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During COVID, My 401(k) Grew Consistently and Impressively While My IRA Fluctuated Wildly

I designed the performance of my retirement plans. Did you?

There was a joke that started in 2002 after the dot com bubble burst that said “my 401(k) lost so much money in the stock market that it is now a 201(k).” The joke came back during the market drop in 2008-2009 and again in March 2020 when COVID rattled the stock market with the fastest 30% crash in history.

My 401(k) has been consistently growing every single month for years, including during the COVID crisis. In contrast, my IRA experienced wild swings of 30%+ up and down in March-May 2020.


Because my IRA is fully invested in the stock market while my 401(k) is invested EXCLUSIVELY in discounted distressed real estate converted into rentals, notes (secured by real estate) and cash. Yes, my 401(k) is a self-directed 401(k) and can own discounted rental real estate directly, notes and private lending, all secured by real estate as collateral. The stock market is secured by nothing AND can be volatile, like it has been in the past three months with unprecedented swings.

In other words, I decided by design to let my IRA performance flop around in the unpredictable winds of the stock market, figuring that in the long term the overall return will be worth it.

I also decided by design to use my self-directed 401(k) and Roth 401(k) - mostly my Roth - to invest DIRECTLY in discounted distressed real estate converted into high quality rentals and notes (NEVER in the stock market) and being disciplined to buy them at a large discount to full retail value (after costs), typically about 30%.

That means that, in the worst markets, my 401(k) cannot lose a penny unless the real estate market irreversibly drops by 30% AND tenants and borrowers stop paying.

Recovery from a down market is extremely important, more important than most people realize.

When the stock market goes down by 30%, the market must then go up by 43%, NOT by 30%, to get back to where it was.

Over the past decade, my self-directed 401(k)/Roth 401(k), invested exclusively in discounted distressed real estate, notes and private lending, achieved a compounded annual return MUCH higher than the compounded annual return of the S&P 500 of 8.2% for the same period. That includes investment “dead zones” during which my 401(k)/Roth 401(k) funds were NOT invested at all between investments.

The graph illustrates the difference between a one-time investment of $100,000 for 20 years at 8.2% (the actual compounded return of the S&P 500) and a 50% higher growth rate at 12.3%, which is a conservative growth rate for a sophisticated investor who invests self-directed IRA funds in distressed discounted real estate using strategies such as buy-fix-rent and buy-fix-rent-sell (NOT lease-option). As you can see, the difference in performance is huge. You can do a lot better than 12.3%, even over the long term, if you invest prudently in real estate after performing in-depth due diligence on each deal.

Most people choose an asset allocation for their IRA’s and 401(k)’s made up of stocks, bonds and cash, then forget about it for many years.

Have you designed the investment mix for your retirement plan or is your plan on cruise control after engaging in a 10-minute analysis of your risk profile in the office of your stock broker years ago when the world was a different place?

The Smarter Investing home study course shows the details of how I invested my self-directed 401(k)/Roth in real estate for very impressive gains such as more than 15% cash-on-cash return ON TOP OF more than 100% equity-on-cash return within 11 months. When you take into account that these 401(k) funds sat idle at near 0% (not deployed) for 6 months of those 11 months, these returns are even more amazing.

You have been making your choices and living with the growth of your retirement plan. Simultaneously, I have been making my choices and enjoying impressive growth in my retirement plan. My 401(k)/Roth 401(k) growth has been high, consistent, reliable and predictable due to the decisions I made and implemented.

If you have been managing your retirement plan well, congratulations! If you’re like most people, you have not been managing your retirement plan well. If your retirement plan is on cruise control, how many more years of investing for retirement are you going to waste while mine grows? Now buy the Smarter Investing home study course.


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