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I lot of investors are buying rental properties with the belief that the sh#t is going to hit the fan and the stock market will collapse. Yet these same people think their tenants are going to continue paying them rent while this financial collapse occurs.
You might be able to weather that scenario if you paid cash for your rentals but those that are leveraged up to their eyeballs on these rentals are going to go bankrupt under that kind of economic meltdown.
Disagree. You gotta live somewhere. Not saying that all rental areas are good - but did rents go down in 2009?
I'm getting very frustrated with the ups & downs of the market. I'm 43 and have nearly $200k in my 401. Is there an investment offering out there that "guarantees" a 5% annual return? I know that may be ambitious and I know the guarantee part will probably make this impossible, but wondering if anyone has any thoughts.
My feeling at this point is if I can find a relatively risk free investment that offers this kind of return, I would move all of my retirement savings to this.
Well, you aren't guaranteed to make 5% each year, but if you go 100% equity and don't retire until 70 or so, you have a virtual guarantee of making at least 6% annualized (i.e. there has never been a period that long in history that didn't perform that well.)
Three caveats - first, avoid mutual funds with expense over 0.5% per year - if necessary, roll to an ira to get away from toxic high-fee funds. Second, DO NOT SELL if you see the value tank. SIT TIGHT....it will come back up and then some. Third, diversify across sectors (construction, consumer retail, energy, housing, etc.) , capitalization (small cap, mid and large), and countries (domestic and foreign), so if one part of the market performs poorly, the others can make up for it and then some.
that guaranteed equity return may be no longer historically represented .
we never had conditions going forward in the equity markets as we have today so you cannot historically compare any time frame.
in the 146 years shillers data goes back we never ever had conditions of high stock valuations and historically low interest rates at the same time , a bad combo going forward.
for 13 years we had next to no progress. stock dividends and interest rates are related and since rates are low dividends will be lower than historically and they alone account for 33% of the markets returns.
historically if markets fell 15% a 50/50 mix was whole again in 2 years.
it can be many many years before even a 2% real return is a sure thing .
nothing is a sure thing anymore as the new normal is very different.
i am a guy who believes in equity investing too as i was always 80-100% invested up until the last few years as i get ready to retire but i think the new norm may be very different from the past data we saw..
Last edited by mathjak107; 11-24-2013 at 05:26 PM..
Wonder where the OP is today compared to 2011 when he had $200k in his 401K. Hopefully he rode the wave because it's been a good one for several years now.
IF there were any such thing at a guaranteed return in an equities and IF I had to put some money somewhere, I'd go with ContraFund. I have and continue to be heavily invested in this fund going on 15 years now. I'm a Will Danoff believer and trust him.
that guaranteed equity return may be no longer historically represented .
we never had conditions going forward in the equity markets as we have today so you cannot historically compare any time frame.
in the 146 years shillers data goes back we never ever had conditions of high stock valuations and historically low interest rates at the same time , a bad combo going forward.
for 13 years we had next to no progress. stock dividends and interest rates are related and since rates are low dividends will be lower than historically and they alone account for 33% of the markets returns.
historically if markets fell 15% a 50/50 mix was whole again in 2 years.
it can be many many years before even a 2% real return is a sure thing .
nothing is a sure thing anymore as the new normal is very different.
i am a guy who believes in equity investing too as i was always 80-100% invested up until the last few years as i get ready to retire but i think the new norm may be very different from the past data we saw..
This is precisely why I said to diversify. Your analysis is based only on one country and only on the large caps. If you look at the larger picture there is nothing really all that crazy going on right now in the overall equity markets.
oh yes there is a problem now , show us a point in time where rates are zero and stocks are fully valued. you can not .
the problem is that is a hellish combo for future gains for quite a long time going forward.
Rates are not zero everywhere - so yet again, the analysis fails to consider the other parts of the world (which have 96% of the population, of course).
International bonds have taken a bad hit . We dumped most of them at this point but we did lose money in them this year. we moved back to equities and have since recovered the losses.
Spreads have been growing because the bonds values have been taking a hit . the international bond market is very risky. with world rates having no where to go but up the out look is no better than here.
almost every industrialized nation has historically low rates .
International bonds have taken a bad hit . We dumped most of them at this point but we did lose money in them this year. we moved back to equities and have since recovered the losses.
Spreads have been growing because the bonds values have been taking a hit . the international bond market is very risky. with world rates having no where to go but up the out look is no better than here.
almost every industrialized nation has historically low rates .
'Bond values taking a hit' is the same thing as 'interest rates rising'. It'll happen everywhere once investors start demanding more return.
Over the long run since a drop in prices now means your reinvested dividends (or interest) can buy more shares and increase your dividend income over the long run, a market crash after you buy actually is a good thing IF you will hold for a VERY long time such as 30 years. Of course, it would be even better to buy after a big crash, but not at the expense of having your cash eroded by inflation while waiting for a crash that may be 10 or 15 years away...
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