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Old 06-18-2014, 01:28 PM   #101
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I think we are talking about different things - first I'd like to know more about what "products" you are referring to - as would others on this forum so we can avoid them at all cost. What you describe sounds like either an outright scam or a high fee fund of some sort.

What I was referring to in regards to accredited investors were assets like this:

-Direct ownership of real estate such as apartment complex, mobile homes, notes secured by real estate & residential. It can be hard to take down a whole $5M apartment complex yourself, so if the deal is syndicated you can invest in multiple properties in different MSAs - and syndicated deals typically require accreditation.

While I like Vanguard ETFS and use them, it might be a bit extreme to exclude all other vehicles because someone you know lost money in the past, don't you think?

(BTW in 2008 you would have lost 1/2 your money in that ETF, which was highly correlated to the rest of the market)
These were not scams. One was a direct ownership like you mentioned among people who knew each other a long time, but leverage and market timing brought them zero returns over the decade holding. Another was a limited partnership that was too highly leveraged and went to zero. The limited partnership fees also took quite a bite, much more than a REIT. Another sold his business for big profits and invested in real estate before 2008. He thought he was smarter than the market. He was not. One problem is that usually there is little historical results to measure the product and product risk, just sales talk.

I am not saying that there could be some good investments in real estate partnerships, but if there are large returns, they are very likely tied to substantial (and often unseen) risk.

For me personally and for those who do not have the experience and time to study the deal in great detail, I say yes. it is better to entirely exclude these vehicles. The risk is unknown.

On the other hand, if you have been investing in real estate a long time, have lawyers to study the opportunities, and know the risk, then yes, you are one of the individuals who could possibly benefit from this. It is just that I have too often seen them marketed to folks not in this position. They would have done better in some simple Vanguard funds, and not trying to chase a few extra percent a year.
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Old 06-18-2014, 01:38 PM   #102
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... if there are large returns, they are very likely tied to substantial (and often unseen) risk...
+1

Large potential returns and risks go together. There's no freebie.

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Old 06-18-2014, 01:42 PM   #103
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These were not scams. One was a direct ownership like you mentioned among people who knew each other a long time, but leverage and market timing brought them zero returns over the decade holding. Another was a limited partnership that was too highly leveraged and went to zero. The limited partnership fees also took quite a bite, much more than a REIT. Another sold his business for big profits and invested in real estate before 2008. He thought he was smarter than the market. He was not. One problem is that usually there is little historical results to measure the product and product risk, just sales talk.

I am not saying that there could be some good investments in real estate partnerships, but if there are large returns, they are very likely tied to substantial (and often unseen) risk.

For me personally and for those who do not have the experience and time to study the deal in great detail, I say yes. it is better to entirely exclude these vehicles. The risk is unknown.

On the other hand, if you have been investing in real estate a long time, have lawyers to study the opportunities, and know the risk, then yes, you are one of the individuals who could possibly benefit from this. It is just that I have too often seen them marketed to folks not in this position. They would have done better in some simple Vanguard funds, and not trying to chase a few extra percent a year.
Understood - you make excellent points. The only people who didn't get hurt *at all* during 2008 in real estate were those who weren't invested (or were somehow short).

How do you perceive the risk of being totally correlated to the stock market? I like having some hard assets in the portfolio, not just hard-asset flavored stock funds.
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Old 06-18-2014, 01:51 PM   #104
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I'd actually feel uncomfortable celebrating when I hit $1M, because I'd worry that it would feel like bragging to my friends, and rubbing their noses in it.
Who says friends need to be involved? I'm not throwing a party for anyone but me and my wife. We'll toast discipline and good fortune over a nice dinner and that'll be celebration enough. I just think it's something that is worth noting and an occasion worth marking... because if it's not, what is?

Someone else might go buy their Porsche when they hit that number, but that's not what I'm talking about when I think of celebrating.
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Old 06-18-2014, 01:59 PM   #105
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(BTW in 2008 you would have lost 1/2 your money in that ETF, which was highly correlated to the rest of the market)
And by 2014 you would've regained that half plus another 24% (assuming you bought at peak high of 1575 prior to 2008, watched your money get hacked in half, and held on anyway through today at 1950). This is the folly of these types of statements: most people that are long term index investors are exactly that, and don't care how much they "lost" in 2008. In fact, many (including me) used 2008-9 as an investing opportunity which has paid off handsomely. When a RE transaction goes bad, that money is lost. When the stock market goes down, no money is lost until you sell.
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Old 06-18-2014, 02:05 PM   #106
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Passed that number 2006, and again in 2013. Really not the milestone it used to be but it is nice to know that I won't be selling apples on the corner at least in the foreseeable future. Did I celebrate, nope, it's just a number.
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Old 06-18-2014, 02:10 PM   #107
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Who says friends need to be involved? I'm not throwing a party for anyone but me and my wife. We'll toast discipline and good fortune over a nice dinner and that'll be celebration enough. I just think it's something that is worth noting and an occasion worth marking... because if it's not, what is?

Someone else might go buy their Porsche when they hit that number, but that's not what I'm talking about when I think of celebrating.
Well, no significant other in my case, either, so I have a feeling that any celebration I have is gonna be pretty lonely...

