Worse use of a retention bonus
I was just curious who has the best horror story. I know someone who sank six figures into WB right after the AGE/WS merger. He sold prior to WB going belly up, only to roll into an ultra financial etf whch was around 20 and now is about a medium Starbucks coffee. I've also heard of guys doing the pay the mortgage/fund the college fund/buy a boat route, only to need the cash to pay off the loan and being SOL.
Anything invested in anything long when the AGE guys got their money is under water. Putting it at the bank and forgetting you have it seems to be the best play.let rephrase the questions if you got a big retention now what would you do. for example if you just received a million bucks would you… buy oil and commodities, equities, real estate? hell they are all depressed. if you had a bonus before and you bought anything except cash, treasuries, or went short you basically ate -$$$hit.
Move to South America and live like Kings!
I am with Ice…
Pay off my house.. Upgrade my car to a newer used one.. Max out my SEP.. And then start buying real estatei think i would stick a big chunk in the 2 for 1 dxo on oil. hold for 6 months double my money and sit on my a$$ for a couple years and collect assets from everyone that leaves the business.
I do know a guy that jumped from ag to pru in the late 90’s. He lost it all trading the tech wreck and the sh!ttty part he had several thousand of taxes due each month for years and years on the imputed income. To really stick a fork in the poor bastads eye is about 6 months after the $$$$$$$$$ came in his wife filed for divorce. His gross went from 1mm to 200k for several years. Still in the biz though.
If I got that check I'd put most in a safe deposit box or buy .223 ammo and AR-15's. ;)[quote=buyandhold]
Not sure paying off your house is a good invesment. Even if you're not underwater like most of us, you would be locking up your money in an investment that doesn't generate income and isn't going to grow more than 5 percent annually. Plus in 20 years who knows what condition your town or neighborhood will be in. What if you live in Phoenix and the Colorado runs dry. Or Odessa and we find alternative energy. Or Chicago and the Mex'cans move in. [/quote] BH, your assumptions are flawed. The investment is not your house. You already bought the house. It's already your asset. Your investment is in paying off the mortgage. If your interest rate was 6%, you just guaranteed yourself a 6% return over the life of the loan by paying it off (in decreasing increments, as you would be paying down the principle as you went). Then take the excess cash flow and invest that every month. Of course, you probably lose some tax breaks as well, so the number might be lower, but you get the point. Now, if you are convinced that you can get a better risk-adjusted rate of return than your mortgage rate, then by all means go for it. But even Government Treasuries carry certain risks. To me, for the "safe" portion of my portfolio, your house/mortgage is the way to go. In addition, it doesn't matter what happens to the condition of your house or neighborhood. You would get the same price for it in 20 years whether you had paid down the mortgage or not. Difference is, if you still had a mortgage, you may be underwater . You don't "owe less" on your mortgage just because the value of your house fell.Those are good arguments, b24.
As a matter of principal, though, I want my investments to be more liquid and diversified. If I put 200k in a house, in an emergency, I can only get it back by borrowing my own money back. If my neighborhood tanks, I will only get my principal back, if that. Most wealthy people got that way by controlling large assets with smaller monthly outlays. I try to get people out of the habit of thinking of their home as an invesment. As a rule, a house in not a good investment because it has high expenses, it does not generate income, it can be hard to sell and you have no guarantee what the market will be in 20 years. Maybe my argument is really that it's better to rent than own, as they do in many other places.If i got the million dollar retention (or check for moving) i’d put it into an FDIC insured CD or AAA munis, so the d***s that gave me the check dont own me.
That is my point - the check you got is essentially a mortgage on your working career. You better have it on hand if you need to pay it back. Hindsight being what it is, when I got the AGE check I should have banked it. This time around I did just that.
[quote=buyandhold]Those are good arguments, b24.
As a matter of principal, though, I want my investments to be more liquid and diversified. If I put 200k in a house, in an emergency, I can only get it back by borrowing my own money back. If my neighborhood tanks, I will only get my principal back, if that. Most wealthy people got that way by controlling large assets with smaller monthly outlays. I try to get people out of the habit of thinking of their home as an invesment. As a rule, a house in not a good investment because it has high expenses, it does not generate income, it can be hard to sell and you have no guarantee what the market will be in 20 years. Maybe my argument is really that it's better to rent than own, as they do in many other places. [/quote]Over long periods of our history, mildly leveraged (read conventional mortgage) personal real estate has shown to be an effective wealth builder.
The argument you make is seductive and persuasive only for those who consider the last 2 years to be a good perspective on 'history'.
Now that real estate is down some 20-50% and new home starts have slowed to a crawl, and there are far fewer competing buyers in the market, is this really a wise course of action to recommend?
After all, what do you end up with after paying rent for 10 years? 120 receipts...that's all.
[/quote]
Over long periods of our history, mildly leveraged (read conventional mortgage) personal real estate has shown to be an effective wealth builder.
The argument you make is seductive and persuasive only for those who consider the last 2 years to be a good perspective on ‘history’.
Now that real estate is down some 20-50% and new home starts have slowed to a crawl, and there are far fewer competing buyers in the market, is this really a wise course of action to recommend?
After all, what do you end up with after paying rent for 10 years? 120 receipts…that’s all.
[/quote]
The studies I’ve seen suggest that housing prices go up 3 to 5 percent. That’s in the aggregate. There are wild swings depending on the location, which the homeowner can’t control. Many upper class neighborhoods in my town are now slums.
And the interest just kills you, along with the maintenance costs, insurance, etc.
Re: the comparison to rent – I could rent my home for less than I pay in insurance, taxes, maintenance … and I ain’t getting that money back, either.
Housing as an investment worked for the people who retired at the top of the market, when demand was high. Because of the demographics, you won’t see that situation again, imo. Fewer people in the generations behind the boomers, smaller families…
I’m not dead positive about this by any means. And I’m a homeowner. But after the last two years, I think we have to evalute our assumptions about investing.
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