Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-21-2017, 09:24 AM   #101
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 164
Quote:
Originally Posted by ilikestartrek View Post
If the answer is, "Live with the fact that it fits your needs and be done with it" (as Texas Proud posted previously) - i.e. I do *not* need to transform my AA in order to hold a lot of bonds - then, that means that RE is in some sense a "substitute" for bonds, at least in my own portfolio (which is the portfolio I was asking about in my OP).
I can relate. My own portfolio is 47% RE, 44% stocks and bonds, 5% bank cash and 5% P2P loans. (not exactly 100% due to rounding errors). Of the stocks and bonds, 10% is bonds and 8% is investable cash.

I've considered adding more bonds, but hesitate for these reasons:
1. Rising interest rates compel me to use short-duration bonds with pathetic yields to avoid price drops.
2. Rising equities compel me to stay fully invested.
3. My RE portfolio generates substantial monthly income. I retired a year ago and haven't needed to draw from my tax-deferred accounts yet. I expect to hold off until after I turn 59.5 late next year.
4. My investable cash cushion will provide for my income needs until my FRA (66 and 10) thanks to dividend income.
5. Two of my RE investments have not started paying regular distributions yet. They are more growth-oriented, but I do expect them to supplement my income at some point.
6. As I wrote previously, my RE portfolio is designed to be as safe as possible.

Perhaps if the market cools off I will reallocate, but am currently looking at preferred stocks instead of bonds. Once we get past the next recession, I will sell my bonds and invest the proceeds into safe, dividend-paying equities and be done. NOTE: I am not trying to time the market, but anyone can see we are near the top. The same goes for RE.
Bruceski44 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-21-2017, 09:25 AM   #102
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by Texas Proud View Post
OP asked if RE was a substitute for bonds, not can I substitute RE for bonds...

two very different questions even though they sound exactly the same...
Great observation. Most FAs answer the question for the general public, not for a person's individual circumstance.

An FA wants to be as generic as possible, then they can say (when they turn out to be failures) "That is what all the smart people recommend".
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-21-2017, 12:36 PM   #103
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 953
This feels to me like several ongoing debates. All somewhat related, yet distinct.

Asset allocation- how to distribute your investments for the purpose of balancing risk, return, and the ability to ride out the down times.

Assets- what contributes to your net worth. Most of this thread has been dealing with types of assets.

Sources of income- where is the money coming from? Social Security payments, pensions, annuities, dividends, real estate income, sale of assets, etc.

Where the discussion goes off the rails is when we try to use terms from a different category. How do I consider a pension when discussing net worth? Is real estate income like bond income (or can I sub RE for bonds). My portfolio isn't very large, but I have paid for health care, a pension, SS, and RE income that covers 145% of my projected yearly spend- Do I still need 20 times my last year's earnings in investments?

Rather than try to compare your situation against some 'standard retirement configuration' or others on this board, we need to develop the confidence to assess our own situation and make our own decisions. A lot of the good information on this board can be confusing until you sort out what applies to you and what is not relevant.
__________________
Well it's all right, we're heading to the end of the line...
Clone is offline   Reply With Quote
Old 12-21-2017, 12:49 PM   #104
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Originally Posted by Texas Proud View Post
OH... one other thing... RE has tax advantages that are of no value to me anymore....

IOW, I pay zero income tax.... taking depreciation (required) would only mean I would have to pay recapture tax when sold... I do not have that problem with a bond..
How do you get a middle class family income and pay no tax?

I have a modest income, take advantage of whatever tax benefits are available to me, and still pay a minimum of $5-$6 thousand in federal tax every year.

And this is less than I paid until recently.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 12-21-2017, 02:21 PM   #105
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 30,147
The secret to paying zero tax on a middle class income is tax-preferenced income... qualified dividends and LTCG since they are taxed at 0% of your taxable income is under a certain amount.

