As toothsayer wisely points out - people are stupid. A lot of the stupidity comes from listening to the news constantly talk about when the market is down and how scary things are even when things shouldn't be scary at all. People also like real estate because they can see and touch it somehow making it more safe in their minds.

How are gains on real estate you live in taxed in the US?

Here in Copenhagen, gains are tax free, and with 'standard' 4:1 leverage (a good % of the interest expenses are deductable) a lot of people also earn a ton on that if you buy an apartment (ie low maintenance) or a house w good location, given that the # of inhabitants has just been increasing every single year in like forever. You can obv run into bad timing of the purchase (where the leverage, in the short term, might crush your equity), but that goes for stocks too. Lack of diversification is an issue though, unless you have a lot of money, and there's a potential liquidity problem too.

Compare that to 42% taxation on gains on stocks here.

Property makes sense in some places. I've owned property before when it was a bargain AND unique/desirable AND net rent yield over 10% (unleveraged, cash paid). If it's heavily taxed advantaged too it makes more sense.

I can't imagine why anyone would own property with a gross yield below 8% or so. Seems nuts. Apart from stocks, if you really want real estate, you can own a REIT without the 10% of principal transaction costs, and have quality commercial tenants, monthly dividends, it's like ultra liquid property.

Totally forgot about the tax lol. In the UK it appears it could be capital gains tax of I think 18% to 28% when you sell your shares (once you are over your £11000 tax free allowance). I may be wrong.

If you invested in US shares and no longer were resident and in the UK would that affect the tax .So confused. It's only a day ago that I truely witnessed the wonders of compound interest fully, now I'm gutted I didn't pay attention to this concept twenty years ago haha.

Total investment noob here. Did some playing with compound interest math today about selling some investment property I own.

Can I please get a sanity check on this concept: I cash flow about 2000 per year on this property after taxes and have 65-75k equity in it.

I can sell it and pay off some other debts at 0% and 3% interest for about 50K. I can free up $8500 per year in debt service by doing so. These are obviously low percentages on the debt.

Playing with the calculator it appears that adding a contribution of 8500 on top of my baseline savings contribution to a principal balance of low six figures is 5-7% better over time than adding the baseline only to 50k more principal over a period of 15 years.

Either way I'm coming out way ahead on this property by selling it I think based on the future capital gains vs the cash flow and equity build in the property I would've realized meanwhile.

Any advice appreciated or if there's a better noob thread please link it.

Is there something I'm missing here? The debt seems too cheap to pay off but the math seems to indicate otherwise.

I don't really care about market volatility in this case.

Are you accounting for the fact that you won't be servicing your debt for the entire 15 years?

30K of the debt is student loans at 3% with about 15 years remaining

Maybe I'm misunderstanding. But it sounds like in one scenario you're assuming you're spending $8500/year on debt payments (~130K). But in the other scenario you pay off all your debts with 50K right now.

It doesn't sound right that 50K of 0% and 3% takes 15 years to pay off at 8500/year.

Yeah you're right I need to make a more complex model that accounts for payments in the medium term as the debt is paid off. Thanks.

Paying off debt that is at 3% or lower seems bad to me. Wouldn't it be better to just put the money in equities (unless very close to retirement)?

Along the same line of thinking, can you take the equity out of the property at a low interest rate and invest the money?

Yeah it's better not to pay it off in a lump sum now that I've ran the numbers properly.

As to whether or not to sell it at all, that's a whole different question.

Im not too close to retirement. 10-15 years depending on how things go.

I guess while I'm here I have another general portfolio building question.

I'm gonna be pouring money into the market for the next 10 years.

I'm looking to build a core portfolio using a mix of vanguard market index funds domestic and international and 2-3 ETFs focusing on small cap value securities. For individual securities I tend to pick value investments in medium to large cap dividend paying companies. Not too much analysis there nor do I do any on my own for lack of education. So this is a pretty rough guess.

My goal is to buy and hold splitting the money between the core portfolio and individual securities for the 10 year term at least and more likely 15-18 years. Looking for passive growth investments, don't really care about too much volatility due to dollar cost averaging.

Does this seem like a solid strategy? Too conservative? Any general or specific suggestions are welcome or do you need more information to help me plan? Thanks in advance.

Why pick specific securities if you don't have any real skills around that?

I have a broker that I think is good: he's crushed the market for a family member for 20 years, and because it's fun?

I was also thinking that the volatility in individual securities would help with tax loss harvesting once it comes time to start selling off.

If it's for fun - then cool. But fun as a goal isn't really part of a solid investing strategy.

I'm not familiar with all of the tax implications here but I think going with an ETF that generally tracks the kind of companies you want to hold individually is better.

Thanks jj. Mostly my wife thinks that one can make money picking stocks and I figure that as a part of a larger diversified portfolio with good advice from our broker we're not giving up much on average by having them included.

You're increasing volatility for no increase in expected return.

Got it. So is the alternative just to index/ETF all the money and leave the stock picking to the stock pickers?

And is volatility always negative or isn't it just like poker variance and can be positive too?

I think given your description of your situation it doesn't make sense for you to pick stocks if you're trying to maximize EV. You can probably find a good ETF that holds large cap dividend paying companies that will have better expectation than the companies you pick.

Volatility is volatility. Depends a lot on your personality and situation. But I don't think this is purely a volatility argument. I think you're giving up expected returns as well.

Yes, your individual stock picks could outperform due to positive variance, but that is not the expectation.

Why would you listen to an investment professional when you have amateurs here that will help you?

bahbah, what particular advice would you change?

Same reason you'd read TripAdvisor rather than believe a travel agent getting kickbacks?

I am of the mind that if done right, by a professional, a stock portfolio will beat an index fund or MF long term.

That's just ridiculous. Any guys with those (rare) skills are either trading their own money or working at the street/HF/PE. They're not working as a suburban investment adviser.

Once you include their fees, there's no way 98+% of advisers beat an index. Once you include the fact that most of them are trying to get into things for which they get kickbacks, they become seriously -EV.