[USER]

If you sold 1 million of property and put in S & P 500. If this is forecast to bring in 10% per annum if the market crashes to say 500 k you income would half.

In property if the market crashes normally the house price goes down but the rent stays same.

I am wanting to get out of property but never dealt in stocks so out my comfort zone.

Is this how it works ?

If I had a million in s & p 500 could I take a income per annum and leave the million in if stock holds it value obviously.

Or is stocks long term and not to take a annual income ?

Sorry if sound stupid . Stocks all new to me.

[Mindi]

If you sold $1mil in property you’ll have a huge capital gains tax bill. You definitely won’t be putting $1mil in the stock market.

[Jodi]

For now I keep a mix of indexed funds (ie VTI, FZIP, Etc), rolling 3 month CDs, long term treasury bonds (ie SPAXX) and some individual “growth stocks”.

Hopefully, with so much to invest, you won’t need to sell anything for income because interest/ dividends have been good.

So, the principal stays in the market and grows.

[Nick]

Go with an S&P index fund. It has never done less than a 10% return over and ten year period (to my knowledge). Then it’s good to time it and take out when the market is up.

But keep enough out in cash that you don’t need to stress.

We have a rental that I want to get rid of.

I think I’ll hold on to it for another two to three years, and I think my return will be maxed out (for then Ned decade or so).

Hopefully will take out about $550k after taxes and costs. It was a god run, bought it for $140k in 97.

Equites are the only real passive income. I’m tired of the maintenance and headaches.

[Simon]

In general I would say rent behaves to property values extremely similar to how dividends behave to stock prices.

A flash crash in value typically does not affect rent/dividend at all (maybe extremely small effect).

But in a scenario the underlying reason for the crash is persistant (like the Location of the property is in a neighborhood which is declining or companies get into long term earning issues) then both rent as well as dividend would at some point of time follow the new value levels.

I would say the actual risk of such a continuous decline of just 1 property is much much higher than of decline of a large bucket if various companies

[Stan]

If you bought dividend stocks or an index product like SCHD, the dividends should stay relatively consistent despite any movement in the stock prices.

Of course any company can cut dividends if things get tough but taking a basket approach should keep your overall payout fairly consistent.

[Bond]

It is important to know that there are different ways to invest in stocks, and some I don’t even think of as stocks.

There are investment funds based on stocks with a variety of strategies.

I don’t consider this really investing in stocks, but in the fund’s strategy and the people who manage it.

This is very different from investing in individual businesses.

As an actual shareholder of a company, there are differences too. Some companies reinvest their earnings for high growth, or to adjust strategy.

Some companies pay a lot of dividends to shareholders.

Some businesses are so profitable, they do both. Dividend paying stocks provide you with income, but it is not guaranteed as situation can change and they can stop paying dividends.

(INTC recently did this as they need cash for their turnaround efforts) Some companies don’t pay dividends to reinvest their earnings to accelerate growth by putting their money into R&D or product development…

The hope is that it provides higher growth and your shareholder equity increases more rapidly.

Look at these options differently and not just as “stocks” because they have different strategies.

You are investing in a business and each can have their own strategies.

[Shawn]

Dividends are actually more consistent than stock price. The 4% rule is an all weather rule. You should be fine even in a down turn.

Over the long term stocks go up. But also in the long term we are all dead.

I wouldn’t discount the possibility of rents declining.

They aren’t affordable in many cities and sellers are resisting selling because they got a good deal on a mortgage.

This leads to too many rentals and not enough tenants.

[Tristan]

The stock market goes up and down. If you put 1 mil in and the market drops 20% are you going to be OK with that?

Diversification is important and building a portfolio that capitalizes on the ups and protects on the downs is more beneficial for you, especially if you are needing to draw income from it now.

[Patrick]

Generally what you’d want to do is have 1-3 years of annual income set aside in cash reserves (high yield) to ride out any stock crashes (e.g. you don’t want to sell your stock during a crash…buy more for sure.)

With a million in SP500 it is a safe bet to withdraw 4% a year to live off without touching your base investment (Dave Ramsey says you can withdraw up to like 8%??).

This does not account for any social security you’d (possibly) expect to receive later in life.

I’m considering selling my rentals and dumping all into VTI.

Rental market is not what it used to be in our area.
Hope that helps

[Author]

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