Under the new law in 2018 a married couple filing jointly with standard deduction could have $101,200 of income and pay $0 IF that $101,400 was $77,200 of qualified dividends and LTCG and $24,000 of ordinary income (dividends, pensions, taxable SS, etc).

The above is for a couple and assumes standard deduction. For a single the amounts would be halved.

Under existing law in 2017 the amounts would be $20,800 of ordinary income and $75,900 of preferenced income for a married couple taking standard deduction for a total of $96,700.

That is why tax efficient placement of investments is so important to many of us.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 12-21-2017, 02:41 PM   #106
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by haha View Post
How do you get a middle class family income and pay no tax?

I have a modest income, take advantage of whatever tax benefits are available to me, and still pay a minimum of $5-$6 thousand in federal tax every year.

And this is less than I paid until recently.

Ha
I take excess of $60K in depreciation. That $60K is essentially tax free, until I sell. Add in the standard deductions, and you have another bunch of deductions/exemptions, $6,300 + $4,050, and you have almost $70K tax free.

Factor in a few business expenses that I likely would have had anyway, and it's a bit more.

And I still pay over $20K in federal income taxes....
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-21-2017, 03:04 PM   #107
gone traveling
 
Join Date: Dec 2016
Posts: 733
Quote:
Originally Posted by Clone View Post
This feels to me like several ongoing debates. All somewhat related, yet distinct.

Asset allocation- how to distribute your investments for the purpose of balancing risk, return, and the ability to ride out the down times.

Assets- what contributes to your net worth. Most of this thread has been dealing with types of assets.

Sources of income- where is the money coming from? Social Security payments, pensions, annuities, dividends, real estate income, sale of assets, etc.

Where the discussion goes off the rails is when we try to use terms from a different category. How do I consider a pension when discussing net worth? Is real estate income like bond income (or can I sub RE for bonds). My portfolio isn't very large, but I have paid for health care, a pension, SS, and RE income that covers 145% of my projected yearly spend- Do I still need 20 times my last year's earnings in investments?

Rather than try to compare your situation against some 'standard retirement configuration' or others on this board, we need to develop the confidence to assess our own situation and make our own decisions. A lot of the good information on this board can be confusing until you sort out what applies to you and what is not relevant.
Great Point. I know I'm guilty of pounding my Real Estate Income in the square hole. It has worked for me, and I believe there is room for others to participate in what has worked for me. Hence I want to teach the benefits and strategies I have learned to mitigate risk, and maximize reward.

I wish others would do the same. Teach us how you get those 10% returns from marketable securities. How do you know for certain you have bought the home depot and not the K-mart, JC Penny, or thousands of others that went to zero. Especially on a passive, buy it and forget it basis.

How can you sort through all the stocks, bonds & Mutual funds, to avoid the dogs and be left with the jems that are working for you?

I often hear touted XYZ etf is great nobrainer. Doubting Thomas here says WHY?
Why didn't you say how you came to pick that ETF over the 100's of others advertising the same thing?
Why are you certain that ETF won't take a proportional market cut during a correction, thus wiping out your gains?

When it comes to marketable securities I've picked a few winners, but I've bought my share of in the immortal words of Tommy Boy "If you want me to take a dump in a box and mark it guaranteed I got time." Most of my winners I contribute to luck, since I was looking at the same stats on both, PE, Dividend yield, Book Value etc.

Luck_Club is offline   Reply With Quote
Old 12-21-2017, 04:49 PM   #108
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by Luck_Club View Post
I wish others would do the same. Teach us how you get those 10% returns from marketable securities. How do you know for certain you have bought the home depot and not the K-mart, JC Penny, or thousands of others that went to zero. Especially on a passive, buy it and forget it basis.

How can you sort through all the stocks, bonds & Mutual funds, to avoid the dogs and be left with the jems that are working for you?

I often hear touted XYZ etf is great nobrainer. Doubting Thomas here says WHY?
Why didn't you say how you came to pick that ETF over the 100's of others advertising the same thing?
Why are you certain that ETF won't take a proportional market cut during a correction, thus wiping out your gains?

