Choosing Acreage Over Stocks

The S&P 500 since 1966

From an early age, my dad drilled into my head the lessons of compounding interest.

It was quite simple: start investing in stocks early on in life, add just a little each month, wait a while, and watch as your savings grows by leaps and bounds!

Numbers were touted about how the market had averaged 7% interest over any 30-year period in the past century. Nothing could beat such a rate for long-term growth. It was a no-brainer to invest.

So I did that. 401(k), a trading account, Roth IRA, the whole nine yards. I read books about investing and researched the companies and did many DRIPs (dividend reinvestment plans that let you buy a single stock using dollar cost averaging).

And in the past 13 years or so that I have been investing, the market has gone up and down like a sine wave, the S&P essentially remaining flat. Same for my company’s stock as well. Granted, perhaps the next 17 years will give such enormous growth that we’ll hit the 7% average over the whole 30 years, but I’m not holding my breath.

When Facebook went public, I barely even considered buying it. I knew enough to understand that Joe and Jane Smith on Main St. don’t have a chance with such IPOs. They are for the big banks to make money, the founders of the company to get rich, and everyone else to be a sucker. And sadly, that’s exactly what’s happened. Though Facebook stock has rebounded from its catastrophic drop after the IPO, it is still down 30% or more. The IPO game isn’t something little guys can win anymore.

After my enthusiasm for stocks diminished, I heard about real estate as the new hot thing. “Look at these appreciation rates! They’re through the roof.” It was easy: leverage other people’s money by putting little down to buy a house, then rent it out or flip it and Bam! you were getting rich.

So I bought three houses. Yes, that’s right: three. I was a landlord for seven years. And I bought the houses low after the recession of ’02. The houses went up for a time, until the big housing bubble burst several years ago. They dropped big time, but fortunately I had bought them well enough and had enough equity where I got out basically breaking even. Other friends of ours were not so fortunate and hit foreclosure and bankruptcy.

Granted, the real estate people say the same thing as do the stock people: “You gotta stay in the game for 30 years! That’s how to do it; slow and steady now.”

And perhaps that’s accurate, but for my personality and interests, being a landlord to multiple houses for 30 years isn’t how I want to spend my life.

Give me an acre of land anyday

What’s of real value? To my mind now, owning an acre of land where I can grow and raise my own food, harvest wood for heating my home, and other necessities is where real value is found.

Being able to rear my children where they have land to explore, animals to care for, and imagination to engage in is infinitely more valuable than some 401(k) stock number that may at any time plummet and erase all my paper gains.

Now, it’s true that I haven’t liquidated my 401(k), and that money is in equities like stocks, because for such investment vehicles equities are the only game in town, but I no longer put my trust in the stock market to give me a cushy retirement in 25 years. Instead, I would rather have five acres of land, a big garden, animals, a wood-lot and the know-how to take care of it.

34 thoughts on “Choosing Acreage Over Stocks”

  1. The illusion of money working while you don’t was just that, an illusion. Or rather, a lie from the beginning. Never did the winners of yesteryears invest in this way, they’d actually invested by becoming partners with a a company and working in its board. The idea that you don’t have to work to create wealth couldn’t but end int his worldwide crash. And we thought that we were smarter than people in the 17th century who were for flipping tulips…

    1. Yes the idea is that the pure capitalist would live entirely off the interest of his investments. What a great system!

      You don’t get something for nothing, and there’s no get rich quick scheme that works for more than just a few people; I think most realize that now. Sure if you start with a lot of money you can make lots of money as a capitalist, but most people who made lots of money worked hard, built their own businesses, or got onto boards as you said.

  2. I was one of those forclosures in the bubble. I did all the “smart” things… I bought my “starter” home, a 2 bedroom townhome for a cheap price (at the time) of 118K. A few years later after the bubble popped when my family was growing out of the place (literally) I couldnt even sell it for 70K. I had to foreclose. Never again will I trust people who see houses as an investment. It is only an investment in your family, not a money making oportunity. You’re right Devin, that we need to invest in our families by seeing our property as more than a resale value, but seeing and enjoying what it IS. When we buy anything, whether it is stocks or land or a house, it should be something we want and believe in. Something we want for its own sake, and hey, if we end up selling it for a profit someday, all the better.

