These "Stress Tests" Are Such Horse ****

[KrazyHorse]

Me buying index funds
Everybody else trying to beat the market
Ted Striker

[DanS]

You misjudge my intent. I come in peace. Don't mean to poke you in the eye.

That said, risk is not what you think it is. It is merely volatility in returns based upon things (good or bad) that happen in our world. A piece of land might have what you believe to be a zero chance of losing money, but still be risky in its own right and in a portfolio.

The problem with your strategy is mainly in the fact that your portfolio is not diversified. If something (good or bad) happens in your small town in the Phils, your entire porfolio bears the full brunt of it. And presumably, there are a limited number of crops that you can grow or harvest. If the market for these limited number of crops goes up or down, your entire portfolio bears the full brunt of it. In your portfolio, you should also have stocks, bonds, and other assets to cushion these moves.

Most people hugely misallocate money to real estate. You have lots of company.

[Aeson]

If you think $1200 is "hugely" misallocating money to real estate... there's something wrong with you.

[DanS]

If that $1,200 is your entire portfolio, that $1,200 in real estate is a huge misallocation.

[Jon Miller]

Nah, 1200 is good to spend on a new computer or a night at Atlantic City or to give to charity.

It isn't a portfolio.

JM

[Jon Miller]

Basaically, there are thresholds. In the US, the property threshold is generally over 100k.

In the philipines it is a lot less, but still over 1k (apparently).

You can't invest 5000$ in property in the US.

JM

[DanS]

Sure you can. What are you talking about?

[Kuciwalker]

JM, that doesn't make any sense at all.

[Jon Miller]

What property can I buy for 5000$? Particularly farm type property.

JM

[Aeson]

If that $1,200 is your entire portfolio, that $1,200 in real estate is a huge misallocation.

It's the only thing I have not in cash right now.

As for how well it was allocated... I have (soon to be) inlaws who's lives are greatly improved by having access to the land. I'm not sure how to work in "improves the immediate outlook for caloric intake of in-laws" in monetary terms... but needless to say for me it's much much greater than $1200.

Besides, it is a beautiful place and may someday be a place to build a house to retire in. I don't see much downside (other than the revolution/volcano/otherwise act of god).

[DanS]

FYI, cash is part of your portfolio too.

I'm not criticizing your purchase, just critiquing your purchase in light of your portfolio. As a small part of a portfolio, I have no problem with real estate.

[Jon Miller]

To reinforce what I mean, most things you invest in has some overhead or some bit that you pay no matter what. Like you pay a certain amount to put your money into a fund that month. You pay that ammount no matter what, so it isn't worth while to put in 5$ or whatever, you need to wait until you can put in 50$ or something to make it worth while.

This is the threshold. Otherwise you are investing a much smaller fraction of your available assets than you could be.

Because of the need to write up documents/etc, land has even more than that. Especially land that might be useful at all.

This additionally (obviously) has value to Aeson beyond it's strict monetary value. That makes it even a better investment for him.

To always say 'diversify, diversify' with no thought is stuipd.

JM

[Japher]

That's not how I define overhead, but oh well. I think it all comes down to utility and risk aversion of the individual.

DanS is correct in that to alleviate risk you diversify. However, the smartest minds in econ can't even adequately define risk. IMO, it's because risk isn't a function of the investment vehicle, but of the individual making the investment.

I lose a lot now and then, I also make a lot now and then. BAC is making me a lot, thanks to the gov and a few public pump and dumpers. I like risk and volatile stocks. I hate and am scared of options, a common vehicle to minimize risk. To each their own.

My next pick, that I am liking, M and DOW. Once DOW is fully diluted get in, I have no idea when that will be. DOW is still feeling the pains from a bad purchase, but they'll survive. Macy's won't be earning nothing for long, keep an eye on it.

[Aeson]

FYI, cash is part of your portfolio too.

Yes, I am aware of that. Which is why I mentioned the cash, since you seemed under the impression all I had was real estate.

I'm not criticizing your purchase, just critiquing your purchase in light of your portfolio. As a small part of a portfolio, I have no problem with real estate.

The way I look at it is I could spend ~$1k on foodstuffs for a year or two to help supplement my family's caloric intake... that being all the discretionary income I have (the cash is reserved for known costs in the Visa process at this point)... or I could spend that same amount on land that will provide those calories year after year for as long as the land is there. (As well as provide other benefits.) It's an investment of capital that otherwise would have to go towards consumables in the short term.