A Do It Yourself Investment Checkup Guide

A do it yourself investment checkup guide is vital for all DIY investors. I've been a DIY investor since 1996, when I invested in my first stock online through Ameritrade. Investing myself lead me to a career on Wall Street in equities and then to starting Financial Samurai in 2009.

Everybody should get in the habit of evaluating their portfolio at least once a quarter. Left unmonitored for a long enough period of time, your desired weightings can become unbalanced. For example, in one portfolio, I limit my positions to no more than a 5% weighting. After not checking the portfolio for three months, my positions in a gold ETF and Amazon ballooned to 10% each.

We've spent time learning about various investment strategies for retirement based on Modern Portfolio Theory. Now let's spend time implementing what we've learned. After all, learning without taking action is not very useful.

To guide you on how to give your portfolio an investment checkup, let's go through it together using my own example. I'll show you what to think and what to do in seven steps. We're at record highs in the stock and bond market. Now is a great time to do a deep dive analysis.

Step 1 – Do A Self-Assessment

The more honest you can be, the better you can assess your risk tolerance and goals. It’s important to be congruent with how you feel and how you invest. Here's mine.

Age: 46

Work status: Tennis Bum / PF Blogger / Consultant

Investment strategy / goal: Conservative. Focused on principal protection, beating inflation, and maintaining regular investment income in that order. Might as well be a 65 year old classic retiree.

Number of income streams: Over 10 if online income is considered one income stream. Over 20 if online income is broken down into individual income streams.

Net worth composition: Physical real estate 40%, public equity 20%, business 15%, private equity 10%, risk free 15%. Would like to reduce my weighting in physical real estate to 30%.

Investment education: Finance professional from 1999 – 2012, received MBA with emphasis in real estate and finance, have written over 1,200 personal finance articles since 2009, economics/finance geek who loves to crunch numbers.

Dependents: 1 – 5, depending on how much I must take care of my parents, in-laws, and children.

Work ethic: Consistent. Can still work 50 hours a week, but prefer not to. Worked 70 hours a week for 10 years when younger. Ideal number of work hours a week is 25-30.

Attitude towards money: Seen too many busts to take good fortune for granted. Willing to work full-time flipping burgers and driving a car if necessary to make ends meet. 100% believe money is a tool for trying to achieve maximum happiness.

Main weaknesses: Irreverent. Defiant. Working on not being so arrogant. Must constantly work on shining light on blind spots. Slowly losing energy and enthusiasm to work.

Step 2 – Run Investment Checkup

After linking your investment portfolios to your Empower account, go to Advisor Tools -> Investment Checkup from the homepage to run some calculations based off your investment profile you first filled out. You want to find out areas that can be optimized.

Personal Capital Investment Checkup Tab

You should see this screen below after you click Investment Checkup. In my case, Personal Capital says my Asset Allocation in conservative, just the way I like it. However, it's tempting me by saying that I could have $350,000 more in retirement if I mobilized my cash.

I'm not down with mobilizing my cash because I might buy another property in two-to-three years. At the same time, I want to reduce real estate as a percentage of my overall net worth. Therefore, I've got to hustle to grow my other assets. All money I allocate towards buying property within three years is to be held in risk-free investments like CDs.

Investment Recommendation

Step 3 – Find Your Most Appropriate Target Allocation

On the same page, scroll down to the “What Is Target Allocation” section where you can move the bar left or right to see various investment strategies. Your goal is to choose the investment strategy that most reflects your goals, risk tolerance, and financial situation. A proper asset allocation of stocks and bonds by age is important for all investors.

The various investment strategies from conservative to aggressive are:

  • Capital Preservation
  • Capital Preservation Plus
  • Inflation Plus (my desired strategy for this portfolio)
  • Conservative Balanced
  • Moderate Balanced
  • Moderate
  • Moderate Growth
  • Growth (what they recommend for me)
  • High Growth
  • Aggressive

Because I'm 46, Empower still thinks I'm at least a couple decades away from retirement. In such a scenario, a Growth investment strategy makes sense. I prefer investing in growth stocks over dividend stocks to build a higher net worth.

However, I've already found my “enough” money to live off, so I have no interest in taking outsized risk for higher returns. Instead, I'm more about capital preservation + beating inflation. As a result, I've chosen Inflation Plus as my desired investment strategy. Whenever you invest, you must come up with an investment thesis as your guiding light.

Inflation Plus Investment Strategy Personal Capital
My desired investment strategy

Step 4 – Compare The Results

After clicking the “Compare Inflation Plus Allocation” button, I'm being told that I'm still leaving $120,000 on the table over my lifetime based on my current asset allocation. Your goal is to choose an investment strategy where it says you're leaving nothing on the table.

It's important to align your beliefs with reality. I write I'm all about capital preservation + beating inflation, but it looks likes I'm slightly more conservative in the way I actually invest. Let's take a look at how I invest in my Current Allocation versus the Target Allocation for how I'd like to invest in the Inflation Plus recommendation.

