On today’s show with Laura Stover, RFC®, and Michael Wallin, CFP®, we discuss this week’s featured article from the weekend brief: “Investment Trade Offs: Why You Should Know Your Return on the Hassle Spectrum.”
It’s a critical consideration for investors, especially in today’s financial landscape. We discuss the fascinating story about a couple who decided to invest in real estate back in 2018. They were making around $2,500 a month from their investment property. While that might not sound bad, it came with a price—late-night calls, maintenance, dealing with tenants, and taking on additional debt.
The pivotal question is: Is it worth the hassle when you evaluate the return on investment? This concept, known as “Return on Hassle,” urges us to consider not just the expected return from an investment but also the time, effort, and work associated with it. In the case of real estate, it encompasses finding tenants, property maintenance, dealing with debt, and other tasks that are often seen as “hassles” when compared to more traditional investments like stocks and bonds.
We explore the benefits and drawbacks of real estate investing, acknowledging that every investment has its pros and cons and emphasize the importance of viewing real estate as part of an overall investment portfolio and not in competition with other assets. There are tax advantages of real estate investing, such as 1031 exchanges, and the potential impact of changes in tax policies.
One of the key takeaways from this discussion is that real estate can offer more control over your investments compared to traditional options. However, we challenge the idea that it’s the only asset class that provides such control. It is important to choose investments in companies that align with your values and have strong growth potential with emphasis on the need for a well-diversified portfolio that includes various asset classes.
In addition to real estate, we close with another alternative asset class—options trading. Options can provide investors with a level of control over their investments while also serving as a form of insurance for their portfolios. It is important to seek expert guidance when considering options trading, as it requires specialized knowledge.
In summary, we encourage you to evaluate your investments not just in terms of potential returns but also the “hassle factor.” We believe in the power of diversification and the need to strike a balance between different asset classes to build a resilient and successful retirement portfolio.
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Timestamps (show notes):
0:02:38 Discussing the concept of “Return on Hassle”
0:05:25 Unpacking the idea of considering time and work associated with an investment
0:07:21 Evaluating the profitability and time commitment of real estate investments
0:08:56 Examining the volatility and potential risks of real estate investments
0:10:59 Considering external factors that can impact real estate values
0:11:44 Importance of diversifying investment portfolios
0:12:11 Building a portfolio of companies aligned with personal values
0:13:01 Real estate as a non-correlated asset for a diversified portfolio
0:13:37 Tax advantages of real estate investing
0:16:21 Benefits of investing in treasuries
0:18:41 Liquidity advantage of real estate in volatile markets
0:23:36 Consideration of fees and net profit in real estate investing
0:25:42 Control over investment in real estate
0:28:21 Laura explains the value of alternative asset classes like options.
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