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Posts Tagged ‘retirement’

Earlier this week, the inadvertent farmer described her dabbling in real estate as a vehicle of financial independence.  In a similar way of thinking, I thought I would describe how we deal with investing.  Like she said, this may seem a little off topic but I suggest that the “norm” in stock market investing has little to do with what I will be discussing.  Let’s consider the “not-norm” in investing.  Believe it or not, there are ways to not lose your shirt and not panic every day as the stock market closes.  To be sure, it is not for everyone and you can definitely lose money at the stock market game, but it’s also possible to be ok too.  I am no stock market guru or advisor so take what I say with a grain of salt…this is just what we do…

Ouch...not a good day

A lot of times, when one thinks of investing in the stock market, we think of some poor person staring at a computer screen, either waiting to push a buy/sell button, hoping to time it just right or of someone ready to jump off the edge of a cliff because that hot stock tip overheard in the restroom didn’t pay off and his lifesavings is lost.  One can absolutely trade like that and while you can win big, more likely than not, unless you are a brilliant business person, you will lose big.

Most people look at the stock market all wrong.  We don’t usually go buy a new car because someone mentioned something about the latest model in the restroom.  We don’t buy our house on a whim or because it has the biggest for sale sign in the front yard.  In most every investment/purchase you make, you do research.  You aren’t thrown about by the whims of people around you.  You take your time and do it cautiously.  Why on Earth would you treat your retirement or lifesavings any differently?

Huh?

But gee whiz, I don’t really want to research the bazillion stocks and mutual funds and all that stuff.  How do I do research then?  I prefer to let other experts sort of take care of that for me.  Enter Lazy Portfolios.  Rather than trying to buy a bunch of individual stocks that can easily rise and fall based on totally unforeseen or uncontrollable events, lazy portfolios direct the investor to regularly and faithfully invest in mutual funds or exchange traded funds (ETFs) that sample large portions of various markets.  For example, you might make an investment that is comprised of all the stocks in the S&P 500 by buying one mutual fund.  You’ll own a representation of a ton of stocks with one purchase of these vehicles.    It spreads your money across sectors/ regions/etc so all of your eggs are not in a single basket.  While very few investments of any sort have done much in the last 2 or so years, several example lazy portfolios have done pretty ok, all things considered.

Of the lazy portfolios in the previous link, I like the Second Grader’s Starter…that’s exactly how we invest.  It has a representation of the entire US stock market, a total representation of the international market, and a representation of bonds.

We buy portions of all three every other week…not a huge investment, but a regular investment.  Sometimes we buy high, sometimes we buy low.  In the end, we are betting on dollar cost averaging (check this idea out!) to level the ups and downs.  I don’t try to time the market.  I don’t try to tell the future.  I just buy and hold.  Over time, my investment compounds.  I don’t panic when the market slides (though I do celebrate when it rises…shhh…don’t tell!) because I know I am going to be buying low and holding.

Slow and Steady

Warren Buffett, the Oracle of Omaha (read more about him…fascinating even if you’re not an investor) equated this idea something similar to buying hamburgers.  He said that his household like hamburgers.  They don’t celebrate and go buy lots of meat when the price of beef goes up.  Quite the opposite, they are happier when they can buy it at low cost.  If you buy quality stocks/bonds/mutual funds/ETFs that way, you can expect that buying low today will be a good thing as their prices will eventually rise (buying junk is always a bad idea of course).

Like I said, stock market investing is not for everyone, but if you look at it with a perspective other than “normal”, you may want to give it a try.  There are lots of places where you can set up automatic investing strategies with low cost transactions and low/no minimum starting values (I like sharebuilder.com).

Do any of you folks dabble in the stock market?  What are your investment strategies?

Warren can also be found at My Home Among the Hills writing about the adventures of life in WV.

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I was hesitant to write this post.  I was not sure if it fit in here with the chickens, homesteading, and gardening…but I have been asked so many questions about a recent remodel that we did for our newest rental I thought I would try to answer some of them here.

Why here?

Well the writers and the readers of this blog are an independent, hardworking bunch that don’t always follow the same path as the rest of the ‘normal’ world.  So discussing financial freedom through a less than common means seems appropriate here.

First of all we did not set out to own rental houses.  Just a year after we purchased our first home my husband took a job across the state.  We tried our best to sell our home but couldn’t.  We were left with no option that we could financially manage except to rent it out.  It rented quickly, we asked just enough to cover our  mortgage with taxes and insurance.  As complete novices we lucked out and got great renters that ended up staying there 20 years!

When we purchased our next home across state  it needed a lot of work...a lot! Being young and eager to learn we took it as a challenge to remodel our own home.  We learned to strip wood molding, lay flooring, hang wallpaper, re-plumb, re-wire, put in new bathroom fixtures, and a whole host of other skills that would serve us well over the next 2 decades.

When it was done we looked around and grinned at each other…”want to do it again?“.  So on to the next house we went.  Instead of selling the original home we decided to rent it out.  How could we afford a down payment without selling the other house? Well we saved up for the down payment,  just like people do on their first house.. Instead of doing the typical move up to a bigger and more expensive house we purchased another just like the one we were in.  In fact it was only 2 blocks away and a little less money than the first!  It again needed tons of work.  This time we tackled an addition as well as the usual jobs.  Mark some more skills off our need to learn list…roofing, siding, framing…check!

We again moved across state and ended up selling the home we had just finished and use the money for a down payment on the next house plus a decent nest egg to use when we found another real estate purchase.  The very first house was now a rental, the second was also a rental, the third was sold.

We did this 3 more times moving, remodeling, renting…we now had 5 rentals.

All the while we were searching for somewhere to build…somewhere in the country with acreage.

We had to search for a few years until our current property was finally found…flat place to build, south facing, no busy road, property for my parents, room for animals, and of course room for a garden! As the farmer who owned the property would not just sell us the 15 that we wanted we bought 38 acres in total.  I would have LOVED to have kept the whole 38 acres and lived there just my family and my parents.  But my husband wanted to have a home that was debt free…besides I think he might have been worried about how many animals I would acquire if I had that many acres to fill!

We sold 2 rentals to come up with the down payment we needed.

So we divided, improved, and sold 23 acres.  We made enough money to build our house without a mortgage.  This also gave us the freedom to be our own contractors, do much of the work and build at our own pace which would not be possible if a bank had been involved.  The skills we learned from remodeling were put to good use on the construction project.  It is an experience I will always look back on and be glad I did.

Now I am not going to try to fool you and say that owning rentals is for everyone.  We can make it work because we know how to fix a sink or patch a roof…if we had to hire this done it would be hard to be profitable.  We also are very diligent to screen our renters. Lastly we are fair landlords who ask a fair rent, enough to cover our expenses but we do not make lots of extra money each month.  We could ask more, but we don’t.  We appreciate that  affordable housing in nice neighborhoods is a rarity. We like that we rent to working families who treat our homes well in part because that have been treated well.

We have found that investment in real estate has been more dependable and more profitable than any other ways we have tried to invest for our future.  As long as you don’t speculate, flip, or otherwise try to ‘get rich quick’ with real estate, because this journey has been neither quick nor easy. We have spent countless hours on our knees laying tile, and fishing wire.  But it has been a journey of much learning and much reward.

Oh and by the way…we are still not done with our house! I am hoping to start baseboards this summer!

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