So...where do I put my money?

[LRAO]

in the introductory section, I've already given a background....so now here's the dilemna...

where do I put my money? (I'm willing to take moderate risks, and am looking to play it smart and minimize my capital gains taxation, in other words, hold on for 12+ months.)

I've maxed out my IRA for the year, and depending on what my AGI ends up at, I'll switch b/t a Roth and a traditional if I go over.

I'm putting money away into the SEP-IRA, BUT...

I need to be liquid. I have $15,000 in my ING account, but 2.2% seems pathetic. My personal plan is to buy real estate in 2006-7, as it is my belief that So Cal RE prices will become more reasonable/less insane. I want to do RE because it is already a budding family business and a legitimate interest of mine.

So...where do I put my money?

 

[brewer12345]

A couple of thoughts:

- Why an SEP-IRA instead of a solo 401k? The solo k seems like a better, more flexible instrument, assuming you are the only employee.

- You have a 2 to 3 year time horizon for the RE money. That means you realistically have two choices: either you pick something that will give you the money in 2 or three years with certainty and accept a low return, or you pick something that may or may not give you back your principal plus a return but does offer the possibility of a higher return. TANSTAAFL. If you are really serious about buying RE in a couple of years, I would either leave the money in an ING savings account, or I would find a two year CD for the highest yield available. If you think there is a reasonable chance you will not be investing in a couple of years (maybe SoCal RE will still be insane), I might be inclined to invest in something that looks something like RE (ie good cash flow, tax advantages, some kind of had asset, probably some leverage juicing returns).
Options for the latter might be REITs (which look pricy to me) or a publicly traded partnership (there are many). Both of these types of investments would be less volatile than equity indexes, and should be pretty easily liquidated in case you ran across the RE deal of a lifetime.

 

[LRAO]

Hmmm....

Thanks for the input. Here's what I figured out today:

The SEP allows me to put away 25% of my PTI, up to $41,000.

The 401(k) allows me to put away $13,000 and 25% of my PTI, up to $41,000 combined.

So, up to $112,000 of PTI, the 401(k) plan is better as $13,000 + ($112,000*0.25) = $41,000.

With $140,000 of PTI (what I'm scheduled to make), I would only be able to contribute $35,000.

So, you are right. The 401(k) is better. Dammit. Vanguard doesn't offer a single employee 401(k). I guess I will have to switch/rollover to Fidelity. Well, I guess I can now get that Fidelity CC (1.5% rebate into a Fidelity account).

As for liquidity, I'm looking heavily at the Vanguard Short Term Bond Index Fund at this point.

I don't know enough about REITs or PTPs to invest in them.

What does everyone think about Realty Income (NYSE: O)?

 

[John Galt]

Here's what I figured out today:

It takes me just under 2 minutes to fillet a catfish.

Martinis don't taste good when you dump leftover
pickle juice in with the olives.

It is very difficult to restore a motorcycle helmet to
respectability by painting it after it is scuffed and
scratched. (Even more difficult to restore your head
if you don't wear a helmet).

If you make it to 85, you will spend a lot of time going
to doctors.

Shop around and negotiate. There is always a better
deal. Always!

If you own dogs and decide to wipe your hands on the grass, be careful where you do it.

John Galt

 

[LRAO]

Haha.

Do I consider it an honor to be made fun of by the one and only?

Thanks, guys!

 

[brewer12345]

Hmmm....

Thanks for the input.  Here's what I figured out today:

The SEP allows me to put away 25% of my PTI, up to $41,000.

The 401(k) allows me to put away $13,000 and 25% of my PTI, up to $41,000 combined.

So, up to $112,000 of PTI, the 401(k) plan is better as $13,000 + ($112,000*0.25) = $41,000.

With $140,000 of PTI (what I'm scheduled to make), I would only be able to contribute $35,000.

