Lost $53K in the market downturn

[LivingAlmostLarge]

Scallywag I think you think you know everything. And you do about your situation with your son. But trust me we can give financial advice unbiased. Fwiw there are many people on the board with special needs kids so don't assume because people have their act together their life is perfect. I have iep for both my kiddos and it hasn't been easy for either.

First low hanging fruit is buying a home with 10% down. I might tell you do it this summer. I might tell you to rent a house long term. Why? Because it depends. Depengds on how much are you paying for rent? For an apartment? Or house? What size? What would it cost to rent the house your are planning on buying? How much will it cost to buy?

The numbers for rent and then the numbers for buying can help us tell you to buy asap or rent longer. Or maybe rent a house long term. Why because renting isn't just apartments or condos. You can rent houses and sometimes it's worth the extra money.

Second I don't think you should even be considering 80/20 if you panic sold. How much was your entire portfolio? What were you invested in? What mf and etf and stocks? If you don't want to give a dollar amount do percentages.

I think you need to really reflect on your risk. If the stock market drops 30% would you sell again in a panic? I think if the answer is yes then 80% is still too high. It sounds like you are looking for high return and no risk. It doesn't exist. I bet you don't want to lose any money you "invest". If that's the case you should invest in stocks but at a lower percentage.

I gave an example of how peollp do risky things and I wouldn't judge if you chose to buy with 10% down. But I do think it helps to write all options and look over numbers of buying and renting and even buying now instead of later. Or renting long term a house.

Some areas like SF it rarely makes sense to buy if you could even afford it. In other areas it make sense to buy because it is so cheap.

[disneysteve]

What's income investing ? Dividend investing ?

Dividends are part of it. Investing basically breaks down into Growth and Income.

Growth is focused on the principal climbing over time but not so concerned about throwing off current income. So a stock that doesn't pay a dividend that is $20/share today but is projected to be $50/share 5 years from now.

Income focuses on creating a stream of current income. So a pretty stable stock, like a utility company, might also have a $25 share price but pay a 2% dividend. Five years from now, the stock might still be right around $25 - so no growth - but you will have gotten those quarterly dividend checks every year along the way. The same with something like a CD. Buy a $10,000 5-year CD at 3%. Get a check for $25 every month for the next 5 years and then get your $10,000 back.

Some investments are a little of each, growth and income. Real estate for example. Buy a rental property for $100,000. Collect rent every month as long as you own it. When you sell it, hopefully, it's value will have grown to maybe $150,000.

There are also things like annuities where you give your principal to the annuity company and get paid a monthly check forever (or whatever the terms of the annuity contract are) but you never get the original investment back.

[Scallywag]

Scallywag I think you think you know everything. And you do about your situation with your son. But trust me we can give financial advice unbiased. Fwiw there are many people on the board with special needs kids so don't assume because people have their act together their life is perfect. I have iep for both my kiddos and it hasn't been easy for either.

What ? Where and why do you get the idea that I believe everyone's life is perfect or "have their act together" ? I make no such assumptions even of people that i know even in real life ! My son doesn't just have an IEP, he's pretty significantly disabled -- IEPs cover a wide range of functioning abilities and while it's hard across the board and not a competition as to "who has it harder", I am dealing with a situation where I would be lucky if my kid one day learned to say "Papa" or "Mama".

As for numbers, let's just say that rent where we live is currently comparable to the mortgages on homes where we plan to eventually relocate to and buy. We will be relocating and thinking of buying in the summer of 2020.

[Scallywag]

Dividends are part of it. Investing basically breaks down into Growth and Income.

Growth is focused on the principal climbing over time but not so concerned about throwing off current income. So a stock that doesn't pay a dividend that is $20/share today but is projected to be $50/share 5 years from now.

Income focuses on creating a stream of current income. So a pretty stable stock, like a utility company, might also have a $25 share price but pay a 2% dividend. Five years from now, the stock might still be right around $25 - so no growth - but you will have gotten those quarterly dividend checks every year along the way. The same with something like a CD. Buy a $10,000 5-year CD at 3%. Get a check for $25 every month for the next 5 years and then get your $10,000 back.

