Investment Newsletter for the end of October, 2016

The Dow was down this month by 166 points in total. Lots of back and forth excitement. Lots of the “world is ending” election news. In the end, the market was essentially breakeven. And the TV pundits are still exaggerating or making up reasons for ratings.

Today’s topic is real estate, not a stock market topic at all. It is, however, an investment topic. After all, your net worth includes all your assets; your stocks, mutual funds, bonds, the gold you have hidden in the safe in your closet (everybody knows about it), and real estate. The point of portfolio management is to manage your total net worth.

Each type of asset has an up and down curve. The different curves will differ from each other. But everything goes up and down. Right now, the stock market is going sidewise. The real estate market is going up insanely. Or are the buyers insane – interesting question? The house across the street from me sold in 3 hours. I am sure there were multiple offers. The real estate curve will not always go up. There are down turns also. The buyers are getting sucked up by the emotion and are becoming desperate. I.E. It’s a bubble.

I have had clients pull money because everyone they know was making money on real estate. That would be running with the herd or more exactly behind the herd. It is not very smart. I am the guy facing the stampeding very thirsty buffalo herd with the only water just behind me. That makes me very smart.

I personally do not want to buy anything, stock or real estate, when the buyers are desperate. I want the sellers to be desperate. I want to buy cheap. Four years ago, I bought a townhouse in a short sale. It was a week short of foreclosure. It is now worth almost double what I paid. The good people who were forced to sell it bought it at the top of the prior bubble. During the last crash, real estate agents were driving trucks and working as clerks to survive. That is the right time to buy. And, it happens on a regular cycle and it will happen again.

I have made the point many times that the more up and down pistons there are in a portfolio, the lower the overall risk will be. Therefore, I can achieve higher overall return for the same amount of risk. The reason is because the curves are going up and down at different times. Real estate is excellent at diversifying stock market risk and vice versa. I believe rental properties have a legitimate place in a portfolio. That does not mean that I should buy stupid.

Personally, I am accumulating my cash (properly invested of course) waiting for the next desperation stage of the cycle. I have no problem waiting three or four more years.

I know many of you will disagree but I do not consider your home to be a pure investment. It is at best a hybrid of investment and personal consumption. Your intention is to live in it not to resell it at a profit. You can and will do many things to your home to increase its magnificence, its joy to you. They will not increase the sales value. Your new kitchen cabinets, deck, vacuum system will not increase the house sales price as much as they cost. You did these things for you. An investment property has a different attitude. You do what you have to but usually not more. Profit is the agenda.

Thanks for your attention.


Fee Structure

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. Please contact me if you want me to write about a particular topic. If you would like to submit a post to my blog, please contact me.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

Did my newsletter make sense? Do you agree or disagree with what I said?

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