Is worth drilling down on a bit. Like there may be other investments that outperform the stock market, but aren’t able to be done from a retirement account. If the housing market crashes in the next 12-18 months, and the stock market doesn’t, I could definitely see the return on a rental property crushing the S&P bt a big margin over the next 20 years.
I think this is a good time to be open to alternate strategies, whether that be different allocations in equities (more emerging markets perhaps), eschewing traditional strategies for real estate, or other alternatives.
For most the increased time involved may not be worth it, but it’s worth considering.
This isn’t really a head wind to total market growth though. Companies are entering and falling out of the S&P 500 all the time. Companies are merging and acquiring all the time. Even if the total market does great, you’d expect some companies and whole sectors to do badly or fall out of the index altogether.
Sure. Diversification is a good thing. But there is an absolute ton of uncertainty in alternative investments (real estate, infrastructure, private equity, etc.). I am not dead set against them, through my employer sponsored plan I hold a little bit of all of them, but if someone is thinking “oh no the US economy is losing it’s power and climate change is a real risk so I think stock returns will be bad going forward” it’s not like “real estate” is some magic bullet that evades all those risks. It is subject to those risks and others. As is infrastructure and commodities and everything else.
most companies will reap the benefits of buying cheap energy from renewables, rather than fossils. pure fossil plays like exxon will get hammered over the long term from their exposure, but in reality that’s going to be a long term transformation (and possibly consolidation) in that industry, much longer than even 10 years. i doubt they will crater because of the shift to renewables. they will crater if they continue to deny reality
It should be but you have to be extremely careful. My understanding is you have to have funds inside the qualified account for all repairs etc. If you spend a penny of outside funds on it you lose the preferential tax treatment. I rarely encounter this stuff, but I’ve seen it a few times.
Yeah that definitely makes it tricky, but assuming the rent flows into it, that helps a lot. Of course, the wealthy get such preferential tax treatment on real estate it’s probably a sucker move to waste IRA space on it.
I don’t own my house as an investment, I own it because I need somewhere to live. And when I pay off the mortgage it will be a very cheap place to live that I can continue to occupy even if I go bankrupt. The only entity that can kick me out is the city, and it’d probably take them close to a decade to do it.
Yeah, most people have made big net worth gains through their own home, but it doesn’t compare well as a pure “investment” vs. some securities sitting in an account. Although most people think of their own home as an investment, when I think or real estate investment I think of either direct ownership of property for income (rent) and capital appreciation, which makes it easier to compare to owning a stock or a fund.
Yeah I look forward to hopefully being in that situation in a few years. Right now we’re a single income household, when my girlfriend finishes school and starts working and we keep our spending the same, we should be able to start gaining ground pretty fast.
You can just purchase short term treasury mutual funds or ETFs at your brokerage. Look for “average duration” of right around 6 months. It’s not quite the same as buying treasury notes, but they pay roughly the same and it’s a lot easier to buy and sell when you want to.
So much this. Own my home free and clear and it will probably never have any resale value. But it’s the best “investment” I’ve ever made, as this has freed up cash to invest, bolster my savings, and travel, all while living well below my means while continuing to enjoy a nice lifestyle.
