Why Other Investments? How to Grow Outside Your SandBox
Day 4, Post 4
Other investments, how to grow outside of your investment real estate sandbox.
The answer is simple:
Because of the current volatility, the coronavirus pandemic has thrown the investment real estate marketplace into a tailspin.
The tenants who live in the investment real estate space are concerned about having a safe and healthy roof over their heads and are frightened at the prospect of losing their employment.
We, as investment real estate owners, are doing everything in our power to stabilize our tenant situation and focus on keeping our investment real estate portfolio intact.
My wife and I, in the fall of 2019, sold one of our investment properties. We have a plan to rebalance our real estate investments, and this was the first of several moves in the next five years.
Our five-year goal is to build a multi-residential complex.
We need these additional funds to be secure and grow over the next five years.
Run into the Financial Fire
With limited access to all the resources needed to expand our real estate holdings (many professional and government offices shut down), we felt it was not prudent at this time to purchase investment real estate.
We took part of our funds, shored up our investment real estate portfolio and decided it is time to run into another investment direction, not letting our funds flame out.
Knowing what we do today will make our dream of adding a unique multi residental complex reality in the future.
So What Now?
In 2008 we saw the subprime fiscal drag many high stock values down, and for several months it was a shock to our mental system around investing. Only through some luck and our financial portfolio manager running towards safe and durable stocks, paying dividends we came out of the subprime situation stronger, but it took time.
The Caveat to Dig Ourselves Out for 2008/2009
We had to hold on to these stocks for ten years. These funds were set aside for the long haul, and the dividends continue to fund our stock portfolio in our Retirement Savings account.
In late January 2020, we rebalanced our retirement savings account and had some extra cash inside the retirement account we needed to put to work.
Ouch, we bought right at the height of the market, the only saving grace is these stocks are all dividend-paying. These companies are still paying their dividends even though the price of their shares got slaughtered.
The value of our retirement account sank, but we were not accessing cash. It was to build revenue for the future. (Our retirement savings account is registered and handle by a portfolio manager.)
We have other savings vehicles like many of you, a government pension, old age security if you are lucky enough to have a company pension, or your company has a matching savings plan. It is essential knowing an outside financial company usually administers these plans, and you get no say in how these funds get invested.
Many of these investment vehicles you have are using global stock markets to drive the return on the funds.
When the stock markets get volatile like in the Great Depression of 1929 or the market metal down due to the subprime in 2008/2009 or when we have a global pandemic, (our current situation), people sell off their financial portfolio at the lows of the market and then come back in at the highs of the market.
The company’s administering company pensions or matching contribution funds are less likely to overreact and work hard to keep the future revenue from these funds intact; their road back can be long for your investments.
It is not only your tenants who may be worried; you may have concerns over your health and job security; you take risks with your finances, trying to protect your present and future. Tough to safeguard the present and the future at once if funds are scarce or you are worried your income funds might dry up.
With our investment real estate under some short term risk, we have taken advantage of our lender’s six-month mortgage deferral program. It is important to remember these lender programs are only a deferral and, the mortgage payments will eventually need to get paid.
Don’t be afraid to use this deferral program for your own residental home, even if you are not worried about losing your job. Having a little more money in the bank in this critical time can not hurt.
Remember when the COVID-19 dust settles, and you have extra cash from deferring your mortgage payments, you can always put a lump sum on your mortgage balance and start to catch if this is important to you.
Short-Term Pain, Long-Term Gain
We decided to set up an online trading account and see if we could ride the bottom of today’s current stock market up. Tomorrow I will go into much more detail on what we have done.
The stock market tied to the coronavirus pandemic; you can see this when things looked bleak for the world.
With China saying they have brought the coronavirus dragon to its feet and much of Europe seeing signs of bending the curve, we will slowly see the world markets start to gain some momentum and hope.
As long as the number of coronavirus illnesses and deaths keeps rising in the United States and Canada, the North American stock market will continue to be fickle.
What is holding the North American stock markets up is all of the government stimulus being poured into the North American economy by the governments?
All the major nations (i.e. G20) have poured trillions, yes trillions of dollars into their economies and have reversed their financial slide.
Pouring vast sums of money has worked short term but, if the coronavirus pandemic goes on for months, there will be another massive sell-off in the markets until the next stimulus package or when the world, yes, the world bends the curve or a vaccine found to fight COVID-19.
Days after the USA announced and passed a 2 Trillion financial aid package; President Trump is already talking about borrowing another 2 trillion because the interest rates are virtually zero. Trump wants to put the entire 2 trillion into the American ageing infrastructure and create a ton of good-paying jobs building and repairing America. Whether you like Trump or you don’t, creating jobs and making your country’s infrastructure better is good for the economy and jobs, not a bad idea.
There is no crystal ball; there are plenty of lessons each nation or continent as learnt and tried. It is too early for many countries still pledged by the raising of cases of the coronavirus.
From Our Happy Place to Yours, Be Healthy, Be Safe Until Our Next Post
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