When it comes to marketable securities I've picked a few winners, but I've bought my share of in the immortal words of Tommy Boy "If you want me to take a dump in a box and mark it guaranteed I got time." Most of my winners I contribute to luck, since I was looking at the same stats on both, PE, Dividend yield, Book Value etc.
I just do a lazy man's portfolio. Returns greater than 5 years ago I had a lot of cash ready to pounce on real estate. I have beaten the S&P or come close to it with just ETFs IVV, IVW, IWM, QQQ, DVY, HDV. I have beaten the MSCI World Index handily for 10+ years, which many (Fisher Investments) say is the gold standard.

No trading, no reallocation, no capital gains taxes. Sleeping well at night.
Attached Images
File Type: jpg returns.JPG (122.4 KB, 12 views)
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-21-2017, 05:53 PM   #109
Full time employment: Posting here.
hesperus's Avatar
 
Join Date: Aug 2013
Location: san juan mountains, co
Posts: 750
Quote:
Originally Posted by Luck_Club View Post

I wish others would do the same. Teach us how you get those 10% returns from marketable securities. How do you know for certain you have bought the home depot and not the K-mart, JC Penny, or thousands of others that went to zero. Especially on a passive, buy it and forget it basis.
I don't know, I kinda like the $18-20K month passive dividend/interest income we get from our portfolio, without having to juggle rental properties.
I could liquidate & plow half our eight figure portfolio into real estate and really shoot for higher income, but I don't want to manage rentals and take on that effort. I generally keep our real estate for personal use, and this actually does work toward my allocation goals. I have been there and done that with owning rentals. It's still work.

But Kudos to you for finding a way to get out of the mega corp world and blaze your own path.
hesperus is offline   Reply With Quote
Old 12-21-2017, 06:46 PM   #110
gone traveling
 
Join Date: Dec 2016
Posts: 733
Quote:
Originally Posted by hesperus View Post
I don't know, I kinda like the $18-20K month passive dividend/interest income we get from our portfolio, without having to juggle rental properties.
I could liquidate & plow half our eight figure portfolio into real estate and really shoot for higher income, but I don't want to manage rentals and take on that effort. I generally keep our real estate for personal use, and this actually does work toward my allocation goals. I have been there and done that with owning rentals. It's still work.

But Kudos to you for finding a way to get out of the mega corp world and blaze your own path.
I'm not fully done, but close.

My life is great, can't complain one bit. I've been blessed with frugal genes, and a modest intellect. The combination of which leads to a very comfortable life.

I'd love to find path to "truly passive" marketable securities. However, 2.16% doesn't make it happen. When the portfolio is only $1-2 mill, which is typical for the board, not much skiing happening on $1,800 to $3,600 a month.

Yep if you goosed the return to say 6% you'd have $50K a month Not that $18-20K isn't great to have for clipping coupons.

I WOULD LIKE TO FIND THE SAFE 5-6% RETURN IN MARKETABLE SECURITIES, as I'm sure many would.

I guess I still have the accumulation mentality, since my spend rate is under $5K a month, but want much more a month just in case.
Luck_Club is offline   Reply With Quote
Old 12-21-2017, 06:52 PM   #111
gone traveling
 
Join Date: Dec 2016
Posts: 733
Quote:
Originally Posted by Senator View Post
I just do a lazy man's portfolio. Returns greater than 5 years ago I had a lot of cash ready to pounce on real estate. I have beaten the S&P or come close to it with just ETFs IVV, IVW, IWM, QQQ, DVY, HDV. I have beaten the MSCI World Index handily for 10+ years, which many (Fisher Investments) say is the gold standard.

No trading, no reallocation, no capital gains taxes. Sleeping well at night.
Duly impressed what made you choose those, and would they take a hit if the "market" took a pause of say 10%-30%?

