Put more in 401K or invest elsewhere?

[TexasHusker]

I think you misunderstand the definition of the word "risk".

As I stated earlier, risk means different things to different people.

[Nutria]

As I stated earlier, risk means different things to different people.

Only to people who don't have a fundamental grasp of basic words in their own language.

"risk" does not equal "risk tolerance".

[TexasHusker]

Only to people who don't have a fundamental grasp of basic words in their own language.

"risk" does not equal "risk tolerance".

[Fishindude77]

Real estate is the lowest risk investment, if you're not a complete idiot. I bought a vacation home to rent out back in 2005 at the top of the market. It is worth $75K LESS today than I bought it for 11 years ago. HOWEVER, the rental income has essentially paid me back every dime, so if I had to sell today, I'm walking away with $200K in profit even with the value decline.

You can overpay for property and still make stupid money in real estate if you have a little patience.

The least risky investment is your own business. That is because you are in complete control, and aren't dependent upon the integrity and acumen of someone else.


I agree with a lot of your thoughts Husker, but the above should include an "IN SOME CASES" disclaimer in big bold type. You obviously put some serious thought and planning into your real estate purchases before jumping in. Many have lost their asses trying to do similar without a good plan, and many work on pretty thin margins where over paying would kill them.

Don't know about your business, but unless you have zero employees, zero suppliers and do everything yourself, you are never in complete control. Good businesses go broke every day due to mistakes, accidents, lawsuits, etc. We mitigate risk by hiring good people, with good procedures and policies, checks and balance procedures, insurance, etc. but your money in a business is in play and at risk every day.

And if you've never taken an ass whoopin on a project, had a bummer project, or a serious negative spike in your business you've either not been in business long, or been darned lucky because it happens to everyone at some point. Keep some hefty cash reserves, because at some point you will need them to get through one of these challenges.

[Nutria]

Don't know about your business, but unless you have zero employees, zero suppliers and do everything yourself, you are never in complete control.

Don't forget

• Tenants from Hell
• Baseless class-action lawsuits
• Changing laws and regulations.

[tripods68]

Risk means different things to different people.

Some rate a savings account as the lowest risk. I rate it as the highest risk because the money is guaranteed to do absolutely nothing.

There are 2 different of Risk in Finance. Some people here already touched some of this, but I'm here to add little bit more.

1) Systematic Risk - It affects the overall market, or an entire market segment. Political events, Feds action, War. Not just your own property. Example of subprime loans caused -housing crashed of 2008.

2) Unsystematic Risk - Also known as specific risk. It is a type of uncertainty that comes with a business. This can be reduced through diversification. Don't put your eggs in one basket. Diversify, Diversify!

In your particular industry:
Credit or Default Risk - Unable to pay your own debt obligations. Poor health is another factor, not able to properly manage all your property due to poor tenants not paying on time.

Interest Risk - is the risk that an investment's value will change as a result of a change in interest rates. Bad financing deals (not putting enough money as a down payment) create business risk. You have to shoulder higher payments & higher interest cost due to bad credit score.

Market Risk - Housing boom goes up and down--not always a straight line. A good example is the Oil industry were doing great for years...not today.

[LivingAlmostLarge]

I agree. I once said to my FIL who owns his own business must be great to be your own boss. He said I'm not the boss, my clients are. Why do you think I work so hard?

[TexasHusker]

Real estate is the lowest risk investment, if you're not a complete idiot. I bought a vacation home to rent out back in 2005 at the top of the market. It is worth $75K LESS today than I bought it for 11 years ago. HOWEVER, the rental income has essentially paid me back every dime, so if I had to sell today, I'm walking away with $200K in profit even with the value decline.

You can overpay for property and still make stupid money in real estate if you have a little patience.

The least risky investment is your own business. That is because you are in complete control, and aren't dependent upon the integrity and acumen of someone else.


I agree with a lot of your thoughts Husker, but the above should include an "IN SOME CASES" disclaimer in big bold type. You obviously put some serious thought and planning into your real estate purchases before jumping in. Many have lost their asses trying to do similar without a good plan, and many work on pretty thin margins where over paying would kill them.

Don't know about your business, but unless you have zero employees, zero suppliers and do everything yourself, you are never in complete control. Good businesses go broke every day due to mistakes, accidents, lawsuits, etc. We mitigate risk by hiring good people, with good procedures and policies, checks and balance procedures, insurance, etc. but your money in a business is in play and at risk every day.

And if you've never taken an ass whoopin on a project, had a bummer project, or a serious negative spike in your business you've either not been in business long, or been darned lucky because it happens to everyone at some point. Keep some hefty cash reserves, because at some point you will need them to get through one of these challenges.

I've had a few ass whoopins. I can't begin to tell you how many frogs I've kissed.