Vanguard REIT Index has had an after tax return of 8.5% since 1996, which includes the Great Recession in 2007-2009. And that’s overall, not specific REIT categories, some really performing extremely well. That’s not too shabby. And for certain markets, where developable real estate is drying up or has dried up, returns will continue to be very good to excellent.
I’d also suggest reading about bonds and their advantages, including in a rising interest rate environment. Not for everyone, but for some investors, bonds make sense. Otherwise, we wouldn’t have a bond market.
In a sign the area’s housing market is softening, the county’s median price dropped to $370,000, one of the few monthly drops during a seven-year run of rising home prices"
Four things to consider with FA - do you have the time, interest - including making sure that your assets are doing the best with more than casual monitoring, energy, risk level aversion or not. H’s boss who recently retired was happy we pointed him to our FA group, as it gave him additional information and the security to know he could retire and also reduce his risk. As another said, one’s spouse may not be able to manage well w/o FA on succession events.
@doschicos In our area nothing at all to buy but prices remain about the same. Some houses will sell that wouldn’t otherwise ( due to low inventory) but low inventory isn’t pushing prices higher. There are many jobs in the area but there is a generation of kids ( millennial) who even with two working cannot afford the cost of a home ( and in most cases could just barely manage a condo). They also seem reluctant to compromise. If they cannot buy in the best areas they just pay extraordinary rents until they can either afford a home or move.
I know many FAs. A very few of them I would trust with my life, without a concern or doubt. The majority of them I wouldn’t trust to run the Little League Snack Concession. I think if you can tell the difference between the two types, you probably can do your own money management.
That said, if you’re really busy and don’t want to deal with it, a good FA is okay. I personally find the couple of hours per year, or perhaps a dozen hours per year that it takes, to be well worth my savings in AUM fees. I do have a CPA, because I want someone to look over what I entered into TurboTax (although I’m usually right). I also have a guy who cuts my lawn and plows my drive, because buying a tractor, maintaining a tractor, and spending probably 2 days a week during the summer on that tractor is not something I want to do. Ditto snowplowing. My lawn and CPA expense is more than made up for by not paying 1%, or even 30 bips, on our assets.
Also, if you have complicated estate planning issues, a lawyer might well be necessary. What I said about FAs is solely about managing investments.
@doschicos , our house in Northern NJ has gone under contract, at a price around 20% lower than the realtors wanted us to list it at. People with jobs are unsure of their jobs in NYC. DeutscheBank laying off scores, other banks rationalizing expenses, garment industry possibly affected by trade wars, etc. The SALT changes didn’t help either, but that was priced into the initial listing price.
Hmm, there seems to be a lot of criticism of FA’s on this board. We have had multiple FA’s over the years. Some who worked for big firms were just awful. They pushed products and really had limited ideas. We got rid of them fast. For the last 10 years we have worked with small boutique firms. The first was a great shop but he limited himself to mutual funds and honestly I don’t like the fees or the funds. The next rebalanced our portfolio (which was really tech heavy), introduced lots of new ideas and could always answer why they were suggesting one stock or fund or another. We have done very very well. I feel as though the money is well spent. We have beaten the indexes year over year. We have also been able to ask about financial considerations over the years. Some were small like saving in a 529 and some were big (sale of a business).
We are both busy people. There is no way we were going to spend 6-8 hours a day on our portfolio like they do. Yes, we have the capability but we are not in the financial industry and do not want to be. So many people think they can just look at their money daily and make it work. I don’t believe that’s true. Even when there are financial blips and the market moves quite a bit I’m not worried. I know what we are invested in ( each and every stock and bond and fund) and I know that they are watching these stocks for multiple customers. In addition, I know they spend lots of time on research. I can ask why a stock has been chosen and get a coherent answer. Like many things ( attorney fees and other consulting or professional fees (plumber comes to mind) the payments are well worth it. You cannot learn everything from the internet and one cannot easily manage their retirement without risk. Even if you have the academic skill you don’t necessarily have the insight.
Except for the fact that I suspect many investors are like my parents. Someone told them they should have bonds many years ago, and they still have them. They don’t know why, nor do they know what they have off the top of their head. They know they are unhappy with them, but scared to do anything about it, don’t want anyone to manage their money, and don’t want to even look at it.
