quote:

Originally posted by JALLEN:
I’ve been very happy with a significant investment over the years in Realty Income, (NYSE: O), Link, which is a Real Estate Investment Trust. It pays a dividend monthly, now running around 4-5% annual rate. It’s real estate, like being a landlord but without the plumbing emergencies, irresponsible tenants, bouncing rent checks, incompetent real estate agents, escrow officers and greedy lenders. There may be a REIT out there more attractive but I don’t know of it.

You've posted this information previously. Are you saying that you've purchased stock in Realty Income or that you are invested in real estate trusts?

Why is it that everybody who comes on here looking for legal advice gets, in the first couple posts, something like "LAWYER.", in big letters, and a chorus of voices agreeing, but everybody who comes in here looking for financial advice gets all sorts of help?

GO PAY SOMEBODY TO HELP YOU. Get sound advice from a qualified professional.

quote:

Originally posted by Fla. Jim:
I sold a property this year and I know I will have to pay capital gains on the profit this year. I want to invest some or all of the rest while paying as little taxes as possible when I withdraw the $.

To answer your specific question:

As far as I know, the only tax-free investments available to regular folk like us are municipal bonds and municipal bond funds.

The interest/dividends are free from federal tax. Whether the earnings are taxed at the state level depend on your state and the specific bond or bond fund

The capital gain (if any) from selling a bond or bond fund is taxable.

quote:

Originally posted by Fla. Jim:
I sold a property this year and I know I will have to pay capital gains on the profit this year. I want to invest some or all of the rest while paying as little taxes as possible when I withdraw the $.

Once you pay the capital gains tax, you will only pay additional tax on any future interest or dividend income, or capital gains. Interest is taxed at the highest marginal rates, and dividends and capital gains are taxed at a usually lower rate.

You cannot contribute to an IRA or a Roth IRA since you don't seem to have any "compensation". "Compensation" for IRA contribution purposes includes wages and self-employment earnings (things you pay social security taxes on), but does not include pensions and rental income (see IRS Pub 590 table 1-1).

You refer to index funds - there are many, many flavors! Mutual funds used to be all the rage, the modern improvement is the ETF, or Exchange Traded Fund. There an almost unlimited number of flavors of ETFs. The ETFs trade like stocks. You start an account at a broker (I use Schwab) and buy the ETF of your choice. One of the most popular is the Vanguard S&P 500 ETF (symbol VOO). The S&P 500 is an index, composed of 500 stocks, which is reported frequently in the financial press, along with the Dow Jones 30 Industrials, and the NASDAQ index. The Vanguard ETF (VOO)attempts to track the performance of the S&P 500 Index. Vanguard charges a very low annual fee of .04% for administering the fund. The share price of VOO will change as the individual stocks of the S&P 500 Index changes. Any dividends paid by the underlying 500 stocks will be paid to you as the owner of the ETF, at the favorable dividend income tax rate. When you sell the ETF, you will pay tax on the gain, if any, at capital gains rates.

Since there are many flavors of ETF, you can focus your investments, but at a cost. For example, you can invest in two different subsets of the S&P 500 - 1)Vanguard S&P 500 Value, Symbol VOOV and 2) Vanguard S&P 500 Growth, symbol VOOG. As the names suggest, VOOV invests in "value" stocks of the S&P 500, while the VOOG invests in "growth" stocks of the S&P 500. But for this specificity, you will pay Vanguard a somewhat higher annual fee of .15% for fund management.

You can also invest in a number ETFs based on lesser known indices, like the iShares US Energy ETF (symbol IYE), which tracks the Dow Jones US Oil & Gas Index. You will pay an annual fee of .44% for fund management. If you think oil is going back to $100/barrel, this may be the fund for you.

So you can pick other ETFs that track emerging markets, European markets, or nearly any other type of stock groupings that you can imagine.

Index funds are very popular for several reasons. They have very low annual fees, and very low portfolio turnover (which reduces stock trading commission expense). Furthermore, Index Funds typically outperform about 80% of actively managed funds - that's right about 80% of the professional, highly compensated stock pickers are beat by the Index. And if your actively managed funds happens to be one of the 20% that beats the Index this year, it is very unlikely that they will beat the Index next year. This is why "Hedge Funds" are going out of business every year.

ETFs are a low cost investment vehicle. But stocks and bonds are risky investments and loss of principal is possible, and maybe even likely. At your age don't put the majority of your new found funds into stocks. At your age I would not put money into direct real estate investment either due to the potential lack of liquidity. You could need cash real quick for medical or other emergencies.

Good luck!

quote:

Originally posted by HuskySig:

quote:

Originally posted by JALLEN:
I’ve been very happy with a significant investment over the years in Realty Income, (NYSE: O), Link, which is a Real Estate Investment Trust. It pays a dividend monthly, now running around 4-5% annual rate. It’s real estate, like being a landlord but without the plumbing emergencies, irresponsible tenants, bouncing rent checks, incompetent real estate agents, escrow officers and greedy lenders. There may be a REIT out there more attractive but I don’t know of it.

You've posted this information previously. Are you saying that you've purchased stock in Realty Income or that you are invested in real estate trusts?

I’ve purchased the shares of Realty Income stock.

There are hundreds of real estate investment trusts publicly traded, like Realty Income, with all sorts of emphasis, commercial, residential medical offices, mortgages, etc.