Related: New Year Checklist For Financially Savvy People

Inflation Plus Target Allocation Recommendation

Recommended Target Allocation
Way overweight cash

Now I know the main reason why Empower (Personal Capital) says I'm leaving $120,000 on the table is because I've got a 23.3% cash allocation versus their 2.0% target allocation. Another reason may be my 1.9% current allocation in Alternatives versus their 9.2% target allocation. But since the software doesn't know I have private equity and venture debt investments, it thinks I'm underinvested in Alternatives whereas in reality I am not.

Now let's look a the Capital Preservation Plus strategy, which is one step more conservation than the Inflation Plus strategy.

Capital Preservation Plus Target Allocation

The Capital Preservation Plus target allocation says that I'm not leaving any money on the table based on my current allocation and my goals. Given what I know about my desire to buy another property in ~2018, if you strip out my cash holdings, I actually invest more aggressively than the Inflation Plus strategy.

The ideal portfolio return in retirement is low volatility high income.

Remember to always think holistically about your money. Question the results and come up with your reasons why.

Personal Capital Capital Preservation Plus

The below bar chart is another way to look at your Current Allocation versus their recommended Target Allocation by various strategies. If you click on the Investment Checkup page and scroll down, there is a whole bunch of great charts.

Personal Capital Bar Chart Asset Allocation Comparison

Step 5 – Find Out Where You Are On The Efficient Frontier

In the menu bar under in the Investment Checkup field, click the RISK & RETURN tab. It'll show where your portfolio is on the efficient frontier. Given the X is below the hyperbola, it looks like I'm not getting properly compensated for the risk I'm taking. As such, I probably need to invest more in stocks if it wasn't for this house I plan on buying.

Remember, the efficient frontier represents the set of allocations offering the highest expected return for each level of risk. The Y axis represents growth and the X axis represents volatility. It is derived from the historical returns and volatility of each the six major asset classes, as well as their correlations to each other.

If your portfolio is inside the frontier it means you are likely taking more risk than necessary.By owning a mix of assets which behave differently at different times, it is possible to lower volatility without sacrificing expected return.

Personal Capital Efficient Frontier

Step 6 – Decide What To Do

Go to Portfolio in the menu bar to the left of Advisor Tools and click Allocation to see the composition of your investment portfolio. Once you know how much money you have to deploy, it's easier to decide what to do.

In this portfolio, there's $291,721 in cash to deploy. My plan is to continue hoarding cash while also being opportunistic during downturns. Stocks, bonds, and real estate in coastal cities all look expensive now. The ~$76,000 of stock I purchased post Brexit was all sold by end of July for a small 6% gain. This portfolio was down about ~$60,000 the second day after Brexit. It reminded me I don't want to lose that much money that quickly again.

One interesting note from this exercise is that for some reason, my equity structures notes are classified as U.S. Bonds not U.S. Equity and only my equity ETFs and single stock positions are classified as International Stocks and U.S. Stocks. My U.S. Bonds allocation is actually closer to 15% in this portfolio, with 23.34% cash, and 54% Stocks. So again, doing an investment checkup helps you think about the true makeup of your investments.

Personal Capital Investment Portfolio Holdings

Step 7 – Run The Retirement Planner

Don't forget why you are investing and analyzing your portfolio on a quarterly basis: financial freedom! The goal is to have your investments grow large enough to provide a steady passive income stream or capital base to withdraw from in retirement.

Go to Advisor Tools -> Retirement Planner to see how your investment portfolio shapes up. You've got to select some variables such as how much you want to spend in retirement, your desired age of retirement (I put 50 in mine so there would be something the planner could calculate), and input any upcoming expenses like college tuition.

Your #1 goal is to have your projected monthly spending ability be higher than your desired monthly spending ability. See the right hand bar chart below.

Personal Capital Retirement Planner

Check That Your Retirement Cash Flow Is On Track

A retirement calculator is a great sanity check tool. But I strongly suggest you not rest on your laurels if the retirement planner is saying you are in great or excellent shape. Things change all the time.

It's kind of sad that a $1.2M portfolio can only generate ~$30,000 a year in dividends. This is why I urge everybody to build income producing assets. Acquire rental property, start your own website, take advantage of real estate crowdsourcing investments, build a dividend equity portfolio and hold on to these assets for as long as possible.

It's kind of hard to imagine a $1.2M portfolio growing to over $3M in 11 years according to the Retirement Planner. But if I somehow contribute $0 for the entire 11 year period and earn a compounded 9% a year, I'll get to $3.1M. Alternatively, I can contribute $100,000 a year to the portfolio and earn a compounded 3% a year to get to $3.01M.

Run your own numbers and see where you stack up. Keep inputting different variables to take into consideration different scenarios.

Do Not Leave Retirement to Chance

When it comes to investing, hope is definitely not a strategy. You've got to be methodical in your contribution and your analysis. You may think you're investing according to your risk tolerance.

However, there's a good chance that what you think and how you invest are inconsistent. You might also think you have a much higher allocation in one asset class, but in reality, you’re under-allocated. You’ll never know until you check.

Financial freedom is not a guarantee. But we can take some relatively simple steps to massively increase our chances of getting there before we're too old, sick, or tired to try. Analyze your investments every quarter with Empower, the best free financial tool on the internet. Not only will you get a better understanding of the way you invest, you'll also discover more about your WHY.

