked to thought it was a good idea.
Today, the value of the land has increased by many times. My father has made a small fortune off of it.
The moral of the story is - You have to invest in what YOU believe in and not pay attention to what others are saying. You can't be successful if you don't believe in your investment.
But that doesn't mean it was a good idea. It probably was "risky" as you described it. The more risky an investment is the greater your return should be. The risk simply paid off as it should have this time, but he could have also lost it all. The greater the risk, the greater the return should be. That doesn't necessarily make it smart. It means he was playing the lottery.
But that doesn't mean it was a good idea. It probably was "risky" as you described it. The more risky an investment is the greater your return should be. The risk simply paid off as it should have this time, but he could have also lost it all. The greater the risk, the greater the return should be. That doesn't necessarily make it smart. It means he was playing the lottery.
No, it doesn't mean he was playing the lottery. It means that he had the foresight to know that it was a good investment and that land values would skyrocket over time.
The proof is in the pudding. Results are all that matters. "Theory" without results doesn't count for anything in investing, even though there are "experts" out there who want you to think otherwise.
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But I will pester him a bit more on the 5% match.