Some investments are a little of each, growth and income. Real estate for example. Buy a rental property for $100,000. Collect rent every month as long as you own it. When you sell it, hopefully, it's value will have grown to maybe $150,000.

There are also things like annuities where you give your principal to the annuity company and get paid a monthly check forever (or whatever the terms of the annuity contract are) but you never get the original investment back.

Steve, interesting that you bring up annuities. I have been looking into them and we also (gasp !) carry a whole life insurance policy ! I know, i know but I just wanted a guaranteed payout at my end for him !

I really want to invest in real estate (my parents made their fortune in it) but not sure how to fund it ! Would love to buy a 2 bed 2 bath townhouse or even SFP and rent it out. Any advice on how to get started on real estate when you don't have a lot of $$$$ and how to assess annuities ?

[disneysteve]

Steve, interesting that you bring up annuities. I have been looking into them and we also (gasp !) carry a whole life insurance policy ! I know, i know but I just wanted a guaranteed payout at my end for him !

I really want to invest in real estate (my parents made their fortune in it) but not sure how to fund it ! Would love to buy a 2 bed 2 bath townhouse or even SFP and rent it out. Any advice on how to get started on real estate when you don't have a lot of $$$$ and how to assess annuities ?

There are far better ways to leave an inheritance than a whole life policy, but that's been discussed ad nauseum here previously.

I'm not the person to ask the real estate question. Two things come to mind though. One is buying a small unit in a fringe neighborhood where prices are relatively low but you're not dealing with a total slum. Maybe an older area farther removed from the center of town. the other thought is if you had a trusted person you could partner with. That introduces other risks, of course, and you'd have to have a great attorney draw up the paperwork so that all of your interests are protected.

Not that it's any of my business, but since you're discussing it I'm wondering about something. You say that a big reason for wanting to buy a house is to ensure that your son always has a roof over his head. But if he is significantly disabled, will he be able to manage all of the responsibilities of home ownership after you are gone or will his condition warrant lifelong care? If upon your death he would need to go into some type of assisted living or long term care facility, does it really matter if you leave him a house? I realize that's not the only reason you've given for buying.

As for annuities, not really my area of expertise either. Are you thinking of buying one in his name? It wouldn't do any good to buy it yourself because the payments would stop when you die and the principal would be gone. How old are you and he?

[disneysteve]

The main reason we want a house for him is so that he can build a support network in the neighborhood and will have people (neighbors) who get to know him over the years and will - hopefully - also look out for him after our time.

Do you live in a really small town where that sort of thing is realistic? And do you think it will still be realistic 40 or 50 years from now when you're gone? Call me cynical but I find that outrageously optimistic. We have lived in our house for 24 years. We know exactly one of our neighbors.

I'm not trying to shoot down your plan but it seems backwards to be making your housing decisions based on what your son's needs might be 40+ years from now. There's no possible way to know if the home you buy now will still be where you'll be living then. Maybe the neighborhood will change and you'll get forced out. Maybe his needs or your own needs will change and you'll need to move to accommodate that.

I see nothing wrong with you buying a house if you have the means to do so. I just wonder if you're doing it for the wrong reasons.

[Scallywag]

Ok with all due respect can you all please stop ? I am not looking for validation or non financial advise and feel attacked now. Yes I do know best for my life and my family. Thanks.

[disneysteve]

Ok with all due respect can you all please stop ? I am not looking for validation or non financial advise and feel attacked now. Yes I do know best for my life and my family. Thanks.

My apologies. That certainly wasn’t the intent.

[disneysteve]

Try renting when you have a child who is obviously a "behavior issue" but you really need to move because you neighbors complain every day.

I can certainly appreciate wanting your own place and not having to deal with unsympathetic neighbors. And loads of people buy houses with 10% down and a lot less than that. Heck, FHA loans only require 3% I think. If that's the only way to make it happen, you need to do what works for you guys.