Personal Capital Investment analyzer
Sample Investment Analyzer by Personal Capital

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  • Artificial Intelligence & Machine Learning
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  • Financial Technology (FinTech)
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Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

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71 thoughts on “A Do It Yourself Investment Checkup Guide”

  1. This makes me even more sad us Canadians don’t have access to something like Personal Capital

  2. Hi Sam,

    Thanks as always to post as a guy next door, who understands us, and what somewhat financially intelligent folks think or care about.

    My Portfolio Adviser at Personal Capital has been shouting “Too much Cash” for years now.

    I have no clue what to do with it. I tried to buy a rental property in Denver, but it has sky rocketed way beyond my imagination when the RE bubble burst. Stocks, I have automatic investments, and I don’t want to change it, for pure dollar cost averaging.

    What do I do with this cash which has already lost a lot of value sitting idle?

    Confused, totally!


    1. Your cash has lost hardly any value. Don’t let advisers or pundits scare you into investing your cash. Cash is a beautiful asset class at the top of the market. I’m aggressively building my cash hoard now and it feels wonderful.

      People will play on your greed for more, especially in a bull market. What you’ve got to do is focus on your greed for less. That is when you become really rich.

      In the meantime, I’ve looked at venture debt, structured notes, and most recently real estate crowdsourcing investments with RealtyShares to generate income.

      1. Thanks Sam. I trust your financial intelligence more than mine, and quite a few visitors here share “gems”, love the site.

        I am inclined towards putting this cash into some tax exempt, low risk Bonds; or in a CD till I can use it to buy a rental which could be 1-5 years away or never.

        I personally do not treat published inflation rate as the cost of me keeping cash. If I could buy a house or gold (a physical thing) for $100 in 2013 and its selling for $400 now, then that is how I treat the inflation in terms of “investment”. A bread loaf price may not have increased, but investment-inflation – as in RE or GLD or SPY – have sky rocketed. So, for an investor, the inflation rate is a lot for keeping the cash.

        Are there any CDs in the market providing a decent return? I tried with ING and even theirs is 1.4% for locking the money for 5 years. Urgh.

        Anyways, thanks so much for your time and thoughts.

        I believe the problem is widespread with “where to put cash?” (I googled on it) in the last 3-5 years, and deserves some serious advise! :)


  3. Hard to find 50 baggers nowadays! Did you end up cashing out of Apple at a profit? it had a huge drop in 2013, then rebounded big time but has been declining for the past year.

    There was this one “advisor” named Andy Zaky ran an Apple “hedge fund” but lost investors alot of money.

    1. Cashed out half and just riding it up and down, down, down recently.

      The only 50 baggers nowadays are in private investments. Even those don’t have any liquidity for a long, long time.

  4. Hey Sam do you still actively trade stocks in large quantity right now? You made some comments a few yrs back that you had a $200k gain with Chinese stocks and Apple…and you had a huge position in Apple a while ago.

    There must be huge swing in your portfolio doing so!

    1. I’ve been pretty inactive for the past several years just sticking with index funds and asset allocation mixes. But I do have a large active investment portfolio where I take some concentrated bets in specific positions.

      Dedicating up to 10% of your investment portfolio towards picking ideas is not bad. If I didn’t actively search for investment ideas in the early 2000’s, I wouldn’t have been able to find the crazy 50 bagger that allowed me to buy my first property in San Francisco in 2003.

      Now I mostly focused on larger cup, income generating equities, with low volatility. I like to spend time on things which have a high correlation with effort and performance Eg this site.

  5. Jeff Proctor

    This is really valuable stuff, thank you for sharing! And to think, so many people pay a financial advisor thousands of dollars each year to do something as simple as this. It’s completely ludicrous. Independent investing is definitely the way to go, especially if you just want to keep everything in index funds.

  6. Hey Sam,

    Where do you think pensions fit in to the whole investment portfolio? My situation is that I am heavily invested in physical real estate and my wife has a sweet pension that they no longer offer for obvious reasons. We really don’t own any stocks/etf/bonds that will mean anything, is betting solely on physical real estate and a huge pension a bad idea?


    1. “A huge pension” is like winning the lottery! You guys are set for life John and really don’t have to worry about stocks and bonds and diversification as much if your debt levels are under control and your pension covers all your expenses.

      Take the annual amount of your pension and divided it by 2% – 4% to see what it’s worth. It is worth A LOT!

      See: Passive Income Is Much More Valuable Than You Realize

      Ranking The Best Passive Income Streams

      1. Awesome, thanks Sam! I guess I was a little suspicious of how much you can rely on a pension. Child of the Great Recession and all.

  7. BeSmartRich

    Wow that was a very extensive article. Thanks for sharing. People need to stay invested whether it is good or bad assuming they picked solid companies with great fundamentals.

    BREXIT was sweet event for me making easy 10% on several purchases already.

  8. Great article. I recently signed up with PC myself and looking to understand it. I review my investments once a quarter (any more than that drives me crazy), but I’m only getting account balances to log into my spreadsheets. Since I’m in the accumulation stage, new money re-balances my portfolio for me.

