Personal Finance/Investments Question

[jwoodie]

There seems to be a growing consensus that rising interest rates and/or inflation are on the horizon. I am wondering what individuals of modest means can do to protect themselves from the resulting reduction in their purchasing power and net worth.

Historically, loading up on long term low interest mortgage debt has been a successful strategy; however, the current real estate market is being propped up by low interest rates which could rapidly change affordability. For those who can purchase for cash and don't mind being landlords, income property seems like a good bet. For the rest of us, I don't have a clue.

Any thoughts?

 

[Spoonman]

There seems to be a growing consensus that rising interest rates and/or inflation are on the horizon. I am wondering what individuals of modest means can do to protect themselves from the resulting reduction in their purchasing power and net worth.

Historically, loading up on long term low interest mortgage debt has been a successful strategy; however, the current real estate market is being propped up by low interest rates which could rapidly change affordability. For those who can purchase for cash and don't mind being landlords, income property seems like a good bet. For the rest of us, I don't have a clue.

Any thoughts?

vote republican

If you can afford it, income property is a great bet. let the renter and uncle sam pay for your property. you can buy a lot for your money right now. if you're investing, I'd say go with stocks that pay good dividends. the market is going to continue to bounce all over. If you have the stomach for it look for stocks that seen dead in the water. a favorite of mine has always been american airlines. since december I've made 5 times my money with them. the trick is knowing when to get out because they are like a seesaw.

 

[jwoodie]

I'm afraid it's too late for that- $20 trillion debt by 2017. The only question is who gets blamed.

BTW where do I find AA stock?

 

[Spoonman]

I'm afraid it's too late for that- $20 trillion debt by 2017. The only question is who gets blamed.

BTW where do I find AA stock?

AMR Corporation (AAMRQ)

 

[ReallyMeow]

vote republican if you want yet another fiasco produced by lax market oversight and have the capital and connections to properly exploit the market turbulence. If you want a healthy market, vote democrat.

If you dont already have one, an ira is essential. start here, but get real tax advice on the details.
Publication 590 (2012), Individual Retirement Arrangements (IRAs)

 

[PaulS1950]

IRAs, 401k and similar funds are worthless unless you work for a company that still contributes a high percentage of what you invest and you level of pay is high enough that you can afford to put money into it. The interest on your money is very low, the management costs can be high and unless you can control the specific investments you are at the mercy of the management group. Government bonds are a high risk - low return investment that no one should invest in. Gold and silver will protect you from inflation but the value does not increase so you alway end up with slightly less than you invest because of trading fees. There are investments that are good for the long term but if you want to make a lot of money fast your choices are slim at best.
I have stocks in food production and supply companies - slow growth but growth, certain high-tech companies that produce good results but the stock prices are high and usually require a minimum level of investment - not a good choice for the average guy supporting a family.

It takes a lot of work to find stocks that pay above average returns and still have low cost stocks. There is always risk involved when investing in another's business - a change of leadership or in a government policy can cost you a lot in a very short time.

If you have good credit and an above average wage then property (not homes - just land) can be a great investment but you have to get the property at very low prices - have it surveyed and then break it into smaller "lots" to sell the unimproved land. Banks don't like to loan money on unimproved land because it is too hard to unload if they have to sell it to redeam a default so it takes a lot of disposable income to procure the land.

 

[Toddsterpatriot]

vote republican if you want yet another fiasco produced by lax market oversight and have the capital and connections to properly exploit the market turbulence. If you want a healthy market, vote democrat.

If you dont already have one, an ira is essential. start here, but get real tax advice on the details.
Publication 590 (2012), Individual Retirement Arrangements (IRAs)

vote republican if you want yet another fiasco produced by lax market oversight

Really? What market oversight did the Republicans miss?

 

[ReallyMeow]

vote republican if you want yet another fiasco produced by lax market oversight

Really? What market oversight did the Republicans miss?

the subprime housing market was the direct result of the lack of regulation on the market, the loan makers lied to the loan repackagers, the loan repackagers lied to the ratings agencies, everyone lied to investors.

RAs, 401k and similar funds are worthless

at the least, its a tax writeoff, only at one end or the other, but its something.

The interest on your money is very low, the management costs can be high and unless you can control the specific investments you are at the mercy of the management group.

I agree, fees eat you alive.
Self-Directed IRA - Wikipedia, the free encyclopedia

 

[Toddsterpatriot]

vote republican if you want yet another fiasco produced by lax market oversight

Really? What market oversight did the Republicans miss?

the subprime housing market was the direct result of the lack of regulation on the market, the loan makers lied to the loan repackagers, the loan repackagers lied to the ratings agencies, everyone lied to investors.

RAs, 401k and similar funds are worthless

at the least, its a tax writeoff, only at one end or the other, but its something.

The interest on your money is very low, the management costs can be high and unless you can control the specific investments you are at the mercy of the management group.

I agree, fees eat you alive.
Self-Directed IRA - Wikipedia, the free encyclopedia

the subprime housing market was the direct result of the lack of regulation on the market,

Didn't the government encourage banks to lend to less desirable borrowers?

the loan makers lied to the loan repackagers, the loan repackagers lied to the ratings agencies, everyone lied to investors.

Were all subprime loans lies?

 

[ReallyMeow]

Really? What market oversight did the Republicans miss?

the subprime housing market was the direct result of the lack of regulation on the market, the loan makers lied to the loan repackagers, the loan repackagers lied to the ratings agencies, everyone lied to investors.

at the least, its a tax writeoff, only at one end or the other, but its something.

The interest on your money is very low, the management costs can be high and unless you can control the specific investments you are at the mercy of the management group.

I agree, fees eat you alive.
Self-Directed IRA - Wikipedia, the free encyclopedia

the subprime housing market was the direct result of the lack of regulation on the market,

Didn't the government encourage banks to lend to less desirable borrowers?

the loan makers lied to the loan repackagers, the loan repackagers lied to the ratings agencies, everyone lied to investors.

Were all subprime loans lies?

Yes the govt would insure loans, but only within reason. the sub prime market specifically avoided participating with f+f because they would ask for pesky things like documented sources of income and job history. Why go for petty millions in govt money when there are trillions of dollars in private investment money held by gullible rubes that will buy anything marked AAA? f+f did eventually get sucked into the mess, when the hud decreed that f+f were lagging behind its public market counterparts and forced them to buy hundreds of billions of garbage cdo's.



Causes of the United States housing bubble - Wikipedia, the free encyclopedia
Causes of the 2007?2012 global financial crisis - Wikipedia, the free encyclopedia
Subprime mortgage crisis - Wikipedia, the free encyclopedia

By some estimates, more than 84 percent of the subprime mortgages came from private lending institutions in 2006 and the share of subprime loans insured by Fannie Mae and Freddie Mac decreased as the bubble got bigger (from a high of insuring 48 percent to insuring 24 percent of all subprime loans in 2006).[164] Critics of government policy argued that government lending programs were the main cause of the crisis,[165][166][167][168][169][170][171], the government sponsored Financial Crisis Inquiry Commission concluded otherwise.

http://www.hsgac.senate.gov//imo/media/doc/Financial_Crisis/FinancialCrisisReport.pdf?attempt=2


So let me tie this back onto the topic- the housing market is still backed up, full of people that are stuck in houses they overpaid for, that no one has the money or inclination to buy. its a rotting pile of timber which comes with legally binding chores, and a tax for owning that rivals what you would otherwise be paying in rent on top- only ever buy a house as a home.

What is good? Things people need. Buy stock in the companies that you feel do the best job at creating products to meet that need.