[amastewa93]

I know what I did may seem stooooopid to many savvy investors but I just couldn't take the anxiety anymore. I am younger thsn you so maybe it won't matter in the long run but I just had to bail for now.

It definitely isn't stupid - we all have different risk tolerance. Have you considered chatting with an advisor? They may be able to help you construct a portfolio that will help reach your goals and stick to your risk tolerance. I would have likely done the same thing (I'm quite a bit younger as well). I haven't invested a penny in the market yet (outside of inherited stock) for that reason. I'd be set in a panic. Maybe having someone to advise/manage the portfolio could help you handle these moments a bit differently

[TexasHusker]

I'm not in the "put down 20% or don't buy the house" camp. Put down as little as the bank requires. Now, do I think it is stupid for banks to lend at less than 20% down? Probably, but that's not your problem. Play the game by the rules you are allowed. If you can find a bank to give you 100% financing do it. Then take whatever down payment you were going to use and put it to use in another investment.

I think there is tremendous value for your kids in finding a stable neighborhood and living there from now on. We did that when my firstborn arrived in 2000 and we have been here ever since. We know most of the people on our block and vice versa. They have watched my kids grow up and it is a great thing. We visit one another, sometimes have an open house, and so on. Several brought graduation gifts for me son. He's mowed their grass, looked after their pools, shoveled snow from their sidewalks, and played football in their front yards. The kids trick-or-treated for years on our block.

You're on the right track.

If your child is profoundly disabled, I am certain there is governmental assistance for you - state and federal, that will help provide for your child the rest of his/her life. But I am equally certain you have run those traps. Just wanted to mention in case.

[LivingAlmostLarge]

No Scallywag we aren't judging your decisions we're bringing up questions that profoundly influence financial decisions. And many of us have dealt with things like disabled family members. All of this does influence each individuals decisions. TH as you saw said he isn't for 20% down. And steve mentioned 3% down payment. I think if you wanted honest opinions you'd tell us how much you are thinking of buying and perhaps some of us would give good advice. There are quite a few landlords here that might suggest buying now before interest rates go up higher and then renting it until you are ready to move into it. Or the answer is to rent until you have 20%. Or rent a house instead of the apartments. What is the difference you HAVEN"T answered between renting a house and buying a home? You haven't answered the cost nor the reasoning why you couldn't rent a house. Why? Because you don't like the fact that people here give suggestions outside the box as well.

No I don't think whole life is a bad idea in your case. However there are different types of whole life insurance and how you structure the payout could affect your son claiming benefits in 40 years. That's a different issue.

The big issue? Yes you are not an aggressive investor. You want returns but no risk. It's pretty obvious in the way you write and become defense. Nothing wrong with that. And losing say $53k but on a $1m portfolio I'd say is barely a loss that's 5%. So it makes a difference of how much of a portfolio are we talking about.

Like I said I think you need to look at your investing strategy in parallel with your desire to buy a home. Maybe the answer is you don't invest anything period right now. You take 100% of your portfolio and buy the house you are dreaming of and pay cash. Again we have no idea how much you have, what the house cost, what rents are, etc. Then you can move in and have very low living expenses potentially. This could allow you to free up cashflow and move to where the house is, because it sounds like you aren't living where you plan on buying.

Now is your entire portfolio entirely in retirement accounts? If so is it worth pulling it out to pay for a home? Maybe for someone like you who wants certain guarantees. Maybe not. But if you panic over $53k and an 8 year old then probably yes. Then you are extremely risk averse. You are panicking over money that you are not going to need for 40 years but you pulled it out of the stock market. 40 years. There isn't a 40 year period you would lose money.

Sooo....you tell me how aggressive you really are? I'd say close to 0. I really question whether you should be investing in March 2019 and instead you'll end up pulling out say 12/2019 and losing even more money.

[disneysteve]

I'm going to go ahead and close this thread. I think it has run it's course and OP has already stated she felt attacked so continuing to belabor the subject serves no purpose.

[Guest]

Thanks for this awesome thread.