    One fly in the ointment I see though is property tax. Although having a small homestead can reduce that cost.

    1. David that is terrible. I’m so sorry.

      I mean, the bank would have been better off writing you a new mortgage for $70K rather than foreclose. It costs them more money to foreclose, and they still can’t sell the home for more than $70K anyway.

      1. Yeah, it makes no sense. I was shocked when I looked at all my options and forclosure was by far the best. If they could have written a 70K mortgage, then I could have rented the place out and afforded a second mortgage or rent on a bigger place for my family. But that was not even an option on the table. The bank just changed the locks, somehow managed to flood the lower level by messing with the water softener (which needed a special touch) and let mold grow over a period of months and let the place go to seed. They have no brains or respect. What should have been a place that I sold at a slight profit (I had made some improvements) was ruined and ended up selling for near nothing.
        The whole experience has made me very distrustful of banks, and of our whole capitalist economy in general, which sees absolutely EVERYTHING in terms of money. Well, houses are about people, not money. And when people start speculating with houses, the little guy (me in this case) pays the price. And I will be paying it for a while yet.

  3. An ever intrusive government may not allow you to do all those things you want to do with your land.

    The time may come when they feel that government control of ALL land is in the best interest of society. It has happened before. It can happen again. You’ll be able to thank environmentalists and their power hungry partners in crime, the leftists in government.

    I pray that it will not come to that. But the handwriting is on the wall.

    1. Steve yes that is happening more and more, as is seen in the way that waterways are handled. Now, almost anything with moving water counts as a waterway and in some places the government will not let you do anything with it. I was looking this up recently since one property we are looking at has a wet weather creek on it.

  4. I sometimes (often!) wonder if there is any sense at all in the money we are setting aside each paycheck for our IRAs. Is that really the best use for that money? We only save a third of what our investment advisor friend recommends, as we aren’t looking to travel the world and buy a vacation home (or McMansion) as seems to be the dream of the baby boomers… But still, it adds up. Would the money be better spent on improvements on our property? Or on something (or someone) else entirely?

    1. Amber,

      That’s ultimately your judgment call. We have a 401(k) and two Roth IRAs. They are invested in various mutual funds. Whether they will be worth anything in 30 years when I hope to retire is dependent on lots of factors, most especially the solvency of our country.

      What we do is put some amount into them each year, less than the maximum we could by far though, and are going to spend the bulk of our money to buy our homestead and necessary equipment. To me, owning a cow that can produce milk on land where it can eat the grass is a better investment than having all your money in stocks and bonds or even in the bank.

      You can also buy other types of things, outside of equities, like gold and precious metals. I haven’t done that, but many people do, seeing the value as more real than cash or stocks.

      1. The carrot in IRAs is the tax deferral or the matching. However, I’m afraid that as it’s happened in many other countries, that carrot is often shrunk at the strike of a pen, if withdrawn forthright, when you’re left only with the stick.

        For example, the UK, France, Poland, Hungary, all made it mandatory that all IRAs be partially invested in public debt, a shrewd move to create buyers when buyers would rather not buy them.

        And if you think that it cannot happen in the US of A, then look no further than California, which has just approved such a plan: http://bit.ly/TDReVr Note that state workers take precedence accessing those funds. Sure, one can opt out, but one has to opt out every two years. IOW, they’re making it harder to opt out, counting on many not doing so. Surreptitious approach, for now.

        I say that the carrot is not that interesting anymore, since it’s being threatened to be shrunk while the stick gets bigger. So, do hedge your savings by saving at least something outside the government-controlled IRAs.

        As Mark Twain said, at this moment, I’m more concerned about the return OF my money than ON it.

      2. I’m not actually looking for advice :-) Besides, it isn’t ultimately my call to make – I give input and it is my husband’s decision. But it is something we discuss and wonder about.