I’m kind of horrified, but I don’t want to press it, they seem to have plenty to get by on and my dad claimed to have a good sum of money awhile ago. But to be so fearful you don’t want to even look at it or talk about it is crazy.
I promise this is not a humble brag. At some point along the financial continuum, one has “enough.” That’s a different point for everyone, and the original question raised in this thread. At that point, one can continue to keep a really sharp pencil and figure out how one’s asset allocation computes to the third decimal point, and worry about rebalancing, and fretting over the market going up or down. OR, they can move to something called a liability matching portfolio (LMP). That’s what we have done. We have a large amount in Bonds, which we will not touch until after we deaccumulate. All other money, including new money, goes into equities (PRIMECAP, Total Stock Market, and Total International Stock Market).
PS Re bonds, there have been periods where they outperformed equities, especially on a risk adjusted basis. Just sayin.
I am curious what sort of bonds you have, IxnayBob, if you don’t mind. If I can pry some information out of my mother, perhaps I can direct her towards something similar. I would think there are some bonds that perform decently.
I realize that over the long haul, there are times that bonds do better, but I wonder if, in the history of the stock market, there has been another time where interest rates were held down artificially for so many years.
I do have a few Inflation related bonds (I bonds and TIPS), and also some Stable Value Fund, but the vast majority, in tax-advantaged accounts, are vanilla Total Bond Market. In taxable accounts I have Vanguard Intermediate Term Tax Exempt Fund.
@IxnayBob
The “enough” concept is one my husband and I have talked over many times.
He has had “enough” for quite awhile. He grew up in a low income family and has money beyond any dreams.
For me it took longer to say “enough.” The women in my family live forever and despite them never running out of money it was always talked about. I have culturally inherited that fear. We ran some numbers last night and I will now say “enough.”
We live a blue jeans, sneakers, and small town diners lifestyle. The only thing he can get me to spend money on travel and charities. We are increasing our donations to our favorite causes. We are also gifting travel to relatives that are curious about the world yet unable to afford tickets.
Just how much is ‘enough’. So much is unknowable such as how investments will do in the future, or whether there will be inflation. Over the last 40 years since I was a child, gas has gone from 35 cents a gallon to (now) ten times that. Milk and bread have tripled. The car I bought in 77 for $3500, would now be $35,000. Our family used to pay $20 for a roadside motel. Now the cheapest are $100/night.
And no one knows how long the money has to last. There’s so much guess work.
As many here surely understand, the price of bonds moves inversely to changes in interest rates; when interest rates fall, the value of existing bonds increase. Interest rates peaked in the U.S. sometime around 1981 and have been in a general decline ever since, at least until quite recently. That decline created a great long term bull market in bonds, but that party is over.
@TatinG We are operating on the quick and dirty method of 4% drawdown per year. We think we will be ok. Currently we have a mix of index funds, US, international small cap, REIT (smallest amount), tax free municipal bonds, his company, cash etc. We figure even if everything goes to h3ll in a hand basket we will be able to retrench our expenses and ride it out.
Another unknown in determining “enough” is the future cost of medical care. Medicare may not be reliable in the future either, due to increasing costs and smaller tax base funding it.
And future years could bring increased taxes. Medicare for all may reduce Medicare for seniors. The market could crash again. The baby boom generation will all be seeking assisted living at roughly the same time which will drive up those prices.
Right now, I feel good. We have stocks, bonds and a commercial property that pays a nice return in rent. (However, if retail crashes big time…).
I’m going to try and enjoy life now, spending reasonably on what I want to do (travel) and not worry too much about the future. In my experience, much of what I’ve worried about over the years has not come to pass and so I worried for nothing.
Our basic retirement plan is to own enough free and clear rental real estate to generate adequate retirement income which is generally inflation proof. Anything on top of that is gravy.
Edit to clarify: Our rental real estate isn’t in our retirement accounts, as that becomes a little problematic with respect to management and mandatory distributions.
Our retirement accounts are primarily invested in our asset based real estate lending business, along with a few stocks for good measure.
It wasn’t what I wanted, since I felt we had “enough money,” but my wife hadn’t had “enough work,” so she continues to make a very generous income. That means that whatever investment decisions I make are “good enough.”
I don’t “see enough” of my wife, but we do enjoy our time together. Enough.
