Investment question.

What will have a higher rate of return in 25 years. If a person spent X amount of dollars on some land or stuck the same amount of money in the bank?

Thinking of doing something for the grandkids and wondering what the prevailing thoughts here are.

Thanks you.

Land hands down. Never question land. Buy desert if you can, someone will buy it.

when you say stick it in the bank do you mean just in a savings account or an investment account? money that just sits either in checking or savings is really losing purchasing power if left there for a long amount of time. that being said land is never a bad option.

Hmm. Nobody can reasonably predict what will get you a better return.

Putting it in a 529 college savings plan invested in mutual funds is a good option. A growth mutual fund will average ~10%/year and a 529 will keep the government hands off any gains. If they graduate college debt free they can buy their own land :).

Invest in a mutual fund. It’s something that parents, other grandparents, or even the kids themselves could potentially contribute to.

Land could be tougher to liquidate in the future. Land value is also extremely subjective. What a farmer/hunter/developer views as a good investment or a fair price can be significantly different even when the demand is there. Some researchers even believe that the subsidies that drive modern agriculture will one day lead to a “burst” of the tillable land “bubble” much like what has happened to the housing market in the past.

I know one thing, they are not making any more land.

There is a continual cost of owning land. Taxes. Even if land goes up in value, so does your taxes.

Buy a pay 20 year cash value life insurance policy on each of the grandkid.
Premiums are really low when they are young, and never go up. By the time 20 years it over the policy is paid in full, the premiums stop, and typically you have accumulated somewhere near 4% money. It is a better place to put your money than a bank. At anytime you can give the policy kid or use the cash in the policy to help the kids pay for collage, wedding, house down payment, who knows.
The earning are tax free. Talk to an insurance agent, pick an agent for a large life insurance co. (not one that by the way happens to sell life insurance with your home and auto stuff)

shale wrote:

Hmm. Nobody can reasonably predict what will get you a better return.

Putting it in a 529 college savings plan invested in mutual funds is a good option. A growth mutual fund will average ~10%/year and a 529 will keep the government hands off any gains. If they graduate college debt free they can buy their own land :).

shale wrote:

Hmm. Nobody can reasonably predict what will get you a better return.

Putting it in a 529 college savings plan invested in mutual funds is a good option. A growth mutual fund will average ~10%/year and a 529 will keep the government hands off any gains. If they graduate college debt free they can buy their own land :).

I will give you whatever you want if you guarantee me 9% return. I think current expectations for long term equity growth is 6-7%

I would still take that over land. Like others have said, land comes with additional costs and your miss out on any compounding and dividend reinvestment.

Mutual Fund. Stick with the major fund organizations: Vanguard, Fidelity, T. Rowe Price, Dodge & Cox. They all have websites. Don’t buy into anything exotic; to start with stick to index funds like a S&P 500 or total stock market index. You can move to manged funds later as you learn more about investing. You don’t need a broker, you can do this online. Buy and hold. Don’t try to time the market. You won’t make 10% but you will make more than bank rates and you can sleep at night.

Finally, never take advice from strangers on the internet.

^ HRL Hormel…

Putting it in a 529 college savings plan invested in mutual funds is a good option. …and a 529 will keep the government hands off any gains.

A 529 also keeps our hands off it.

I started one for the FGD.

Egg’s.

And baskets.

Do both if you’re able. Diversification. One or the other will crash and burn at liquidation time, roll of the dice which one it’ll be.

I got this hot stock………its a penny now but I’m going to make millions if it ever hits.

I for one am in mutual funds. I have a group of friends that really like Edward Jones. Yes you pay some fees but their getting good returns. Just depends if you trust the broker or not. Someday I will be with them just not quite yet and happy where I am at.

Now land on the other hand, if your actually going to use it I don’t see the bad in that, but if your going to purchase it to let it sit, not sure if I would do that.

But then again, I never take investment advise from people on the internet. Unless I am investing in fishing tackle.

Undeveloped land sucks. I have 3 acres I bought 15 years ago and have been trying to sell it for 3 years. I can’t even get offers at 30% less than I paid for it. And I’ve been paying $400/year taxes for that entire time.

Spend like crazy on memories now, who wants to be rich when you’re old and crippled and can’t do crap anyways. Just enjoy the state funded jello later in life

bigpike wrote:

I know one thing, they are not making any more land.

agree

You say “grandkids” as in plural.

Don’t buy land. Land that has multiple owners or people who have a “financial interest” is also known as a cluster ####. It can only go one way: Bad.

I know so many people who have ended up with a giant sh!tstorm on their hands because they ended up co-owning cabins, hunting land, farm land, etc with siblings and other relatives.

The problem is that land is usually an all or nothing proposition. It is very difficult for one party to sell their share, when they want, for the price they think they should get, and without creating hard feelings and misery.

If you’re viewing this as an investment, then there has to be the ability to liquidate. Compared to a mutual fund, land can be very difficult to liquidate at certain times and it can take an extensive amount of time and money to sell it. Keep in mind that the liquidation costs of land can involve paying the commission of real estate agents, so 7% of the sale price gets cut off the potential market gain.

Buy a low-fee S&P 500 index fund and enjoy life. A mutual fund can be liquidated within minutes. The 529 idea is also a very sound idea, but obviously that has a specific purpose that has to be a fit.

Grouse

Apple Stock…Ching Ching…RR

shale wrote:

Putting it in a 529 college savings plan invested in mutual funds is a good option. A growth mutual fund will average ~10%/year and a 529 will keep the government hands off any gains. If they graduate college debt free they can buy their own land :).

529 college savings plan all the way. We were able to pay for my daughters first year of college with the money both sets of grandparents contributed. It has been really nice not have to stress about where the money will come from this year and it has delayed student loans for now.

Dutchboy wrote:

What will have a higher rate of return in 25 years. If a person spent X amount of dollars on some land or stuck the same amount of money in the bank?

Thinking of doing something for the grandkids and wondering what the prevailing thoughts here are.

Thanks you.

Start a 529 and you can add when ever you want.

Start a 529 and you can add when ever you want.

And change the investments if you don’t feel they are working hard enough for you.

AAPL $132.18 -.24
HRL $37.08 +.16
YUMC $26.54 -.42 but this one will take off fairly soon.

The 529 and land are great options, but 20 years down the road you have no idea what the grandkids will be interested in. Maybe they don’t want to go to college. Maybe they will lose or never have interest in the outdoors. My kids both went to trade school and paid for it themselves with grants and no loans. If they had a 529 what would they do with it? I really don’t know the answer to that.

My brothers and I are very fortunate that my Dad bought a nice chunk of land, put it in and LLC for use boys and protected it very well. If we didn’t hunt, fish and enjoy the outdoors it would not be such a great investment.

sticker wrote:

My kids both went to trade school and paid for it themselves with grants and no loans. If they had a 529 what would they do with it? I really don’t know the answer to that.

A 529 plan is not just for college. That is a big misunderstanding that is out there.

It can be used for any qualified education expense including almost all trade and technical education.

Also the money can be redirected to other family members so it is not lost if one child does not use it.

Grouse