LOL, I’ve heard good arguments from people about investing in stocks vs real estate but I’ve never heard someone try to argue that just holding cash is the best path forward.
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SFBA real estate strategy is basically appreciation play. High appreciation comes with lot of volatility (price swings). So, if one has to go with real estate, for the same risk, one can look for REAL estate in places where investment is mostly focused on income and very little gain through appreciation.
For example, one can specialize in Atlanta Real Estate (I know nothing about this market) But, RE outside bay area can become problem if investment is small and has to be managed from a distance. And, the hard reality is that sometime there are no good investment options. I wish one could stay in cash indefinitely. But, that is not an option if politicians of any stripe would turn on the printer at the drop of the hat. The cities I keep hearing from my friends are like Nashville, Boise (never been to these cities myself) etc. Know nothing about them There is one truth about investments. It is that investments across all assets tend to be same when adjusted to the risk. If you are good in picking stocks and options, that is still better because you can plan you future entries and exits rather easily should your bet go right or wrong.
An investment is safest when you buy at profit. That is the you buy below the market because seller did not want to put effort to find another buyer, or was not smart, or some special situation prevented the sale at market price.
Some places where people I know have purchased some investments (outside SFBA). Most of them were anchored into these places by someone they knew:
- Portland
- Fresno
- Reno
- Sacramento
- Phoenix Metro
- Yuba City
7, Albuquerque - Denver Area
The real estate in these cities have very little competition from other buyers. So, no premium to pay just to get a property.
Added Later: The above list is not a suggestion to ignore SFBA, but if an opportunity comes in SFBA that is like buying at profit, one must act.
To paraphrase WC Fields. I spent my money on women booze and gambling. The rest I wasted.
If you are a true bear, spend your money don’t waste it on investments that keep you up at night
Very true. Consumption is a good form of investment. The purpose of wealth building is ability to enjoy life better. But, if wealth becomes source of pain, it is not a good investment. The investment should be about creating source of income stream so that what Aristotle said applies to you. Money should work for you.
OK, so you are simply saying that you think there may be better real estate opportunities outside of Bay Area/California. Fair enough – especially right now.
In some way yes. A friend of mine who is a syndicate investor told me that he invests in less competitive markets because then he has very little risk of losing big in the principal. He realizes all gains through income. (Such investment have a different kind of challenges)
I agree with him.
I think what I am saying is that we have to understand two sides of the equation. What we may lose ( the risk) and what we may gain in a particular investment, given that the losses and gains may not become apparent for many years.
If I have to invest in SFBA, I will watch for a few years to understand how SFBA is reacting to various factors that are working against it. The risk in this strategy (of waiting for three years) is that the SFBA may start appreciating in a year or so (as @Jil thinks) and the good SFBA investment opportunities are gone. For most of us, SFBA is best because we live and breathe in it and we can manage the investment easily without needing a property manager.
To which I would add put some effort into developing passions and interests which engage and entertain without involving a lot of spending. Make your fun instead of paying someone else to. The most precious thing you can ever purchase with wealth is time.
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They are not aware of the triple whammy risk.
Risk 1: Have a tech job
Risk 2: Own houses that depend on health of tech industry
Risk 3: Own tech stocks
Collapse of the tech industry would lead to tumbling house prices and likely jobless. ATM probability looks low but future is unpredictable.
Future is unpredictable, past is the guidance for future !
For long term, QQQ is a winner over SPY !
So far so good. My point is the triple whammy risk. Long term, should diversify appropriately. Should hold some non-tech stocks such as utilities (e.g. AWK, AWR), consumer staples (e.g. PG, JNJ), waste management (e.g. WM, RSG), … I own those 
For rentals (you have decided not-good compare to trading), anyhoo, diversify e.g. SV, Austin, SG Tenant profile of my Austin rentals are not all tech, many non-tech. Rentals in SV tends to be tech guys 
Tech guy owns tech stocks, own rentals in tech neighborhoods that rent to techies 
If you are talking about stock investments. European and Russians stocks will never get valuation of US stocks even if they have better cash flow and debt levels. but in downturn and reasonable growth prospective. they feel more safer.
It will be real physical investment what Elon Musk is doing at large scale. and Elon Musk is big believer in German engineering. Revolutions in physical product productions comes from there .
This has highest return, enviable growth…
In fact, this kind of diversification argument is waste of time. I had analyzed this four or five years before and have clear strategy how to handle it.
One who does not know the subject of diversification, does not know how to handle situation needs to be concerned by this.
I am core techy and know this issue, risk…etc. It is not a major concern.
In your own way I can tell this:
When AAPL files bankruptcy, assume Nasdaq is dead, QQQ is dead and SFBA RE died. Now you decide when this will happen…and I need to rethink my strategy when this happens…
True. The valuation of a stock depends upon earning capacity of underlying company, and how much reliable and liquid is the stock of company. Since stocks traded on American Exchanges are more liquid and reliable (because of the accounting standard they have to adhere to) , they get higher valuation per dollar of earning potential.
So, investing in foreign stocks may be good if one has good understanding of those markets and know how to deal with it. It is essentially Reward/Risk play.
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Apple cannot file bankruptcy as it does not own any factories with long term union contacts.
It can still sell phones based on supply global chain but problem is that supply chain will increasingly divert to other competitors products. Apple will have no control over it. Its valuation and dividends will go down.
but head count in California will go down faster than any other place due to high cost of business and climate change.
Germany is already counting that there are 60,000 German engineers and programmers working in California. it is matter of time before better startup funding in Europe create exodus of these people
Useless points, waste of time.
IMO, Perfect ! Stick to this concept.
CEOs and employees make much more working for American company and US health care per employee far more expensive than Europe/Russia. There is no way US based firm has higher earning potential. more over EU is more efficiently connected to China in so many ways that make final product cheaper. Europe dont want to make Stock market size bigger than actual economic potential as it create systemic risk.
I did not say US based firms have higher earning potential. I said that American Firms are valued more for the same earning potential because of liquidity of their stocks and earnings reliability.
Fake news as well. FEZ fell deeper than SPY and didn’t recover as well. European stocks are worse investments in good times and bad.
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Happened once in Dotcom bust 