Banking and Finance


falseFollowBetty Liu

Founder/CEO at Radiate, Inc.

2016 has not been kind to our bank accounts.

Fresh from the holiday cheer, we were hit with a cumulative 1,400-point drop on the Dow. China seemed to go unhinged. Oil dropped below $30 a barre. And just when we thought things were stabilizing, overnight #Brexit slams us back on the floor.

Watching the stock screens today will be quite scary, as it has been for the last 12 hours in Asia and Europe. Even so, it's important not to let your emotions cloud your view of the future. I've worked in business news for 20 years and have already watched and reported on 3 global market crises. Let's hope we're not entering a fourth. Even so, there's several things to keep in mind that will help keep you calm.

1. We've been here before and we always bounce back. Consider this excerpt from a New York Times article:

Executives [in Silicon Valley] say that the slump in stock prices, especially if it is prolonged, could disrupt the formation and growth of young companies that often pioneer in devising the latest technology.

Written just a few weeks ago? Nope. How about published October 25, 1987, days after Black Monday, one of the worst crashes in stock market history. People in tech were fretting that successful companies would never IPO and that some would run out of cash. Some did but others thrived, including a company called Apple that listed publicly 7 years before. History repeats itself and while we may not always learn past lessons, we know that what goes down always inevitably goes back up.

2. Crises tend to make businesses more disciplined-and that's a good thing. 
It's a touch ironic this surprise vote by Britain to leave the European Union happened the same week Elon Musk decided to turn his electric car company Tesla Motors into a sustainable energy company by buying Solar City. It seemed like the ultimate form of hubris from someone who doesn't lack any of it. Time will tell if his shocking gamble will be an outrageous win - but you can be sure the new environment is not going to tolerate moonshots anymore. Leaders will be forced into far more discipline, which will create far better companies. As one CEO told me, times of crises separate the great leaders from the ones who shouldn't be there in the first place.

3. Some companies thrive in a recession. While very few people still say a recession is around the corner, it doesn't mean that's not on people's minds. That doesn't spell bad news for all companies. In fact, some companies thrive in a recession. Green Mountain Coffee Roasters did amazingly well during the last recession - Americans still wanted their cup of gourmet coffee but opted to do it at home instead. Other products like laundry detergent and Monster energy drinks also sold well. A great Bloomberg articledescribes how companies who made life easier for people or found innovative ways to keep costs down outperformed during a downturn.

So while you might be worried watching stock markets tumble, remember this saying from Warren Buffett: "Be fearful when others are greedy and greedy when others are fearful." In other words, don't follow the pack. Take it from someone who's seen more crises than almost any of us.

Investing in Real Estate for Retirement With a Solo 401(k)

By: Dmitriy Fomichenko

Most people turn to stocks, bonds and mutual funds when they want to invest for retirement. These assets can be good sources of passive income — but some retirement savers prefer to mix in alternative investments, such as real estate, as well.

Solo 401(k) plans allow certain investors to do just that. The self-directed plans are designed for owners of small businesses without any full-time employees other than the owner and the owner’s spouse. They offer great flexibility in their investment options; plan owners can choose to act as the plan trustees and invest their funds in the assets of their choice. Take my client Susan, for instance. Susan is a university professor, but she also does independent consulting work that qualifies her for a Solo 401(k). She invested her retirement savings in rental properties in her neighborhood in Jackson, Mississippi. Thanks to her knowledge of the area, she was able to capture many great real estate deals.

Investing within a Solo 401(k)

Once her Solo 401(k) plan was set up, Susan started to invest immediately, taking advantage of the low home prices in her neighborhood. She purchased an investment property for $30,000 and turned it into a rental home, which she now rents for $850 per month. Next, she bought a $16,000 home with cash from her Solo 401(k). She spent $4,000 to fix up the house and is now renting it for $700 per month.

These properties were purchased as direct investments through her Solo 401(k). That means that the houses are strictly investment properties that are rented out to her tenants and are owned by her retirement plan. Susan must deposit all rental income she receives back into the plan, and use it to pay all of her rental expenses.

Plan owners can’t use Solo 401(k) investments for personal gain — outside of retirement saving — or to benefit any disqualified person, such as their spouse, parents or children.

Using a Solo 401(k) loan to purchase a primary residence

Thanks to the flexibility of self-directed Solo 401(k)s, Susan can also borrow money from her plan. She used a Solo 401(k) loan to purchase the home where she now lives.

Using the participant loan option, Solo 401(k) plan owners can borrow as much as 50% of their balances, up to $50,000, whichever is less. The loan is tax- and penalty-free and can be used for any purpose.

Plan loans must be paid back on a regular schedule over five years. Their interest rates are the prime lending rate plus 1%. If, like Susan, an owner uses the loan to buy a primary residence, he or she can pay it back over a 15-year period.

Because she borrowed from her Solo 401(k), Susan needn’t worry about losing the loan privilege. If she’d borrowed from a company-sponsored 401(k) and lost her job, she’d have to pay back the entire balance at once.

Follow the rules

Self-directed retirement plans, such as Solo 401(k)s, give investors more flexibility than company-sponsored 401(k)s and IRAs — but there are still rules.

Again, account owners aren’t allowed to receive any personal benefits from their investments. For instance, any properties Susan purchases in her 401(k) must be rentals. She’s prohibited from using any of these properties as her primary residence.

Rules also prohibit plan owners from providing any services to the plan. Susan can’t personally perform any work on the property, even a task as simple as changing a light bulb. All work must be done by an unrelated third party.

But as long as Solo 401(k) plan owners follow the rules, real estate investments can offer healthy returns. With the right knowledge and experience, investors might get even better returns for their retirement funds than they’d receive with stocks or bonds.

This article was originally published on