  9. Finance Solver

    Hey Sam, I just got Personal Capital through your links. I only played around with it briefly for a couple of days and linked everything. The only thing I don’t like is that they think my 401k is all invested in cash when I have 90% in a vanguard ETF and 10% in bonds (this screwed up the retirement planner forecast because they assumed a 3.4% average return instead of the normal 7-8% average annual return “if” I’m invested with the market). Also they don’t let me link robinhood accounts as well. Bummer.

    However, I’m still happy that I got it because I get to see my net worth in one snapshot and get to see exactly how much I’m losing or gaining in net worth. I’m going to play around with it longer and thanks for posts like this guiding me through some of the features!

  10. I’ve been doing informal checkups for years, but I like the idea of making it a formal analysis and writing things down to keep yourself accountable.

    One thing I’ve been placing a greater and greater emphasis on recently has been debt reduction, which I don’t see directly addressed in your post. Yes, we are at all-time lows for interest rates, but that means that rates have nowhere to go but up. I’m actively looking at my debt and determining if it makes more sense to pay down mortgages (locking in a guaranteed ~4% return) or investing in bonds (~1% returns if held to maturity) or stocks (uncertain, but I just wrote an article about the current PE ratio and the inevitable reversion to the mean and I believe we are likely headed for 10 years of low single digit returns).

    In the past you’ve written about using your additional cash flow to pay down your mortgages. Did you do a formal analysis and decide that was your best use of cash, or are you paying down your mortgages because it’s the safest use of your cash?

  11. Hi Sam,

    The investment checkup feature in PC is great, especially because it’s all FREE! So you know the advice is not bias.

    I’d also like to add if people out there have a retirement account, you may be able to contact your Fidelity, Nationwide, etc. account rep for a free basic “checkup” to see if you’re on track, and ask questions. Why not take advantage of these people; that’s what they are there for and the fees we are paying in our retirement funds are partially paying for their salaries anyway!

  12. I guess this question goes to everyone around here maybe someone can give me some good advice. I’m always fascinated reading about what tools there are available to the US residents. It seems that Personal Capital is no exception. Here in Europe we don’t have tools that pull your investment data from multiple sources. I was wondering if there is a similar tool / site where you can input your own numbers manually and still do the calculations and checkups. I’m currently keeping everything in an excel spreadsheet and try to manage my finances there, but obviously none of the tools are available unless I build them.

    Any suggestions you all could give would be highly appreciated.


  13. I did an investment checkup just last month actually. I’m trying to get in the rhythm of taking a close look at my portfolio every six months. It’s easy to lose track of time so I’m using the mid-year and year-end marks to help me remember to take some time to see how I’m doing. Excellent insights and details above on the checkup btw. Love the tools!

  14. These check-ins are so important. It is useful to see precisely how you do it, too. I’m not yet ready to use Personal Capital, but I am happy to be reminded that it does not know my true goals and I need to always take my own desires and knowledge into account when making these plans.

  15. Done by Forty

    I’ve been trying, unsuccessfully, for the past few months to get Personal Capital to ‘see’ the funds in my Fidelity 401k Brokerage Link. It seems when I use that feature in my 401k (and that’s where all my 401k funds are now, due to wider/better choices than in the standard 401k), they become invisible to Personal Capital. Emails to the company, and even replying to nice lady from Personal Capital who asked me to link to PC in one of my articles, has so far yielded no fruit.

    Anyway, that’s kind of a nit. The overall point of regularly looking at your portfolio and seeing if it aligns with your plans, or even where you think your investments are, is solid advice. We generally should put things on autopilot and not look too often, but a quarterly check in is great. You could probably get away with biannual or annual, too.

    1. Sam – I finally dove into Personal Capital a few weeks ago – although I sent them a note I thought you would be interested to know with Fidelity 401K accounts – all the variations of funds we hold just come through as cash allocation, which is pretty useless with this assessment — I see on PC help page tons of comments about this – Done By Forty is all over this as well — thanks for any insights from anyone

  16. Jon @ Be Net Worthy

    Another great post Sam. I went through a similar analysis just a few weeks ago to re-allocate my portfolio. Like you, it was a little out of whack since equities have been on fire and my precious metals fund was through the roof, almost doubling so far this year!

    I used Personal Capital to check my allocations but had to resort to Excel to figure out how to allocate my positions across a 401k and multiple IRA accounts and still minimize fees.

    Good stuff!

  17. Gary Herman

    “I’m happy with what I have, so why take unnecessary risk?” My situation exactly! I’m retired, but luckily will have a union pension that goes up 9% every year I wait past 65 (I’m 64 now) so my need and/or desire to take risk is pretty much nil.

    My tIRA is 50% bond funds, 50% cash (yeah I know.. waiting for the big stock market drop after the election, since Hillary says she’s going after the big banks, wall street etc). Love your postings, you are very sensible compared to most of the other financial bloggers and commentators out there.

    1. Not sure. The more I work, the more I can help other people. I plan to give as much as possible away above the estate tax limit. And in the meantime, I’ll continue to write as much as possible to help folks who might be seeking answers.

      Working online is also fun. If I stop working one day, it’ll be sad b/c then it means I’m physically or mentally incapacitated or no longer having any fun.