So, I'll just celebrate with you guys!
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Old 06-18-2014, 02:13 PM   #108
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Agile. mobile, and hositile. Not to mention cheap. ER'd age 49, 1993, NW maybe 250k ballpark. 150 k inheritance along the way. Time in the market, small pension, some temp work for a year, early SS.

No IPO - married the second million late in life. Party on.

heh heh heh LYBM is cool. 20 plus years ER'd and counting.
Now that's what I'm talkin' about!
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Old 06-18-2014, 02:34 PM   #109
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Bad karma.
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Old 06-18-2014, 03:14 PM   #110
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Understood - you make excellent points. The only people who didn't get hurt *at all* during 2008 in real estate were those who weren't invested (or were somehow short).

How do you perceive the risk of being totally correlated to the stock market? I like having some hard assets in the portfolio, not just hard-asset flavored stock funds.
Also good points. Of course nobody knows the future. But for the stock market we have long term historical measures of volatility and market risk.

I agree having real estate assets as a part of your portfolio is a great idea. I really only have experience (and limited at that) to coastal southern California, but as long as you were not leveraged, it has been hard to go wrong owning real estate here long term. Actually I wish I had invested more. That said, I have also known people here (in two real estate cycles - both prior to the 2008 cycle!) who had to walk away from underwater mortgages.
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Old 06-18-2014, 03:16 PM   #111
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Bad karma.
Or envy.
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Old 06-18-2014, 03:43 PM   #112
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Bad karma.
How is celebrating life bad karma?
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Old 06-18-2014, 04:38 PM   #113
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How is celebrating life bad karma?
Same as crying typing out "Wh***", I think.
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Old 06-18-2014, 04:39 PM   #114
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I passed the million $ mark last year some time. Didn't even realize it till earlier this year. I feel more accomplishment with having $0 debt. I paid for 2 kids college education (they graduated with $0 debt which is a nice gift to them to go into life based on what you read about student debt problems today) and weddings along the way which give me more satisfaction than knowing I have a million+ in investments (I don't use my home value in my calculation).

I knew that it couldn't be all that big of a deal to reach the million mark if I passed it and it was confirmed today with an article at CNBC: Study: Millionaires grow in number and wealth

From the article:
"The United States had the most millionaires, at 4 million, followed by Japan with 2.3 million. Germany was third with 1.1 million, and China was fourth with 758,000. Those four countries were home to about 60 percent of the world's wealthy."

I don"t consider myself wealthy; comfortable (which is just fine), but not wealthy. I have a great life which I judge by my family (good health, all the kids are independent w/ good jobs and own their own homes, etc. and great wife) not by the $$ I have.
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Old 06-18-2014, 04:40 PM   #115
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The first time we hit the 1.0M mark DW and I celebrated w big night out then came the great recession weeks after so when we went back over we did not do a thing other than breath easier. When we hit the $2.0m in net worth I mentioned it to DW she smiled and kept reading her book. We are close to hitting 2.0M in investable assets when we if we hit that it will be interesting to see if a breakdown and buy a new car as the one I drive is a 2001 has 212K miles and fading paint but runs great. Most likely will only buy if current car takes an expensive repair bill. Hopefully we shall see.
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Old 06-18-2014, 05:46 PM   #116
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Would it be cheating to include the discounted net present value of a pension stream to get to the magic 7 digits?
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Old 06-18-2014, 05:47 PM   #117
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Would it be cheating to include the discounted net present value of a pension stream to get to the magic 7 digits?
I won't say anything if you don't.
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Old 06-18-2014, 05:55 PM   #118
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Same as crying typing out "Wh***", I think.
Fair enough. However, while no one around me knows my status, I do celebrate with my DW. Hopefully not to the extent that I would jinx any future success. With todays new market highs the celebration consists of splitting a candy bar and a bottle of water in a New Jersey hotel room.
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Old 06-18-2014, 05:56 PM   #119
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While I like Vanguard ETFS and use them, it might be a bit extreme to exclude all other vehicles because someone you know lost money in the past, don't you think?

(BTW in 2008 you would have lost 1/2 your money in that ETF, which was highly correlated to the rest of the market)
Heh, heh..

I had about 45% of my portfolio in VTI, VBR, and VEU, and another 15% in assorted equity funds left over in my 401K. Amazingly, in early 2009 I HAD lost half the money in the equity side of the portfolio, just a year after I had retired.

O noes!

My investment plan, which is mine, called for me to check for allocations that had drifted more than +-25% from the target allocation and rebalance once a year, in February. It also called for me to aggressively tax loss harvest.

So, I did that. I sold bond funds and assorted funds with losses, and bought similar but not substantially identical funds/ETFs. Buying equities. In February 2009.

This did not end badly. I would be very surprised if I had to pay capital gains taxes in the next decade. (Not that there's anything wrong with that. If I did have to pay CG tax, I'd be doing quite the Happy Dance anyway, just because the gains would have to be that big...)

Feel free to tell me how much better I would have done in private goodies like Fortress Fund IV or V, Fairfield Sentry, Kingate, or Rye Investment, though. I'll make popcorn...
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Old 06-18-2014, 07:35 PM   #120
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$1M NW is a nice milestone. I went out to dinner with SO back in 2000.
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