Index funds to build capital for REI?

Starting Out
5yFollow

Index funds to build capital for REI?

Mike Street
Rental Property Investor · Exeter, NH · Member since 2019 · 37 posts · 9 votes

My capital is being killed by inflation while it sits in my savings account. Should I put most of it into index funds while I continue to build savings, learn, analyze deals, network, etc?

Thank you!

Mike

0Reply
18 views

Most Popular Reply

Carl C.
Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
5y

Inflation is currently 1.4%. Not exactly disastrous. If you feel that is a problem, you can certainly put your money into an index fund. But ask yourself how you'll feel if the market declines while you are preparing for an investment. The cash for my next investment is just that, cash. 

1Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Carl C.
    Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
    5y

    Inflation is currently 1.4%. Not exactly disastrous. If you feel that is a problem, you can certainly put your money into an index fund. But ask yourself how you'll feel if the market declines while you are preparing for an investment. The cash for my next investment is just that, cash. 

    1Reply
  • Felicia Feliciano
    Member since 2021 · 41 posts · 14 votes
    5y

     I just sold 3 Bank of America puts expire in 30 days, strike price $31.50 @ 53 cents.

    Collateral put up about $9,000.

    Say puts expire worthless. I make $159 one month on $9,000. Thats a whooping 21% annualized.

    Say i get put the stock.  My $9,000 is used to purchase 300 stonks of BAC.

    I own shares. Monday i sell covered calls on my position.  More premium.

    Market Crash .  I get hit but so does everyone else.  My way can be managed.   Bank of America is not going Bankrupt.

    My goal is just churn to collect Premium.  Over n over again.

    WARREN does step one to ease himself into stock positions.

    0Reply
  • Bradley Padula
    Rental Property Investor · Boston, MA · Member since 2019 · 124 posts · 121 votes
    5y

    Depends on your risk tolerance and time horizon, so I can't say yes or no. If inflation of sub 2% is crushing you capital in savings, I'd ask can you afford potential downward market movement and still have enough $ left to sell the index funds to buy your next deal? Would an index fund decrease of over 2% then be really killing your capital when compared to inflation? Conversely, any gains are gravy. Keep in mind if you sell prior to holding for a year you get hit with short term capital gains vs long term

    Index funds are generally regarded as fitting for longer term investment timeframes to ride out the ups and downs. If you're buying an index fund to hold for a month, 3 month, 6 months etc, You'd just hope to land in an upswing versus a downswing

    1Reply
  • Mike Street
    OP
    Rental Property Investor · Exeter, NH · Member since 2019 · 37 posts · 9 votes
    5y

    @Carl C. I exaggerated haha but inflation is likely going up since the government printed trillions of dollars. Great points, thank you!

    0Reply
  • Mike Street
    OP
    Rental Property Investor · Exeter, NH · Member since 2019 · 37 posts · 9 votes
    5y

    @Bradley Padula great insight! Thanks!

    1Reply
  • Zander Kempf
    Developer · Honolulu, HI · Member since 2018 · 111 posts · 93 votes
    5y

    @Felicia Feliciano Selling naked options is incredibly risky and is not recommended to anyone

    1Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Carl C. Do you really believe inflation is 1.4%? Really? The CPI is a government lie. I would encourage you to look up the real inflation level.

    0Reply
  • Jeremy Komer
    Rental Property Investor · Cincinnati, OH · Member since 2020 · 84 posts · 81 votes
    5y

    Bond index ETF, they don't move more than maybe 2-4% up or down and return 2-3% in dividends

    Not risk free but allot less risky than an index fund and better return than the maybe 1% you could get for a high yield savings.

    Also if the economy were to crash they would likely increase in value by the 2-4%

    0Reply
  • Felicia Feliciano
    Member since 2021 · 41 posts · 14 votes
    5y
    Originally posted by @Zander Kempf:

    @Felicia Feliciano Selling naked options is incredibly risky and is not recommended to anyone

    Did i  say sell em NUDE?

    I think i said cash secured puts n covered calls.

    Whats risky is Bonds when 10 year treasury was @ .70%.   Those guys must be getting Hammered right now.

    50% rise in Rates is HUGE.

    0Reply
  • Felicia Feliciano
    Member since 2021 · 41 posts · 14 votes
    5y

    Did i say sell em NUDE?

    I think i said cash secured puts n covered calls.

    Whats risky is Bonds when 10 year treasury was @ .70%. Those guys must be getting Hammered right now.

    50% rise in Rates is HUGE.

    0Reply
  • Chris Egan
    Real Estate Agent · Omaha, NE · Member since 2016 · 43 posts · 46 votes
    5y

    I started putting some money that I intended to be for real estate into index funds about 4 years ago. I just figured I didn't want a lot of cash sitting around and I am comfortable (at least I think I am) with market volatility. The other thing that I considered was the current RE market if there were deals to be had around every corner I would have kept more money in cash but since good deals are harder to come by I felt I could be more picky with what real estate I purchased since the money was already invested and not just sitting in cash.  Even if the S&P drops quite a bit I still think I'll hold my RE purchase money there and just hope a great deal doesn't pass me by while the S&P is down. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free