      1. Sounds very altruistic which is a good thing :)

        I was wondering what you thought of this analysis I read from Quora (from an entrepreneur) of how being a billionaire is better than being a millionaire. He pretty much went through a few different wealth levels:

        “Being a millionaire ain’t what it used to be :-). In thinking about net worth, it’s helpful to consider everything using a common denominator, such as your potential annual income based on the return that the wealth could theoretically generate. (Because otherwise, if you start spending your principal, you won’t be a millionaire very long.)

        So, for example, a million dollars put into the safest CD you could find, might, if you were lucky, generate 1% interest each year… which is $10,000!

        Even if you had, say, $5 million, and were willing to take a fair bit of risk and put it all in the stock market where it might (with real luck) generate 5% as a sustainable annual withdrawal, you’d still be making “only” $250,000 a year. Take out taxes (being very generous, let’s use a 20% rate) and you’re at $200k.

        That’s enough to rent a nice apartment (or pay the mortgage on, say, a +/-$1m house), take a nice vacation each year, and probably pay private school tuition for one or two kids… but you’re certainly not going to be flying your own Gulfstream with only $5 million.

        Next, if we skip over the run-of-the-mill deca-millionaires and jump to someone with $100 million in assets, NOW for the first time are we just getting to the point where you have a good bit of flexibility.

        Assume that with this kind of cash you begin to have access to some good hedge and venture funds, so maybe you’ll be able to consistently get 8% on your money. And now that you’re in the privileged class, we’ll figure you can find some good tax shelters and squeeze things down to a 13% tax rate. This means you’ll net out to about $7 million disposable income annually.

        At this level you can do pretty much anything you’d reasonably want. Pay the mortgage on a $10m mansion as well as a $5m summer place in the Hamptons, put four kids through Ivy League colleges, fly first class anywhere you’d like, make half a dozen angel investments at $250K each, eat out every night at three star restaurants, vacation on the Riviera, and have a full-time cook, butler, nanny and chauffeur. I expect you’d even tithe $1m annually to good causes, which probably gets you named Man of the Year for a big local charity.

        All in all, not a bad place to be! But still no Gulfstream, no $35 million penthouse in midtown Manhattan, no building named after you at your alma mater, no mega-yacht docked outside your Riviera estate, no getting Justin Bieber for your daughter’s quinceanera, no 24/7 security detail like the President, no executive-producer credit on Avengers 3, no invitation to the Allen & Co retreat, no mega-trophy-spouse.

        All that needs to wait until you get your first billion and put it to work.

        Here we’ll assume that with enough portfolio diversification you’ll finally hit a Google or LinkedIn, and be able to comfortably plan on >10% annual returns from your professionally-managed holdings. And since you’re now an oligarch, let’s say that your hardworking gnomes will figure out how you can limit your net taxes to <10% (very tough on a big portfolio, but we'll assume your gnomes are really creative.)

        This means you'll now have close to $100 million a year after taxes, and FINALLY you can afford all those things you've always dreamed of! While you might not be able to pull off in the same year paying cash for BOTH the $85 million pièd a terre in Manhattan that Russian guy bought for his daughter, AND the $150 million megayacht of the Sultan of Dubai, you'll be in pretty good shape.

        However, those constraints DO make a difference when you're playing in the big leagues, so figure that you'll have to step up to the next category, before there really are NO practical limits to what you can do and how you can live.

        Once you get above the $10 billion level, all is good, and you can both help change the world (viz. Bill Gates) AND indulge yourself in any way you desire (viz. Larry Ellison and various sultans). From this point on, it's simply a matter of score-keeping in the great Monopoly Game of Life. You'll need to decide for yourself how important your place on the Forbes list is, and whether you care about your standing relative to Mark Zuckerberg ($10 billion), Michael Bloomberg ($22 billion), David Koch ($25 billion) or Warren Buffett ($44 billion)."

        1. Sounds good to me. Have you made your first million or maybe even 10 million yet? If so, how long did it take and what were your strategies to get there? I’ve learned there are so many ways multi-millionaires built their fortune. So fun to hear people’s stories.

          Health, family, freedom. That’s all one needs after they have a livable income stream. Being able to help other people is truly one of the big benefits of being financially independent.

          1. No, I haven’t. But your post made me think about how much it would take to ‘live it up’ as well as help people.

            I think the Giving Pledge that Gates/Buffett created is very inspirational. It also is reassuring when younger billionaires like Spiegel are joining the promise to give half or most of their wealth away.

            I was watching how Allen/Gates started MS and Gates used to be very cutthroat which is probably one of the qualities which allowed him to reach the heights of success, but if you were to look at him now, he has completely mellowed out. Its all about his organization.

            “I’m certainly well taken care of in terms of food and clothes,” he says, redundantly. “Money has no utility to me beyond a certain point. Its utility is entirely in building an organization and getting the resources out to the poorest in the world.””

            When I read some of your posts, it seems to me that if you had billions of dollars (or even a few hundreds of millions), instead of spending it on yachts, mansions, islands and other toys (not that there is anything wrong with that per se of course), you would probably sigh the Giving Pledge too or at least donate a lot to charity.

  18. Financial Canadian

    This a great rundown of how to analyze your portfolio to make sure it aligns with your goals.