        And I’m not sure I would want a cow (or cows, really, if I wanted milk year around) – how on earth would I fit in processing the 4+ gallons of milk a day along with the homeschooling, cleaning, meal making, etc? Yikes! From what I’ve read in older writings, I think the only way to make it work is to cut way back on what I expect my children to learn. Either that or hand them a stack of workbooks and let them fend for themselves… perhaps when my kids are older it will be more feasible – they will need less hands on time during school, and they will be able to help more too.

        I would like to get a couple of milking goats, but we haven’t been able to figure out how to protect them from bears. We had to give up chickens for that reason. Black bears are such a pain – and you aren’t even allowed to shoot them around here!

        1. Amber,

          Cow or goats, your choice. And with a milking machine the milking itself would not take that long. You could also get a small cow and keep the calf on it such that you got more like 2 – 3 gallons per day. The takeaway from my comment is that you can invest in things that have tangible value.

          Did you try electric fencing to keep the bears out? I know some people have done that around their beehives with some success.

          I built a small shed that protected our goats against coyotes, but I don’t know how far bears will go to get at something–will they start ripping boards off a shed? Or digging under it?

          1. I’m not concerned with the time the milking takes, I’m more concerned about what to do with all that milk – right now we only go through about 2 gallons a week and I use it to make our own yogurt as well as for drinking. I’ve experimented with cheese making, and maybe when you’re good at it it isn’t as time consuming… but as it is, I just can’t imagine how I could work that into my life!

            Bears will rip the siding off of buildings, rip through dimensional lumber, go through plywood, rip a roof off a building if they can get on top of it, go through many electrical fences… really, there isn’t much that can keep out a determined bear short of masonry (maybe heavy duty metal fencing with concertina wire so they couldn’t climb it) and high powered electrical lines – expensive and potentially dangerous around small children. There are distinct disadvantages to living in the woods!!

            But yes, I get the gist of your comment – I interject because I’m living on acreage and I wanted to share that it isn’t necessarily quite so easy or prosaic as I think you make it out to be. :-)

  5. The Democrats have repeatedly floated the idea of seizing all the money in 401(k) accounts to pay for Social Security, or unfunded union pensions, based on the idea that it’s not “fair” that you have extra funds for your retirement but those others have none. Naturally, they will promise to pay out your 401(k) when it comes due (just as when they initially raided Social Security, they left it full of IOUs). But basically, unless you’re within a couple years of retirement, I wouldn’t bet on getting your money back, ever. (Practically speaking, though, I think the better bet is that the US currency will be near-worthless from inflation long before most of us get to retirement age, so it won’t matter eitehr way.)

    Better to invest in land and children, investments that will continue to “pay out” no matter what the government does.

    1. Remember when 401k was jokingly called 201k in 2008? Children don’t get decimated. Unlike paper wealth, children are re the most precious treasure one can beget.

    2. Joe if the government did that, I think there would be a huge uproar. The idea that the government could reach into your accounts and take your money with an IOU note would sink confidence in the country. But I wouldn’t say that it could never happen.

      1. Devin,

        News-flash, this just in: Americans are not unlike the British, the French, the Polish or the Hungarians when it comes to being suckered and sheepishly taking abuse from their own government. After all, indoctrination to shut and obey in piublic schools is a long-time tradition in these countries.

        Gratuitous sarcasm aside, which I blame on the recent choice by the electorate, I think that you overestimate John Q. Public, most of whom voted for BO and is probably at the receiving end of such a “spreading of wealth around”.

        That’s democracy for you: when when the wolves are majority and they vote to eat the minority of sheep.

        1. Augustine is right. Americans no longer have the political will to hold back the tide. We couldn’t organize to stop Obamacare, we haven’t been able to organize against abortion for 40 years, and in 2011 we proved that we couldn’t even slow down, much less stop, the ballooning of the federal debt. No way would we suddenly get organized to stop something like this. No way would the half of the country that is absolutely dedicated to to holocaust of the unborn “cross over” and vote for a pro-life party just to protect the “wealth” of “the rich”. That’s exactly how the media would portray your 401(k) if the GOP had the steel to even raise an objection to the seizure, and they won’t.

