Tangible Assets

[sweeps]

ctb, you always have the option of buying real estate outside of a retirement plan. In fact that is often the preferred way to do it because real estate comes with its own tax benefits.

[tripods68]

I may be the biggest stock bull on the forum, but I have to respectfully disagree.
Practically speaking, if a company fails, a stockholder is left with absolutely nothing. (Not even a certificate anymore since everything is electronic. )

I believe you can still electrornically request a stock certificate mail to your address for a fee. Isn't that tangible asset?

[checkthebudget]

Not to be crude..., but a certificate would be about as tangible as toilet paper... Dirt and lumber would be much more appealing.

[LuxLiving]

But then there are those nasty sink-holes, earthquakes, plate shifts, tornadoes, hurricanes, not to mention termites, fires, etc.

Maybe you should look at precious metals?? But then again, there are those gun-toting criminals out there who want your goodies.

If real estate twists your nobbies, then go for it. Most things in life carry some inherent risk. You've just got to decide what you think the risk ratio is in comparison to your tolerance for it.

Although this post was composed somewhat with my tongue in cheek, IMHO, I don't think assessing your risk tolerance is a comical matter. Asset allocation is very important and your 'pucker-factor' is rightly to be consulted BEFORE you invest in anything.

[sweeps]

Another thing that isn't discussed much is the true cost of ownership. If you buy an index fund from Vanguard within an IRA account, you pay $2.50 or less per year on a $1,000 investment. That's it. To sell it or buy it, you simply click a button on a web site. Piece of cake.

Real estate is a different matter. You incur a cost to buy it, you incur a cost to sell it, and you incur a cost to hold it (insurance, taxes, maintenance and upkeep, etc.). These costs can be substantial.

Other hard assets are similar -- if you like gold, for example, you incur a cost to store it, and someone often gets a cut whenever you buy and sell it.

[Broken Arrow]

Real estate is a different matter. You incur a cost to buy it, you incur a cost to sell it, and you incur a cost to hold it (insurance, taxes, maintenance and upkeep, etc.). These costs can be substantial.

This is an extremely important point when considering real estate as an investment! I didn't mention it here, but have in the past as something to be aware of. When you think about it, taxes, insurance, and homeowner's fees amount to quite a large expense ratio. And if you hold a mortgage, you're also sort of trading on margin. And if that isn't bad enough, this is hardly the time to get into the housing market IMO....

Granted, the story is different when the property also doubles as your primary residence (such as living there yourself while renting spare rooms out). In that case, it may be worthwhile, but not everyone is in that situation or can consider that as an option.

[checkthebudget]

expenses

Excellent thoughts sweeps. The differences in expenses are quite significant. With real-estate, we often just think of the buying price and selling price and not all the expenses that will be incurred along the way. The index fund would certainly be a lot less hassle wouldn't it.

[checkthebudget]

Just found this fascinating article about 401k vs Rental property. It give some interesting things to think about in the comparison: Will you ever put a penny in your 401k again? « How to Make 7 Million in 7 Yearsâ„¢

[noppenbd]

Just found this fascinating article about 401k vs Rental property. It give some interesting things to think about in the comparison: Will you ever put a penny in your 401k again? « How to Make 7 Million in 7 Yearsâ„¢

Very interesting post. I read the article and checked some of the math, which seems to look actually very good. Anyone with experience in rental properties that can vouch for the assumptions made? The poster assumed 5% rental rate (I think that is 5% of the value of the property=yearly rent). He also assumed 25% of the rent goes to expenses (aside from mortgage), is this reasonable?

[ea1776]

What are the funds offered in your 401(k) ?

Stocks are the best long-term investment. Try a solid mutual fund with a low expense ratio, or an index fund, like S&P 500 index fund.

Good luck!