    It scares me a little bit because you’re so diversified – whereas I’m 100% allocated to public equities. Granted, I’m younger, but I’m still setting myself up to get burned in the event of a downturn. Time to build some income streams, I think.

    I started reading this blog about a year ago and I’ve learned so much. Thanks Sam!

    1. Howdy mate, I’ve been through too many financial massacres to not be diversified. The larger your nut grows, the more painful it is to lose money. It really is. In general, it feels much worse losing money than making money.

      Please do build other income streams. You have your site, which can be a gold mind if you develop your brand and your community. The upside is HUGE! Just don’t stop. 5 years from now you will be amazed.

  19. DIY Money Guy

    Refreshing article. We all think we do this thorough financial check up, but in reality we rarely take the time to actually do it. You brought up some great points to help keep the big picture in mind: “Money is a tool…to achieve maximum happiness” and “When it comes to investing, hope is definitely not a strategy”.

    My wife and I regularly talk about our finances and I often pose the question, “what would we do if we had more time and money to do whatever we wanted”. Every we agree that is our reason why we are not leaving “retirement to chance”.

    It is easy to get bogged down in the details or the complete other extreme of just sitting back and assuming everything is going according to plan.

  20. Apathy Ends

    I would like to say I have done one recently but it has been at least 6 months so we are due.

    Thanks for breaking this down in personal capital, I haven’t used it beyond net worth tracking and will give this a shot.

  21. Sam,

    Agree with your strategy regarding the careful balance between wealth building and wealth preservation. Young (ish) investors today ( and I count you as young!!) who have not seen their portfolio hammered by the dot com bubble and the Great Recession will undoubtedly think different when looking at Personal Capital only to see their portfolio slide like an avalanche.

    Experience is what you get when you don’t get what you want.

    1. One more year and I’m over the hill! Although I did have an acai bowl with a 27 yo hitting partner yesterday who said I could pass for under 30. Now I wonder what she’s up to. Hmmm.

      Maybe we will never have another recession again in our lifetimes, even after 7 years of upward movement. Whatever the case may be, I’m happy with what I have, so why take unnecessary risk? Everybody has to figure their own number out!

  22. Vicki@MakeSmarterDecisions

    Hope is definitely not our investment strategy but neither is doing an investment check-up. Now that we are using Personal Capital it is so much easier to follow what is happening on a regular basis. I guess we are in “ultra-conservative” mode as we use our retirement accounts to bridge our way to the days we both have pensions. Now to go learn more about what we might do to re-balance even a small part of what have invested. And happy to still have my free consultation with Personal Capital coming too!

    1. Make sure you ask the advisor some TOUGH questions.

      Basic Background Questions

      Are you a registered investment advisor (RIA)? An RIA has a fiduciary duty to do what’s best for their clients. RIA is different from a broker-dealer.

      * How long have you been a financial advisor?

      * What are your credentials? (undergrad, graduate school, certifications, online presence)

      * Do you believe credentials matter if one has proven they can properly manage their finances over time?

      * How long have you been in your current job?

      * What were you doing before your current job and how long were you there?

      * How are you incentivized?

      * Give me an example of where you helped turn around a client’s financial situation for the better.

      Investment Philosophy And Financial Acumen Questions

      – See more at: https://www.financialsamurai.com/questions-to-ask-think-before-hiring-a-financial-advisor/#sthash.awntO2GM.dpuf

  23. I LOVE the self-assessment!!! Hope I can be as honest with myself.

    I need to go through this in detail. I’m about to jump off the work merry-go-round and will save this post as a note to review my investments accordingly once my head stops spinning.

    Thanks once again for a GREAT, comprehensive, and useful post.

    1. Thanks blogging buddy! I can feel you chomping at the bits to get off the merry-go-round! Please make sure you let me know when that happens, and try to ENGINEER YOUR LAYOFF to get a severance!! You will feel like you beat the house and every day you will feel giddy as a school girl that you got that severance to be FREE!

  24. Preston @TheDrunkMillionaire

    Dividend incomes make me sad… and I totally agree with diversifying with other income producing assets. My wife and I are considering turning our barn into a wedding venue to pay off our house as quickly as possible and add another income stream. It is crazy to think that your allocation will compound to $3 mil in just over a decade.

    1. Why sad? B/c the payouts aren’t that much anymore from stocks? It’s the reason why REITs, rental properties, commercial properties, and bonds have gone GANG BUSTERS over the past couple of years. There’s a strong tidal wave of liquidity looking for yield.

      The fear is that something will burst. But thanks to so much uncertainty overseas e.g. China, Brexit, etc… foreign money and domestic money have aggressively bought US Treasuries, and will continue to buy US debt to keep interest rates low.

      It is kinda nuts, but the MORE CHAOS aboard, the BETTER the US is in b/c everything is relative.

  25. Thanks for sharing your strategy. I’m 42, but I’m not as conservative. I guess I don’t feel like we have enough yet and I think we have enough time to recover from a crash.
    I like the Retirement Planner too, but it seems too optimistic. 24% cash is a big position. Did you share your cash deployment plan? What’s the link?

    1. It’s kind of the irony isn’t it? When you don’t feel like you have enough, you get more aggressive. Sometimes it pans out, sometimes the market slaughters you.

