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Why I Don't Like The Thought of Using HedgeFunds For Investing
| | Tuesday, March 27, 2007 @ 12:49 PM EDT
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Contributed by: Joel Webb
Joel Webb Properties
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Recently in a forum post, somebody asked whether or not to use their 401k to invest in real estate. You can do this through what is called a hedgeloan, or something like investing in the real estate directly through self directed IRA's.
On that note, I don't like the thought of even doing something like HedgeFunds because your loosing what the retirement accounts do best - compound.
Now granted, you could compound on real estate if you did enough deals, but pretty soon deals will become larger, and harder to get your money out of the investment.
Stocks, Mutual Funds on the other hand are very liquid, and the compounding of that money is a good thought to have.
Some people like the thought of having their retirement money in Real Estate.
I don't mind either but when it comes to liquidity, and compounding, why not just invest in a Real Estate Index ETF instead and not have to worry about being the owner.
Two ETF's that I know of are: ICF, and IYR. At the current time, these Indexes are down, so I would give thought to investing at the current time of this writing.
But back to my original point - when doing something like a Hedgeloan, you are giving up something that is very liquid for something that is not. From the bankers point of view, they love this, they don't have to go through the process of Foreclosure in order to redeem their collateral, they just take your stock/mutual funds and sell them.
Simply because of this liquidity and bankers advantage over you, I would make sure that IF you do them, that the rates and closing costs are very worth your while.
Agree Or Disagree?? Feel free to post your comment on this article below.
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