      2. They did it to Social Security. When I say “IOU” I mean that the government will spend the money now, but promise to pay you back what you are owed when it comes do. Just like with social security, we pay this year’s benefits from this year’s taxes instead of from the money that the beneficiaries “paid in” years ago. So far, the fiction is maintained: you paid in, and now you’re cashing out. It’ll be the same way with your retirement accounts. That is, until the pyramid scheme runs out of chumps.

        1. Of course, when the government gives you an IOU it means to tax you to pay you, minus interest.

          TEchnically, the SS fund was sacked, but the cash was replaced with treasury bonds. IOW, when the time comes to exchange bonds for money at the treasury counter, it will send the IRS to collect the money to pay for its face value and the corresponding interest. Bottom line: we pay once into the SS and then again when the government pays back what it “borrowed”.

          If Americans were unwilling to raise even a pip, much less the uproar that it deserves, for decades, why would they change now, short of their bodies being snatched by outer-space aliens?

          1. Well, they don’t tax YOU again because you’re not working. Instead they tax your children. That’s why it’s a pyramid scheme. Pyramid schemes work as long as there are more chumps paying in than early investors cashing out. No nation in the industrialized world is having children fast enough to maintain these schemes much longer.

            1. Lets keep in mind here, that there is nothing inherently wrong with a system like Social Security (at least from the point of view of the Catholic Church). The problems are of a lower moral order… mismanagement. And also the demographic bomb, as you mentioned, will make the western social nets rip to bits when our age pyramids are upended. But an interesting fact is that the rest of the world will be right behind us. Every part of the globe has the same trend in their fertility rates, and all of them are headed towards sub-replacement. Global population begins to decrease in 30 to 40 years according to the best data.
              The best data also shows that the ones left will be the descendants of religious extremists like me, whose wives have high fertility rates.

              1. If the problem with entitlements were only “mismanagement” (the implication being that they are implemented with good intentions) then I would agree with you. These programs that were originally promoted to help the poor and unfortunate have expanded far beyond any possible good intention, and they primarily serve to destroy the family (as parents no longer need their adult children, children no longer need to think about their elderly parents, mothers and children no longer need husbands/fathers) and to ensure broader and deeper dependence and debt to the state. I recently read that “Social Security Disability has become a popular career choice” (http://moonbattery.com/?p=21874). In the first few years or decades, perhaps the proponents of these programs could be excused as having made an honest mistake. But to work as hard as they do to expand welfare and dependency and debt in 2012, there is either great evil behind their actions, or a degree of willful stupidity that is itself evil. No modern person with access to the facts about the 20th century can be morally excused for supporting a redistributionist, welfarist, leftist government.

              2. No, there is something terribly immoral in SS. The first check was cut to a widow who had never paid into the system. IOW, she got something from nothing, or rather something that the state forcibly took out of others. It was a pyramid scheme from the beginning, a scheme that forced all in the USA to take part in, and this is immoral.

              3. To keep it simple I will not reply blow by blow to you guys (Joe and Augustine). But I will just say that the libertarian views you seem (ISTM) to espouse are not the teaching of the Catholic Church. Governments absolutely can tax people and give that money to other people. That in itself is not immoral. Of course it can be done in a bad way, which can get into immoral territory. That was my onlty point. So yes, according to the Church, the “problem with entitlements” is not that that there are entitlements as such, but when they are not administered well by a Godly government. I understand Libertarians disagree with the Church on this issue, and insist on the imorality of SS and what have you, but they are provably wrong. According to the Catholic Church, Governments of nearly any type shy of communism or fascism are acceptable as long as they govern wisely and in submission to Christ. Obviously our government has long since even pretended to do that, and so we have injustice.

              4. DAvid,

                St. Thomas Aquinas would disagree with you and I disagree strongly with you because you portray non-magisterial teaching of the Church as binding. Such matters about what the state can or should do is a matter of prudential judgement, about which the Church has no definitive answer on the matter.

                Historically, the Church kept the state at bay because she knew of the threat that it’s been to mankind in general and to her in particular. The nation-state severed the ties with any Godly conduct when it arrogated to itself reasons of state beyond the Christian moral limits.

