Here’s the thing with stocks, the millionaire next door strategy worked in the 70’s – 2000 because the market only went up. Since 2000 we’ve seen 3 crashes and massive quantitative easing.
I believe the US government wants citizens to put money into their 401K’s so the workers have to work until they are in their 60’s thereby ensuring companies have employees long term.
By putting money in the popularized 401K’s and the primary home, an employee is storing all their wealth in locations untouchable to a young or middled aged person. Plus any maintenance or renovation costs to the primary home are not tax deductible. Paying more on taxes is yet another way the government prevents young and middle aged people from retiring early as “The American Dream” of owning a house was created by the banks in the first place to get them rich!
The current stock market index continues to hit all time highs – we’re in the 10th year of a bull market. Based on the principle’s of economics, a correct needs to happen.
The main reason I see a correction has not happened is the continuous quantitative easing the Federal Government keeps engaging in which is artificially inflating stock market prices to unhealthy levels.
This is not good news for investors who own a lot of stocks and are living off the dividend income from those stocks. If your portfolio drops 40% for one year, that’s 40% less money to live on and 40% less portfolio wealth to make a living on. The worse part is the rise and fall of the stock market is entirely out of your hands. You just hope the market keeps going up or stabilizes so as not to eat into your investment profits.
I’m not talented enough to know how to make money in a stock market crash. Puts, calls, options – these ideas are what should be executed but I don’t know how to do that successfully.
So I must ride it out.
People do need shelter whether or not the market is going up or down. You need to live somewhere.
For this reason, along with debt, taxes, and phantom income reasons, I’d like to put my hard earned money into rental properties. Then into stocks (to grow long term i.e. compounding).
House hacking is the most cost effective way to build wealth. In my humble understanding house hacking is the best way to build wealth over the long term. Gradually your net worth will grow as tenants amortize the mortgage, equity is grown, depreciation occurs, and if you’re good or lucky cash flow and appreciate happen (which are speculative returns).
The only way for net worth to grow quickly is by the sale of a business or an asset. Boom $100K gained.
Now what do you do?Invest the money in real estate. The stock market. Or an online business.
The stock market is straight forward but you need a lot of capital in the market to be financially free.
Real estate is illiquid but the best asset class provided you have the necessary experience and education in this space, which takes around five years of active investing in real estate.
Online businesses have the greatest scalability and opportunity to make lots of money quickly.
All of these asset classes, real estate/stocks/business, have their pros and cons. There is no one size fits all asset class for investors.
The best asset class comes down to passion, temperament, skills, experience, and opportunities.
The worse thing you can do is not pick one asset class to build substantial positions in. Rather opting to just sit on your hands. You’ll never be financially free with that strategy.
A wise man once told me ‘you need to pick something, give it your all, obsess over it, then in 3 to 6 months decide if it’s really something you want to do.’