      This is why I like to invest in things I have more direct control e.g. a business or rental property. A public equity investor is a passive minority investor hoping for the best.

      I don’t have a specific post about my cash deployment plans, but many regarding:
      Venture Debt
      Real Estate Crowdsourcing
      Risk Free Assets
      Building A Business
      and perhaps going long physical property in 2-3 years.

      I’m perfectly happy to sit on cash right now. In fact, I can’t get enough.

  26. Stefan - The Millennial Budget

    Big fan of personal capital but it sometimes has problems linking to certain brokers which distorts my current equity situation. I am amazed at how many income streams you have. If you don’t mind me asking, what age did you first start diversifying once you got out of college, or during college? I am hoping to get into real estate within two years if I get approved for my work visa and curious as to how and when you branched out.

    1. Stefan, I started building passive income streams after the first 3 months at my first job. The firm made us get in by 5:30am every day and we constantly left after 7:30pm. I knew I wouldn’t be able to survive long term, so I started saving aggressively and putting about 30% of all savings into CDs yielding 4%-5% at the time, 30% or so in dividend stocks, and saved up for 4 years until I bought my first property in 2003.

      The irony is that if my job was a nice 9-5 job with less stress, I wouldn’t have tried to save so much.

      Time goes by QUICK. Make the most of it, especially while you still have the energy!

      1. Stefan - The Millennial Budget

        Interesting perspective on the reason behind building our your streams. After reading the article I am more determined than ever to get rental property going. I noticed you put 20% down and underwriters love this but seeing as times have changed would you recommend 20% as the general rule of thumb or will you be willing to put down less?

        1. 20% down is to avoid the Private Mortgage Insurance, an extra unnecessary cost. So that’s the minimum. I fear for folks who put down 3%, 5%, 10%, 0%. And I fear for their neighbors who will get aversely affected if one decides to foreclose or short-sale like so many did in 2008-2010.

          1. Nuclear Real Estate

            I’d recomend 20% for owner occupant, but plan on 25% for investment property.

            You’ll be able to do 20% down on mortgages 1-4, but you’ll pay a higher rate for it, half a point is typical. For conventional mortgages 5-10 fannie mae underwriting standards require 25%.

  27. Hi Sam

    Been Reading your blog for a while. I think it’s great work and very helpful.

    I have a philosophical Question if you allow me.

    You are 39 and being financially independent and in control of your life gives you the capacity to take care of yourself/hopefully live a long and Healthy life. Despite that, your investment allocation is quite conservative in the context of potentially living many more years. I believe you think we are heading for a long period of low returns, but still, with such a long investment horizon ahead of you, don’t you think it could make sense to be more exposed to public equities, maybe in passive index funds, and trust the long term wealth building power of that asset class without so much attention to continuous portfolio rebalancing trying to anticipate short term returns?

    This might not sound great to a 65yr old because of shorter life spam, but could do so to some body in the high 30s/low 40s, who wants to build long term wealth even being retired, and Free up time for other endevours.

    The last part is the main reason for my Question. Trying to find an effective wealth building strategy for a 40-50 retirement period that protects me against inflation in some specific services, but without eating too much of my Free time.

    Would welcome your perspective here.

    Thanks for the great work on the blog.

    1. Hi Frank,

      I actually wish I had more in bonds. Take a look at MUB, TLT, IEF over the past 12-24 months. They have way outperformed equities during this time period due to investors chasing yield and a flight to safety. There’s a default setting in people’s minds that bonds always underperform stocks or never return much. TLT is up 16% YTD and pays out a 2.25% dividend yield for a potential 18.25% annual return. That is huge.

      If I had no other investment alternatives, I’d probably have more exposure to public equities. But when you can make 7% via P2P Lending, 9% – 12% via real estate crowdsourcing, 8% – 18% via venture debt, 6% – 12% in SF real estate unlevered, and 20%+ a year building an online business, suddenly, shooting for a ~5% annual return in public equities (my estimate for a realistic return) doesn’t feel that great anymore. Everything is relative in finance.

      Finally, I originally planned to just live off my passive income streams and my severance after engineering my layoff in 2012. But FinancialSamurai.com grew a lot since then and corporate consulting opportunities kept popping up. There is an excess of funds, which is why I’ve been able to continue writing so much to hopefully help others and put together an ebook for charity. If I was struggling, then I’d focus more on myself b/c writing takes a lot of work (e.g. was up until 2am w/ this post and woke at 6am to edit and make sure everything is fine)

      Only you can define what “long term wealth” means to you. Ask yourself how much is enough and work to optimize your life accordingly. Best of luck and I hope you can build multiple income streams as well. If you need 1X1 help, here is my PF consulting page.

      Related: The Best Asset Allocation Of Stocks And Bonds By Age

    2. FinanciaLibre

      A nice article, Sam. And your comment, Frank, lined up with my own thoughts as I read the post.

      There are two flavors of risk in investing. The first is associated with a wide dispersion of short-run outcomes, or volatility, in a portfolio’s value. The second is the risk of slow, long-run erosion in real value (or failure to gain real value) in the portfolio due to overweighting low-return holdings.