                It’s time for the Church to return to its role as a defender of the people from the state again and give up on diplomacy by conquering the souls of political leaders to Christ again.

              5. BTW, David, the greatest minds behind the ressurgence of libertarianism in the US are Catholic: Tom Woods, Jeffrey Tucker, Gerard Casey, etc.

                I invite you to watch this fascinating interview on the role of the Church as a moderator of the state in the Christian middle-ages: http://bit.ly/11VyUdi

                Remember, since November the 6th, 2012, we’re all Cristero Guy Fawkes.

                God bless.

              6. David, my view is not the same as Augustine’s, and it is not a libertarian position. I am not saying that welfare programs are necessarily immoral. What I am saying is that Social Security has ALWAYS been a pyramid scheme. It was set up with evil intentions and continues to be used as a political weapon for one party WITH NO REGARD to the fact that the program is a net negative for everyone concerned, and is already bankrupt. You assume Social Security was set up with good intentions and is only “mismanaged”, but I don’t think that’s the case.

  6. Devin, I understand your frustration. I’d like to point out that the S&P 500 didn’t make 7% per year in the past 30 years, it made 7.979% per year. In the world of Finance (my domain before becoming a FOCUS missionary) there is an over abundance of information.

    This makes it rather difficult to know what to do and who to trust when it comes to investing your money.

    I recommend the book Unconventional Success by David F. Swensen. It really does not have to be between get rich schemes (owning anything by leverage has always caused people to go bankrupt) and living on four acres. It really doesn’t have to be between getting on IPOs (notoriously bad investments) and living off the grid on some backwoods farm.

    Dave Ramsey is good at getting people to the middle ground, though he is extreme (extreme measures are needed when most people are addicted to debt like in America).

    Most of us have to work (Jesus redeemed work), most of us shouldn’t use debt (I’m not surprised by how the Bible treats Usury) and should save, most of us need a budget (Bible points this out) and most of us need to save for retirement (God gave a retirement plan to the OT priests). Fact of life. Even as a FOCUS missionary they ask us to save for retirement, because even the Levite priests only worked until they were 70, and who knows if I will be able to fundraise when I’m 70 years old and can’t work. By retirement, I like to take Dave Ramsey’s definition: retirement is when your investment account makes more money than what you put in to it. Does not require you to stop working.

    And, to your frustration. Over the past 50 years or so, there has been a shift in different things (real estate for example) that has changed how people view things, not because reality has changed, but because we are irrational beings when it comes to financial stuff. This is most likely because of a general lack of proper financial education besides telling your kids financial mottos spit out by some slick haired man in a boiler room.

    I won’t go into the details of financial behavior (my area of focus) as most people find it highly offensive to talk about (because basically you are showing that most people make the absolute wrong and backwards choices when it comes to their financial well being).

    1. Chris or Buster,

      Great balanced viewpoint. And I still have all my retirement savings in the market, as well as shorter term investments in the market until recently.

      I’ll check out that book. I agree that people often make the worst decisions for the financial well-being, and I know I’ve done that several times over the years. But the point I make here is that no strategy to invest works if the market tanks due to our country’s financial mismanagement. So buying land isn’t necessarily to live in the backwoods and make moonshine, but a hedge against the very real possibility that in the next ten or twenty years our country will lose its privileged economic position in the world.

  7. Chris or Buster,

    “…most of us shouldn’t use debt (I’m not surprised by how the Bible treats Usury)”

    I agree that usury is evil. But I noticed you did not mention the usurERS in your comment. (Although perhaps you meant the whole system of usurers and the used) As a financial specialist, do/did you advise people (yourself or clients) to put money in stocks of banks (or funds containing them) which are usurers?
    To me it seems quite aparrent that to be a usurer is far more evil than the one “addicted to debt” in the same way that the drug dealer is worse than the addict in the gutter he preys on.
    Is J. P. Morgan Chase evil?
    In my experience, it is the wealthy americans who enjoy getting returns on their mutual funds which include the likes of Chase and Walmart who are the first to criticize the poor woman buying groceries between paychecks on a Chase credit card at Wal Mart. To me it seems obvious where the real problem is. Do you agree?

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