401k's

[WestTexasHusker]

I think that WTH believe 401(k) = S&P 500. That is very different from my understanding.

Edit:

on an unrelated note, have you ever noticed all the stories people tell about the night they made a butt load of money at the tables in Vegas? One would think that town would run out of cash soon.

Perhaps, the explanation is that people only talk about their 'successful' days in Vegas but they fail to share the details of the nights when they lost big. I wonder if investment stories work the same way.

Thanks for the vote of confidence in my integrity, but I didn't post to brag - I posted because someone asked me what I was doing in lieu of a 401K. I answered and now my honesty is questioned. If the information I write isn't useful to you, then move on, but don't lampoon me for not investing in a 401K, or question my integrity. You don't know me.

I have lost significant dollars on two business ventures - both of them internet-oriented. But no losses I have suffered have compared in percentage and total dollars to my stock market-related losses. I've given it MANY chances through the years, each time I lick my wounds and say "no more." Hopefully the last time, I meant it.

[Huskerwirejay]

So why is a 401(k) bad?

Do you have to own stocks in a 401(k)?

Can you invest in non-market based positions?

Can you move from X to Y to Z?

How is it a problem for you?

[WestTexasHusker]

So why is a 401(k) bad?

Do you have to own stocks in a 401(k)?

Can you invest in non-market based positions?

Can you move from X to Y to Z?

How is it a problem for you?

A 401(K) isn't bad, I just think it's inferior. Yes, it has its pluses - matches and tax deferrment.

But unless your company's plan is very unusual, you are limited to investing in the financial markets. I don't like that - it's too limiting and that's another man's game.

If a 401K let me invest in real estate, art, collectibles, land, or a business, then of course it would be a logical choice. I have a decent knowledge base, for example, of collecting - buying and re-selling - S-Scale Model trains. If my 401K let me do that I'd be on it like flies on stink.

The other problem with a 401K is that you have to be an old man before you get access to the cash. And even then, you only get access to a monthly dribbling of it - unless you want to pay the gubmit your "penalty."

I get tired of being herded around by the gubmit and their schemes and tax penalties. I resist any investments that tend to be subject to the whims and power issues of the gubmit.

Probably the biggest downer on 401Ks is that they are so boring. I really enjoy investing in all kinds of different things - things I can hold, fish on, work on, tinker with. I guess you could say investing is a hobby to me instead of a bi-weekly obligation.

[Huskerwirejay]

A 401(K) isn't bad, I just think it's inferior. Yes, it has its pluses - matches and tax deferrment.

But unless your company's plan is very unusual, you are limited to investing in the financial markets. I don't like that - it's too limiting and that's another man's game.

If a 401K let me invest in real estate, art, collectibles, land, or a business, then of course it would be a logical choice. I have a decent knowledge base, for example, of collecting - buying and re-selling - S-Scale Model trains. If my 401K let me do that I'd be on it like flies on stink.

The other problem with a 401K is that you have to be an old man before you get access to the cash. And even then, you only get access to a monthly dribbling of it - unless you want to pay the gubmit your "penalty."

I get tired of being herded around by the gubmit and their schemes and tax penalties. I resist any investments that tend to be subject to the whims and power issues of the gubmit.

Probably the biggest downer on 401Ks is that they are so boring. I really enjoy investing in all kinds of different things - things I can hold, fish on, work on, tinker with. I guess you could say investing is a hobby to me instead of a bi-weekly obligation.

I think there are some misstatements in your post.

[WestTexasHusker]

I think there are some misstatements in your post.

please point them out - i don't want to mislead anyone.

[Weinosker]

I think there are some misstatements in your post.

Yep, I agree.

[Huskerwirejay]

you are limited to investing in the financial markets

The other problem with a 401K is that you have to be an old man before you get access to the cash.

And even then, you only get access to a monthly dribbling of it - unless you want to pay the gubmit your "penalty."

I get tired of being herded around by the gubmit and their schemes and tax penalties. I resist any investments that tend to be subject to the whims and power issues of the gubmit.

These are the non-subjective ones you might want to rethink.

I am quite confident that people use their 401(k) to own land, businesses, CD's, even rental real estate.

[RedRum]

A 401(K) isn't bad, I just think it's inferior. Yes, it has its pluses - matches and tax deferrment.

But unless your company's plan is very unusual, you are limited to investing in the financial markets. I don't like that - it's too limiting and that's another man's game.

If a 401K let me invest in real estate, art, collectibles, land, or a business, then of course it would be a logical choice. I have a decent knowledge base, for example, of collecting - buying and re-selling - S-Scale Model trains. If my 401K let me do that I'd be on it like flies on stink.

The other problem with a 401K is that you have to be an old man before you get access to the cash. And even then, you only get access to a monthly dribbling of it - unless you want to pay the gubmit your "penalty."

I get tired of being herded around by the gubmit and their schemes and tax penalties. I resist any investments that tend to be subject to the whims and power issues of the gubmit.

