Reading the darndest things

While waiting in a doctor’s office, I couldn’t resist flipping through a copy of Money magazine and reading their title article “101 Ways to Build Wealth”.

I predicted it would be filled with classic advice, like investing mutual funds, maxing out your 401K & IRA, open a 529, and several other things that don’t have enough evidence to back them up. Essentially, things I would never use.

I was mostly right. But what startled me was item #75 buried towards the end. It indicated that now might be the time to get into real estate. I was pleasantly surprised to see Austin listed at the top in job creation, as you can see in the attached picture to the right. The tip nicely pointed out how job growth is a strong indicator of rental markets, a fact keenly mentioned in the middle of a podcast interview with Jeff Brown.

It was delightful to see references to stocks I had already learned about from the Dividend Growth Investor. I have used his website to help develop criteria for adding dividend aristocrats to my wealth building plan. The fact that I had already heard of them made me feel like I was ahead of the curve slightly in wealth building.

The tips about mutual funds were spread throughout the article. I saw a recurring pattern where they would synonymously refer to mutual funds and stocks both as equity holdings. In essence, when people talk about holding stocks, they really mean stock-based mutual funds. The commonly preached mantra is that stocks are way too risky, and mutual funds are simpler a safer way to hold the same thing. No attention is paid to overall buy-and-hold stock performances compared to buying mutual funds from the perspective of wealth building. They really aren’t the same thing, and mutual funds aren’t inherently safer. Instead, mutual funds mitigate away too much upside for the sake of not enough downside protection. Combined with terrible fees, they are a horrendous way to build wealth, and the historical evidence proves it.

Basically put, real estate is the biggest component in my wealth building plans, and this article nicely made reference to it. Stocks also play a key role in developing another basket of income. But not mutual funds. I was glad that they didn’t totally avoid the subject of these two.

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