MOTLEY FOOL
ASK THE FOOL
Start or Wait?
Q. I’m about to start having a portion of each paycheck automatically invested in an S&P 500 index fund. The stock market might be crashing soon, though – should I wait?
– B.N., Gainesville, Florida
A. No. It’s true that the stock market (as measured by the S&P 500) has been on a tear, posting positive returns in nine of the past 10 years, and as of this writing, it’s up double digits in 2021. But a crash might have looked likely a year or two ago, and if you’d waited then, you would have missed out on gains. It’s generally not smart to try to time the market, because no one can know what it will do in the short term (though over most long periods, it has risen).
If you’re worried about where the market is headed, you can make regular investments of equal size over time – also known as “dollar-cost averaging.” That’s what you’ll be doing if your automatic investments are within a company 401(k) account. The same sum will go from your paycheck into investments regularly, so you’ll be buying shares both when they’re lower-priced and when they’re higherpriced.
FOOL’S SCHOOL Being a Landlord: Pros and Cons
Many people think it could be appealing to be a landlord, owning property and renting it out to tenants. It certainly might seem like relatively easy money: You collect big checks every month, you can get some large tax deductions – and real estate values aren’t that likely to suddenly fall, the way some stocks might.
There are a lot of downsides to “landlording,” though. For starters, there’s a lot more to it than just collecting rent checks. You have to find tenants first, and it can be hard to find good ones sometimes. Bad ones can cause massive, long-lasting headaches if they are repeatedly behind with the rent or, worse, damage your property. If you’re not comfortable dealing with a wide range of people, you may have trouble dealing with some tenants – though you might hire a management company to do that for you for a fee (which is often around 10% of rent).
If an eviction is necessary, that can be a lengthy and difficult process. And there will likely be periods between tenants when you are still making mortgage payments on the property but not collecting any income from it.
Meanwhile, just as with any property you own, you’ll not only be making those mortgage payments (unless you were able to buy it outright), but you’ll also face insurance costs, property taxes, and maintenance and repair expenses. Those expenses include keeping the lawn mowed, painting rooms and replacing carpeting between tenants if needed, and fixing things that need repairs. Also, renters may not take as good care of others’ property.
Read up on local laws relating to investment properties before buying any rental property.
FOOLISH TRIVIA Name That Company
I trace my roots back to the 1940 founding of an oil and refining company. Today, based in Wichita, Kansas, I’m one of the world’s largest privately held companies, with around $115 billion in annual revenue. My operations range from ranching to data analytics, and my businesses include Flint Hills Resources, INVISTA, KBX, Matador Cattle Company, Molex, Infor, Guardian Industries and Georgia-pacific – with brands Angel Soft, Brawny, Dixie, Quilted Northern, Sparkle and Vanity Fair. I boast more than 120,000 workers in more than 70 countries, with about half in the U.S. Who am I?
Last Week’s Trivia Answer
I trace my roots back to the 1830s, when a Vermont blacksmith moved to Illinois. Cast iron plows weren’t working in prairie soil, so he developed the hugely successful self-scouring steel plow. By 1846, he was cranking out 1,000 plows annually, and by 1857, 10,000. My founder (whose name I’m generally known by) later moved his operations to Moline, Illinois, and ended up mayor of the town. I expanded my offerings over time, adding cultivators, tractors, balers, and even chainsaws and forklifts. With a recent market value topping $110 billion, I’m the largest agricultural machinery maker in the world. Who am I? (Answer: Deere and Co.)