Probably the biggest downer on 401Ks is that they are so boring. I really enjoy investing in all kinds of different things - things I can hold, fish on, work on, tinker with. I guess you could say investing is a hobby to me instead of a bi-weekly obligation.

Get out of here WTH. My wife just left Amarillo this morning and should be near your cabin right now visiting some friends that live their. They also rent cabins and do wilderness retreats.

If I look back to 2004 and include matching, I would see about 50% over what I invested in when the company match is included, but I went into full investing after the marked dropped as well. When changing jobs, I rolled everything over into an IRA and I can pretty much invest in anything. Individual stocks, housing funds, etc so that makes it a better vehicle. But having to keep it in the half a dozen options a company may give can be pretty limiting.

I have a house in Omaha, that hasn't done as well as it could as I have to burn 10% to a management company. With depreciation, I loose every year. I should really get rid of it or need to combine multiple properties to make it work better.

[Weinosker]

These are the non-subjective ones you might want to rethink.

I am quite confident that people use their 401(k) to own land, businesses, CD's, even rental real estate.

This might help

http://money.howstuffworks.com/perso...nning/401k.htm

[huskheartguy]

My wife and I started investing in a Roth Ira 16 months ago...we were 26 when we started...just by keeping on our current investment per month and just the average ROI from the past 30 -ish years, we are going to be able to retire with no worries...are 401k's good for people who start investing when they are 45? Probably not...but this is as sure as investment a 20-25 year old can find.

[nems]

To say that rental properties aren't part of the broader market is a misstatement.

One could have 100% of their capital tied into income real estate. I personally think that is incredibly risky. The kind of risky that can wipe you out under the right circumstances. Leveraged income producing property requires rents. Vacancy risk is hard to quantify. Then of course there is value risk as with any investment.

I personally believe in a diversified strategy. A mixture of equities, debt, real estate, commodities and cash.

To not take advantage of 401(k) matching, tax deferral and other 401(k) tax advantages over an entire working career would be a monumental mistake IMO.

[WestTexasHusker]

To say that rental properties aren't part of the broader market is a misstatement.

One could have 100% of their capital tied into income real estate. I personally think that is incredibly risky. The kind of risky that can wipe you out under the right circumstances. Leveraged income producing property requires rents. Vacancy risk is hard to quantify. Then of course there is value risk as with any investment.

I personally believe in a diversified strategy. A mixture of equities, debt, real estate, commodities and cash.

To not take advantage of 401(k) matching, tax deferral and other 401(k) tax advantages over an entire working career would be a monumental mistake IMO.

I don't disagree, if your 401k plan offers this type of diversification. Most do not. Heck, most do not even let you buy a publicly traded stock. If you have a couple dozen middling mutual funds from which to choose you're very lucky. 401Ks are investing for the masses. Sad fact is, the masses aren't going to make a dime.

I am also a big believer in commodities - we are in a commodities super cycle that could run for 2 more decades. Precious metals are also attractive.

But you can have my part of the Principal/Oppenheimer/Americn Funds/Fidelity "2020 Lifestyle Select Fund." Most of that is utter garbage, and if you subscribe to all their marketing, you deserve it.

Been there, done that.

[WestTexasHusker]

My wife and I started investing in a Roth Ira 16 months ago...we were 26 when we started...just by keeping on our current investment per month and just the average ROI from the past 30 -ish years, we are going to be able to retire with no worries...are 401k's good for people who start investing when they are 45? Probably not...but this is as sure as investment a 20-25 year old can find.

Unless you are a shrewd equity investor or are incredibly lucky, I think you will be disappointed when you reach 45. Most 45 year olds today realize a lot of those assumptions and forecasts miss the mark pretty substantially.

The equity averages have been flatline overall for about 12 years, and there are no economic underpinnings in place or even on the horizon that have the potential to change that. This is a country deeply in debt, with high unemployment, with significant inflation looming due to the monetizing of trillions of debt dollars.

Meanwhile all that money you have rat-holed is in a lock box and you can't get at it very easily, if at all.

To each his own - I am just very personal about my investments and I take them very seriously. I don't trust some company to figure out how I'm going to retire, what piss ant mutual funds to offer in their slick brochures, etc. Truth is, they don't give two farts about my finances nor should they.

And neither does the gubmit.

[huskheartguy]

Unless you are a shrewd equity investor or are incredibly lucky, I think you will be disappointed when you reach 45. Most 45 year olds today realize a lot of those assumptions and forecasts miss the mark pretty substantially.

The equity averages have been flatline overall for about 12 years, and there are no economic underpinnings in place or even on the horizon that have the potential to change that. This is a country deeply in debt, with high unemployment, with significant inflation looming due to the monetizing of trillions of debt dollars.

Meanwhile all that money you have rat-holed is in a lock box and you can't get at it very easily, if at all.

To each his own - I am just very personal about my investments and I take them very seriously. I don't trust some company to figure out how I'm going to retire, what piss ant mutual funds to offer in their slick brochures, etc. Truth is, they don't give two farts about my finances nor should they.

