Index funds to build capital for REI?

Question

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

Bradley Padula · Answer

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

Mike Street · Answer

@Bradley Padula great insight! Thanks!

Zander Kempf · Answer

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

Carl C. · Answer

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.

Chris Egan · Answer

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.

Felicia Feliciano · Answer

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.

Jeremy Komer · Answer

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%

Zachary Beach · Answer

@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.

Mike Street · Answer

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

Index funds to build capital for REI?

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