Apocalypse Budget: retirement vs. real estate?

Caveat: I ask this question with a lot of tongue in cheek, but also with a dash of serious curiosity.

During times of national and / or global problems, do you think it’s better to have long-term savings in a retirement account (which depends on stock market health) or in carefully chosen properties to be rentals? Obviously there are risks either way and both methods are only truly successful if you put money back into them on a regular basis. 

This has been on my mind lately given how much my retirement investment account has lost over the last couple weeks and how much crazy growth my town has been experiencing for the past 10 - 20 years. 

I’m not so worried about our current situation because I have at least 25 years before I retire (if then even) and I trust things will stabilize over the next  couple years as we get herd immunity. 

But what about the next pandemic... or war ... or other catastrophes?  How well will an investment account serve me then?  Am I making a mountain out of a mole hill? 

Thanks for speculating / imagining along with me! :-)

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  • Usually you have to trade higher risks for more rewards.  If you don't like seeing your balances going up and down you can ignore them (that's my method) or use more bonds, but you'll have to have a higher savings rate the more bonds you use to try to smooth out the bumps.  There's no such thing as a free lunch.  

    I would take the time right now to ignore your balances and read the Random Walk Down Wall Street book. 

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  • As PhysicsGal says, stocks have a higher expected return than bonds because they're risky. And not just day-to-day volatility, but the big nobody-saw-it-come systemic shocks.

    You wrote:

    Silver Deer said:
    During times of national and / or global problems, do you think it’s better to have long-term savings in a retirement account (which depends on stock market health) or in carefully chosen properties to be rentals?

    The words "market-timing" are hanging over this question. We're not financial advisors, but I can certainly say in a general sense that since almost no professional investors can time the market successfully, you and I have no chance whatsoever.

    That means our best bet is to have a plan and stick to it. Ideally, that plan will answer these questions:

    1. How should I invest? What percentage of my money goes to stocks? Bonds? Real estate?
    2. When should I rebalance my portfolio?
    3. Should my investment strategy change over time as I get closer to retirement?
    4. What should I do when things get ugly out there, because they always do?

    There are only two things in investing we can control:

    1. How much am I paying for my investments? (Less is better.)
    2. How much risk am I taking? (Taking risk is necessary for most investors, but avoid taking more risk than you need or are comfortable with.)

    Good luck out there!

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  • Thank you, PhysicsGal and Matthew !  I will do my best to just ignore that account for now.  Time for more sewing. :-) 

    Like 1
      • PhysicsGal
      • Nerdy female homo sapien
      • physicsgal
      • 7 mths ago
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      • Reported - view

      Silver Deer I literally just deleted my retirement accounts from my Mint account so I don't have to see my balances every time I log in.  This is a part of the process, the downs and the ups, that's how the market works.  With investing, IMO, the easiest and least effort is also ideal, that's why I like my one stop shop target retirement fund.

      My response to this market drop has been to increase my investments into my retirement account.  I just wrote an IPS last month, that tells me to invest the extra money that was going to go to debt payments when there is a market dip that drops the value of my retirement fund (Vanguard TR 2045) by 15% or more.  So now I'm investing more, not less. And ignoring the market even more than I was before.  This is my first real bear market, since I started investing in my Roth 2008 after the market started to collapse.

      On thing that helps is just not really thinking of the money you have invested in retirement as real money.  Since mine is all in retirement accounts, I don't think of it the same way as I do my normal on budget money.  That money is there to just sit and ride the ups and downs until I retire.  It may be hard to transition off this way of thinking someday when I need to start spending that money, but for now it works for me.

      You might also consider writing an IPS for yourself when you're feeling calm and collected, so that you make your investment decisions without emotional attachment to current events.


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      • TechieM2
      • IT Professional and General Geek
      • techiem2
      • 7 mths ago
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      PhysicsGal My retirement and investment accounts other than the Vanguard one that just sits in the holding fund are all off budget tracking accounts.  My old 401k and my 403b I just update the balance on now and then.  My ROTH and my M1 investment account I don't even do that, for now I just track how much I've contributed to them since those are funded by outflows from my budget.

      I'm also years away from retirement, so definitely in the just sit and see camp.  If things are still down when I get my tax refund, maybe I'll toss a bit extra into the Roth and M1.

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