And neither does the gubmit.

I'm not going to retire at 45 though. If you bought 5 houses 40 years ago or invested the same amount of money in a Roth Ira which would have yeilded better results and, based in the current housing crises, which would be a safer investment...since my wife and I started investing so early, as long as we continue on our current pace of saving per month, we will have well over $1 mmillion saved by 65...compound investment is a great thing.

[nems]

I don't disagree, if your 401k plan offers this type of diversification. Most do not. Heck, most do not even let you buy a publicly traded stock. If you have a couple dozen middling mutual funds from which to choose you're very lucky. 401Ks are investing for the masses. Sad fact is, the masses aren't going to make a dime.

I don't limit myself to 401(k). Personal investment accounts are easy to set up, real estate and commodites are easy to buy in the modern technological world.

But you can have my part of the Principal/Oppenheimer/Americn Funds/Fidelity "2020 Lifestyle Select Fund." Most of that is utter garbage, and if you subscribe to all their marketing, you deserve it.

Been there, done that.

I don't invest in that fund. And ultimately, as far as I am concerned, it is much riskier to have my net worth locked up in a couple of pieces of real estate than to have it spread out among various investment types. You should be demanding higher short term returns for that risk. Just don't overplay your hand.

[bilsker]

I'm not going to retire at 45 though. If you bought 5 houses 40 years ago or invested the same amount of money in a Roth Ira which would have yeilded better results and, based in the current housing crises, which would be a safer investment...since my wife and I started investing so early, as long as we continue on our current pace of saving per month, we will have well over $1 mmillion saved by 65...compound investment is a great thing.

Did you say you are around 28 or so? $1M 37 years from now isn't going to get you far.

[WestTexasHusker]

I don't limit myself to 401(k). Personal investment accounts are easy to set up, real estate and commodites are easy to buy in the modern technological world.




I don't invest in that fund. And ultimately, as far as I am concerned, it is much riskier to have my net worth locked up in a couple of pieces of real estate than to have it spread out among various investment types. You should be demanding higher short term returns for that risk. Just don't overplay your hand.

What type of return should a "high risk" investment like a rental house command? I doubled my investment in 42 months, but I realize that's pretty paltry by S&P 500 standards.

My definition of "high risk" is 1) any investment that you know little or nothing about, and are dependent upon someone ELSE to make the money (i.e. publicly traded cos and mutual funds), and 2) investments that are guaranteed from the outset to be outrun by inflation, such as CDs.

[WestTexasHusker]

I'm not going to retire at 45 though. If you bought 5 houses 40 years ago or invested the same amount of money in a Roth Ira which would have yeilded better results and, based in the current housing crises, which would be a safer investment...since my wife and I started investing so early, as long as we continue on our current pace of saving per month, we will have well over $1 mmillion saved by 65...compound investment is a great thing.

Even with the housing "crisis", your 5 houses investment would have blown away the average IRA return for the last 40 years.

And if you buy 5 rent houses and finance them for 15 years, you COULD be retired at 40. Do the math.

Take advantage of the "crisis" and the historically low interest rates. Even Warren Buffet says housing is where it's at right now!

[nems]

What type of return should a "high risk" investment like a rental house command? I doubled my investment in 42 months, but I realize that's pretty paltry by S&P 500 standards.

You could have owned Apple and made 10 times your investment over the same period. You're doing fine, but to be fair you haven't sold your underlying asset yet. If there were to be a real estate down turn in that area, you have a very illiquid asset. An asset with required carrying costs (tax + insurance). The asset is also subject to environmental risks such as fires, storms, etc. Your entire net worth is held in two properties. I personally consider that not super high risk, but certain riskier than many investments.

My definition of "high risk" is 1) any investment that you know little or nothing about, and are dependent upon someone ELSE to make the money (i.e. publicly traded cos and mutual funds), and 2) investments that are guaranteed from the outset to be outrun by inflation, such as CDs.

Rental properties have their own risk factors. You are dependent on some else to make the money, it's called a tenant. And as I mentioned above, you have risk factors that could wipe you out.

By all means, invest how you know and feel comfortable. But to present other people as foolish, while completely ignoring your own risks is disingenuous.

[ChitownHusker]

You could have owned Apple and made 10 times your investment over the same period. You're doing fine, but to be fair you haven't sold your underlying asset yet. If there were to be a real estate down turn in that area, you have a very illiquid asset. An asset with required carrying costs (tax + insurance). The asset is also subject to environmental risks such as fires, storms, etc. Your entire net worth is held in two properties. I personally consider that not super high risk, but certain riskier than many investments.



Rental properties have their own risk factors. You are dependent on some else to make the money, it's called a tenant. And as I mentioned above, you have risk factors that could wipe you out.

By all means, invest how you know and feel comfortable. But to present other people as foolish, while completely ignoring your own risks is disingenuous.

Great post. The basic answer is that there is no one investing strategy that is foolproof or free of risk, and simply because a strategy works for one person doesn't mean that it will work for everyone.