Do you Invest in Main Street or Wall Street?

Do you invest in Main Street or Wall Street? This is a question I never considered until about 2015. Prior to 2015, I had always considered my investing options to be stocks, bonds, mutual funds.

General Education from Wall Street

When we think about investing our savings, our minds are generally conditioned by what we see and hear around us. Every day there are commercials on TV telling us how easy it is to open an account with a Wall Street firm, deposit some money and start buying and selling stocks, bond and mutual funds.

At work, we are offered a 401(k) plan to easily have some of our pay saved and allocated to investing and we are offered anywhere from half a dozen to a few dozen different mutual funds that we can select for investing these funds.

We are told and offered all these different options for investing:

  • Stocks
  • Bonds
  • Mutual funds
  • Growth investments
  • Defensive investments
  • Fixed interest

We are told these are our options. We are told this is the safe way to invest. We are told to save all our lives so that we will have a nest egg to live off of when we retire.

But, These Are the Questions that Come to My Mind

  • Who are the people managing my money?
  • Are these people really aligned with me? In other words,
    • If I make money, do they get paid or make money alongside me?
    • If they lose my money, do they get paid or do they lose alongside me?
  • If I invest in stocks specifically, am I picking a management team that I know, like and trust?
    • If the stock price goes up, do they get paid or have their wealth increased?
    • If the stock price goes down, are they penalized financially?
    • Can the management team even have much influence on the price of their stock?
  • Who really influences the values of the stocks, bonds and mutual fund options?
    • Are they aligned with me?
  • Does the model of saving and investing for decades really work if I dig into the numbers?

What We Learn on Our Own About Wall Street

We don’t really know who manages the funds or the companies represented by their stocks.  These managers aren’t really aligned with us. They get paid whether we make money or lose money.

Our whole working lives, we live off cash flow (our paychecks). But we aren’t really told how we will live off this balance of stocks, bonds and mutual funds we invested in. Sometimes we hear some guidelines like withdraw 4% of your balance every year to live off and the portfolio should last your the rest of you life.

If we think through this scenario, here is how that thought process could go. Let’s use an example where our salary is $100,000 in the last few years before retirement. In order to continue to receive $100K every year, we need to have a portfolio balance of $2.5 million so that we can withdraw 4% to get $100K. If we assume we can average a return of 8% per year from our investments (we are commonly told this is the long-term average) over a 40 year timeframe, then we can get there by saving approximately $9,650 per year. this seems pretty reasonable when making $100K per year. That’s a little less than 10% of our pre-tax income.

But the reality is that if we go back 40 years, we weren’t starting out making $100K per year. More likely we were making $20K per year. In order for our salary to increase from $20K to $100K over a 40 year period, we have to get an average raise of 4.2% per year. But most people average 2-3% raises per year. So, either you need to save nearly everything you make during the early years of your life or you have to save at a much higher percent of your salary because you will have to save a lot more in the later years because your savings were low in the early years. You can see how this is a problem. I did some quick math on a spreadsheet and it looks to me like you have to save about 29% of your salary for 40 years to get to $2.5 million if you earn an average of 8% per year and your salary grows from $20K to $100K by 4.2% evenly.

This is just extremely difficult for the average person to do in our society today.

Here is What I Think We Should Learn Just from the First Six Months of 2020

Risks happen very fast and the financial markets move even faster

Before COVID-19 caused us to start purposely shutting down the economy in mid-March, the stock market peaked on February 19th, one month earlier. By mid-March, the stock market was down roughly 30%; about the same time we started locking down. The stock market moved faster and started declining earlier than the economy.

Were we able to predict in mid-February that the stock market would be down 30% a month later? Highly unlikely. The risk happened very fast and the market moved even faster.

Initial Jobless Claims are a Very Good Indicator of Stock Market Bottoms

If you look back at the peak of initial jobless claims, the highest week was early in April. That is very close to the bottom of the stock market decline. If you look back at 2008-2009, these two coincide as well.

After the peak of initial jobless claims, the stock market started going up. But people kept losing jobs by the thousands and in 2020 by the millions. So how does the average investor make this connection? With so many people still losing jobs, the economy looks very bad, but the stock market is now going up. The stock market is soaring long before people start getting jobs back.

Even this very good indicator lags or coincides with the bottom of the financial market. That makes it very hard for the average investor to use.

What You Might Not Know About Real Estate Investing (What I Call Main Street Investing)

You Can Have a Direct Impact on the Assets You Invest In

With real estate investing…you can choose specific properties. You can choose the purpose and use of the property. You can choose how to improve upon it.

You Can Make a Difference in a Specific Local Area

You can choose where you want to invest geographically. You can choose what cities you want to invest in. You can choose what neighborhoods to invest in. You can improve properties and create value in a neighborhood and still have a positive financial return on your investment.

You Can Actually Get to Know the People that Manage Your Investments

When you invest in real estate, you will have people that work for you to manage your investments. These include property managers. These are probably the most important people in your real estate business and for your investments. You can get to know these people personally. You can incentivize these people so that they are aligned with you.

The Market Moves Much Slower Giving You a Lot of Time to Prepare and React

Real estate markets follow economic activity and demographic changes. They do not lead. Compared to the financial markets, real estate markets change very slowly. Usually when there are recessions, the real estate markets bottom after the economy bottoms. The real estate bottom is usually a longer U-shaped bottom. This gives you a lot of time to prepare for the bottom, the ability to invest at many points along the bottom and average into the market.

You Can Create Cash Flow Now That Will Start Earlier and Continue After You Retire from Your Corporate Job

With real estate, you can create cash flowing investments that will give you cash flow today that you can spend now, will grow over time, and will continue to give you cash flow you can live off of when you decide to retire from working for someone else.


I Can Move Slower and Make Thoughtful Decisions.
I Can Have More Control Over My Investments.
I Can Get to Know and Have Relationships with the People Managing My Investments.
I Can Make a Positive Impact on Local Communities.
I Can Create Cash Flow Now that I Can Live Off Now and When I Retire from a Corporate Job.

I also believe that the returns on your investments can be much higher by investing in real estate than through the options given to you by the Wall Street machine. Keep reading my blog and emails for more information and education on how you can do this yourself.

Thank you for taking the time to read this.
I would love to hear your thoughts on this comparison.