How much money is out there?

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Posted By: warshawlaw

and as you acquire the things life is made of (spouse, home and kids, for almost all of us), your ability to control what you do with your money shrinks. When I was single and living in a dumpy little apartment I had an income many times that of my costs. Now, I have a minimum nut to cover every month so large that I know that the first 90% of my income goes to that and that alone. Almost all of that money is consumed (although the mortgage payment could be viewed as a real estate investment), meaning it is paid out for things that we either eat, use or that have no real remaining market value after I buy them (I don't count garage sale type value as any value). What can I do with the remaining crumbs:

1. Consume it on luxuries
2. Invest it in something "safe" that will earn me maybe 4.5% a year, tops
3. Buy stocks and hope that the ones I choose are more Google and less Enron or Worldcom or Global Crossing or Tyco or...you get my drift.
4. Invest it in hard assets and hope they appreciate or at least hold value relative to inflation.

I'd enjoy option #1 but at the end of the day would probably regret the consumption (some wise older folks in fact recently told me not to do that because they are now regretting it in their 70's). Option #2 won't lose my money but a single really good move in option #3 or #4 would do in 1 year what 10 years of option #2 does. Since I am relatively young, that's why every financial analyst preaches looking to go long when possible with an investment that has the best ratio of risk-reward that you can stand. So we are left with #3 and #4. My wife gambles in #3, heavily. I don't want to put the last bit into it too. That leaves hard assets, either real estate or chattel. I could buy income producing real estate, except that I don't want to take what little time I have to managing and maintaining income producing real estate--tangible hard assets never have broken toilets, they don't need to be evicted for non-payment of rent, they don't need maintenance--nor do I want to pay perpetually out of pocket for someone else to manage real estate. Plus, with a house I am already effectively "into" real estate more than I'd like to be (I wish I could put in a stop loss on my house value). So we are left with hard assets that don't need to be managed or maintained: art, gems, bullion, collectibles. Art is frought with fraud and unless you are dealing in masterpieces, it is extremely hard to recoup your investment because the market is controlled by a cartel of dealers and auctioneers who have most of the inventory and make the market. Diamonds/gems? Again, frought with fraud and controlled by a cartel that effectively sets the price by restricting supply. Bullion? I remember my father making a killing in gold in the late 1970's by buying and selling Krugerrands during an inflationary spike. I have often thought of buying gold instead of cards for the long term. But hard gold (not securitized gold, which is really just a variant on #3) only makes money in times of calamity. In other words, it is the ultimate timing-dependent asset. That leaves collectibles. I don't find other forms of collectibles to be interesting, so cards are it. Which cards, that's like choosing stocks. I've been remarkably successful over the years in picking what cards to buy for investment; I'd like to think it is because my enthusiasm for the task leads me to make good predictions.