I'm meeting with 2 professionals in January, which I imagine are going to propose a watered down bowl of mush picks that barely beat inflation in good times. I have a decent amount of capital to put to work, and need to find a good safe short term parking place. Currently in CD's, because I totally got PO at the broker and liquidated it all saying we would rebuild after the first of the year.
Luck_Club is offline   Reply With Quote
Old 12-21-2017, 07:10 PM   #112
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 30,147
A couch potato portfolio of 70% Total Stock and 30% Total International Stock would have performed similarly.... per Portfolio Visualizer

YTD: 23.50%
3-year (Jan 2015-Nov 2017): 10.05%
5-year (Jan 2013-Nov 2017): 12.90%
10-year(Jan 2008-Nov 2017): 6.57%
Jan 1997-Nov 2017: 7.57%

Plus, these are for Investor class: Admiral class would be a little higher
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 12-21-2017, 07:31 PM   #113
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by Luck_Club View Post
Duly impressed what made you choose those, and would they take a hit if the "market" took a pause of say 10%-30%?

I'm meeting with 2 professionals in January, which I imagine are going to propose a watered down bowl of mush picks that barely beat inflation in good times. I have a decent amount of capital to put to work, and need to find a good safe short term parking place. Currently in CD's, because I totally got PO at the broker and liquidated it all saying we would rebuild after the first of the year.
Mostly random... I wanted index ETFs, and those are some f the major indexes. They are $0 commission at Fidelity. Also, some dividend aristocrats. They would likely follow the market in a 30% drop. That is where SS, Pensions, dividends and real estate income come in.

Maybe a dividend aristocrat ETF can substitute for a bond fund...
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-21-2017, 07:37 PM   #114
gone traveling
 
Join Date: Dec 2016
Posts: 733
Quote:
Originally Posted by Senator View Post
Mostly random... I wanted index ETFs, and those are some f the major indexes. They are $0 commission at Fidelity. Also, some dividend aristocrats. They would likely follow the market in a 30% drop. That is where SS, Pensions, dividends and real estate income come in.

Maybe a dividend aristocrat ETF can substitute for a bond fund...
I've got a fidelity account, I'll give them a look.
Luck_Club is offline   Reply With Quote
Old 12-21-2017, 07:47 PM   #115
Recycles dryer sheets
 
Join Date: Aug 2017
Posts: 182
I looked at return and volatility and sdy returns 0.5 % more than spy wit nearly identical volatility. It's a stock
Doc0 is offline   Reply With Quote
Old 12-21-2017, 07:52 PM   #116
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 30,147
Doc, the subject had changed....
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 12-21-2017, 08:10 PM   #117
Recycles dryer sheets
 
Join Date: Aug 2017
Posts: 182
Oh? what's the subject pb? I thought we were talking about substituting an aristocrat etf for a bond like it says in the message before mine
Doc0 is offline   Reply With Quote
Old 12-21-2017, 08:22 PM   #118
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 30,147
ok i guess that you got it ... your post was a bit cryptic.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 12-21-2017, 08:25 PM   #119
Recycles dryer sheets
 
Join Date: Aug 2017
Posts: 182
Thanks for the validation. Doesn't seem cryptic to me looks like a stock quacks like a stock...
Doc0 is offline   Reply With Quote
Old 12-21-2017, 08:36 PM   #120
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 30,147
What made you think that anyone thought that it wasn't a stock?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Where Does Real Estate Fall into this Asset Allocation? nico08 FIRE and Money 1 11-04-2010 10:53 AM
Real Estate, Trusting Stocks & Asset Allocation msbearkeley FIRE and Money 7 03-28-2010 06:20 PM
Study: Alcohol can be a partial substitute for exercise REWahoo Health and Early Retirement 14 01-29-2008 05:10 PM
Real Estate Agent in Down Real Estate Market TromboneAl Other topics 4 06-09-2007 10:20 AM
No substitute for experience John Galt Life after FIRE 9 02-08-2005 02:31 PM

» Quick Links

 
All times are GMT -6. The time now is 08:02 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.