      For a high-value investor with a long time horizon and income to satisfy living expenses, the latter long-run risk of portfolio erosion is almost certainly the more important one to consider.

      So, Frank, I agree with you: A more passive, higher equity allocation would seem like a good fit for Sam’s portfolio and for others similarly situated… Better long-run financial results, and less time spent worrying about things.

  28. Dollar Engineer

    Hey Sam mentioning your parents made me remember your latest visit to Hawaii. Any closer to making a decision on whether or not to buy a house with your parents down there? I guess this is also relevant since it may shake up your asset allocation as well.

      1. Dollar Engineer

        Thanks! Was traveling this weekend and didn’t get a chance to read that one. Reading it now.

  29. Ms. Conviviality

    Hmm, seems like your goal of reducing physical property holdings to 30% isn’t really aligned with your diversification goals. You mention that you’re hoarding cash to invest in an undervalued property in 1-2 years. Physical properties would become a larger percentage of your investments then, right? Unless, of course, your other investments do really really well and your percentages work out the way you planned.

    1. Good observation. RE is hard to resist, especially if there’s a 15% correction in the target market I want to buy in 1-2 years. And this is why doing such a deep dive exercise is good. It helps one become more CONGRUENT with action and thought.

      I WANT to take advantage of lower property prices in 1-3 years just before an Uber and Airbnb IPO, which I think will reignite the market 6 months after they go public just like FB did in 2012. But I SHOULDN’T do so unless I can aggressively grow my other assets, or figure out a way to sell one of my properties now or find some screaming deal that makes the increased exposure worth it. I tried, but failed. Hence, let me try to grow my business as best as possible because that has the most correlation with effort.

      How about you? What are you planning on doing with your money?

      1. Ms. Conviviality

        I thought I was set for retirement with pension plan benefits kicking in after 30 years of service. I’m lucky in that I started working with my employer right out of college. Retirement will also be supplemented by a 403(B) and rental income. Fortunately, the primary home is already paid off. You’re website introduced me to the concept of FIRE which I’m seriously exploring. :)

          1. Ms. Conviviality

            14 years. Pension benefits will be reduced by 5% for each year that I’m short of the 30 so I need to figure out how to make up for the shortfall. Don’t have an exact plan yet but believe that it’s highly achievable. Aiming to retire in 6 years.

      2. I can believe you on the 15% market correction (well, keeping my fingers crossed) based on 7-10yr real estate cycles, but why are you convinced that Uber (just sold a chunk of itself to China) or AirBnB (refinanced recently- and legal battles galore) will IPO before end of 2017/2018? Is this a general comment based on IPO cycles or are you convinced due to some sort of data?

        Isn’t it more likely the RSUs from a few years ago (when goings were good for engineers) will now have been fully vested by end of 2017?

  30. The Green Swan

    Yes I do regular checkups on my investment funds and allocations. I try to do this every quarter, but more often if I have extra cash I would like to invest. Keeping a balanced portfolio is important and as some funds grow and others decline I keep an eye on any imbalance (trying to keep it within a ~3% variance). Personal Capital has been a great tool with easy to read graphs and charts!

    1. Fiscally Free

      Personal Capital is great, but I’m not so sure a quarterly review is a good idea for most people.
      In theory, a quarterly checkup is a good thing, especially for experts like Sam (and all of us commenters…or not), but I think there is lots of evidence that most people are better off leaving their money alone. If they look at it too often, they might be tempted to make trades they probably shouldn’t.

      1. You don’t have to do anything during the checkup. You just have to make sure your investments are allocated in a way that is congruent with your beliefs. For those who are retired, financially independent, close to retirement, staying on top of your investments is a must.

        Think about all the people who just set it and forget it before the 2008-2010 crash and planned to retire within the next 5 years. Money is always just a means. The closer you come to your “enough money” the less risk you should take.

        From this investment checkup I’ve learned I have a conflict w/ wanting to buy more property to wanting to reduce my allocation towards property. And so, I have some solutions. Further, although PC says I’m way too conservative, I’m less so b/c public equities is a minority of my net worth, and it doesn’t properly take into account my leverage and other investments. Use the free tools to your advantage, but it still takes a human to make the best overall assessment.

        1. Fiscally Free

          I get what you’re saying. I’m just pointing out the average Joe is going to be very tempted to react to the gyrations of the market if he looks at his portfolio too often.

          I suspect the people who “set it and forget it” back in 2008-2010 are a lot better off than the people who panicked and sold everything at the bottom of the market.

  31. Kate @ Cashville Skyline

    Thanks for this detailed review, Sam! I’m a big fan of Personal Capital and will definitely take advantage of these specific tools. What are your thoughts on 100% robo advisors like Betterment? Do you prefer to avoid paying their fees because you’re able to manage rebalancing and tax loss harvesting on your own?

    1. I think Betterment and Wealthfront are great due to their low fees, auto rebalancing, and tax harvesting. I use Personal Capital strictly for their free tools.

      I feel confident people can allocate a slice of their net worth with the robos. The main problem is that unless you tell them your entire net worth, they will invest your money as if what you give them equals your entire net worth.

      1. Have you checked out Fidelity Go? Its Fidelity’s new Robo Offering and the Index ER is a component of the fee.

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