401k vs Multifamily Real Estate Investing

I was always confused why my 401k and mutual fund investments weren’t growing my wealth as rapidly as I would expect, given the projected returns by my financial advisor. It wasn’t until I was taught how the numbers in these stock investments actually work that I really understood… and wished I was educated earlier in life about this.

$1k in a mutual fund for 5 years

Average Return +25%

Actual Yield 0%

$1k in a mutual fund for 5 years with expenses

Average Return +25%

Actual Yield -8.65%

YIKES! This explains why my IRAs are nowhere close to what I’d expect, given the projected returns my advisor shares with me!

Part of the problem is that people in the system get paid for gains but don’t lose compensation for losses, and therefore the returns are calculated this way. It’s a great spot to be in if you’re a fund manager, but bad for me as an investor. Most investors are in the dark about this and it’s extremely difficult to get a fully transparent view into all of the fees in these investments.

Fortunately for me and you, there is an alternative. Real estate. With real estate, you are investing in a real asset that you can physically see, touch, tour and observe. You can see the costs and the income simply on a financial statement. It is straightforward to see how the asset is managed. And, in contrast to the examples above, it’s easy to understand your investment’s true performance. 

My favorite type of real estate investing is apartment syndications. My apartment investments pay me much better returns than my 401k, which is why I focus on real estate now.

If you are curious to know more about how I invest in syndications, feel free to reach out to me. I’m happy to share my experiences and pass along some educational resources that I’ve found helpful.