So, you are right.  The 401(k) is better.  Dammit.  Vanguard doesn't offer a single employee 401(k).  I guess I will have to switch/rollover to Fidelity.   Well, I guess I can now get that Fidelity CC (1.5% rebate into a Fidelity account).

As for liquidity, I'm looking heavily at the Vanguard Short Term Bond Index Fund at this point.

I don't know enough about REITs or PTPs to invest in them.  

What does everyone think about Realty Income (NYSE: O)?

Yeah, as a Schwab client, I was somewhat annoyed that they do not offer solo 401ks, but I guess that the retirement plan biz just isn't that big for them. Fidelity OTOH is a monster in that field, so it is easy for the to offer the product extremely cheaply (by far the cheapest I have found). My wife is doing her own thing as an independent career counselor on a part time basis, so all her earnings will be getting dumped into the 401k (I don't expect her to top $13k this year, and maybe not next year either, so the solo k allows us to dump the most in).

Can you give me the name of the Fidelity card (or a link)? Sounds interesting.

I think a short term bond fund isn't a bad idea, but it isn't clear to me whether the slight pickup in yield is worth the NAV fluctuation, compared with an ING account. I am still on the fence, but a yield difference of maybe 100 BP would probably convince me to switch. Not there yet, though.

The beauty of REITs is that you don't have to pick a specific one, you can just buy a REIT ETF or fund. You would have to decide whether you think that the asset class as a whole is worth investing in, though. Personally, I like the exposure, but I think that REITs are too expensive right now.

With PTPs you really do have to pick individual ones, as ETFs don't exist (and the tax filing would be a nightmare if there were a PTP ETF). The advantage of PTPs is that most of them are in pretty straightforward businesses that are not that hard to understand. I like FUN and SPH, although both are a tad expensive right now.

 

[LRAO]

http://personal.fidelity.com/products/retirement/

Click on investment products, drag to cards/checking and go from there.

I have the Vanguard REIT index fund in my SEP. YTD is 13.91%, 16.13% since I started putting into it.

 

[Nords]

MBNA's Fidelity-linked credit card

Brewer, try this link-- http://personal.fidelity.com/accounts/services/index_sitemap.html?refhp=c -- for Fidelity's MBNA credit-card offer. I think this link works for non-Fidelity customers but I'm not sure what my browser cookies are giving me.

I've had the card for a couple months and it's just OK. MBNA has the direct-mail system from hell so you have to be aggressive at "Do not mail" requests, especially those stupid "convenience checks" with the hidden fees. They also refuse to turn off their mailing of paper bills because they stuff the envelopes with more advertising. They won't even e-mail you when your account posts its monthly statement so you have to jump right on the bill-paying.

As th has pointed out in other posts, MBNA also has some of the stupidest customer-service scripts I've ever encountered. They "lost" my Fidelity account number so the 1.5% rebate balance kept piling up on the card statement (instead of in my brokerage account). I called last week to find out why I wasn't getting my quarterly rebates and they confessed. I provided the number and asked when I'd get my rebate. They said "This quarter, end of December." I commented that in Hawaii's time zone the quarter would end on 30 September. That caused some confusion so I cut out the jokes and said that they were giving themselves nearly four months instead of over two weeks to credit a refund to an account. They said that they'd probably get it done before the end of Sep but that they "Didn't want to give me unrealistic expectations".

It's the best rebate rate I've had so far, it's more widely accepted than Discover, and it doesn't have an annual fee (like USAA's credit cards used to). OTOH it gives me plenty of opportunity to fight unsolicited offers & customer-service personnel. I'll stay with it until something better comes along.

 

[brewer12345]

Thanks for the stuff about the card.

LRAO, the meteoric rise of REITs this year is exactly what makes me nervous about dumping money into them, but YMMV.

 

[John Galt]

I have a pile of credit cards. MBNA is my favorite.
Why, just the other day I had a problem (mostly
me not paying attention), called customer service
and they fixed it right away. My experience has been
100% good with them. They even had my IRA for a while
when CD rates were higher. Again, no problems.

John Galt