Asset Allocation Review – How Much Richer Do You Feel In This Bull Market?

Hammock in Hawaii

At least once a year, you need to do an asset allocation review. An asset allocation review will help make sure you have the proper risk exposure.

In a bull market, the wealthy get way more wealthy than the average person. Even if your $300,000 portfolio is up 30% to $390,000 this year, that's nothing when Warren Buffet is up $10 billion!

Who cares if your $800,000 house appreciated to $1 million when some 23 year old rejected a $3 billion cash dollar offer for his photo messenger app. Ah, the unfortunate curse of financial comparisons.

I'd like us to do some financial reflecting after a fantastic bull run since 2009. Nobody thought 2020 would turn out to be so great in a pandemic either. It's important we review our asset allocation every year and figure out how we feel about where we are to make future allocation decisions. It's very hard to ascertain our risk tolerance without getting a little personal.

Asset Allocation Review: Two Parts Offense, One Part Defensive

If I was a greedy guy I would have stayed on Wall St. for another five years instead of leaving after 13 years for a life as a poor writer and a bootstrapping entrepreneur. It's so much easier to make at minimum $250,000 as a Director at a major investment bank than $250,000 with your own startup. A day job is a piece of cake compared to entrepreneurship!

Instead of using a recovering economy to make more money from a day job, I used a recovering economy to take more risks in the name of long term freedom. Leaving my job was a very calculated risk that took one year of planning before I pulled the trigger. If we were still in a bear market in 2012 it would have been much harder to believe in my abilities to generate income on my own.

If you don't count my online business, my net worth / asset allocation is split roughly 35% in stocks, 40%-45% in real estate, and 25% in CDs. I hold practically no cash. This is the two parts offense, one part defense I'm talking about. Here's my recommended net worth allocation by age chart.

Let's go over my asset allocation review.

Stocks Asset Allocation Review

Most of my stocks are performing in-line with the market +/- 5% because most of my stocks are index funds and structured notes tied to indexes. A smaller, but still significant portion of my stock exposure is my rollover IRA punt portfolio where I'm constantly hunting for unicorns. I've had some nice wins, but the portfolio is underperforming the markets because I've been much too cautious. My forecast for 2013 was for gains of just around 10% so I reduced risk in my rollover IRA accordingly. Chalk another one up to passive index investing over active investing!

I've also come to the conclusion that implementing Rule 72(t) to extract money from my IRA penalty free is out of the question for now due to the growth of my online business. The online business generates enough to live a normal life, hence it's important to stop being so risk averse and allocate the rollover IRA portfolio more heavily towards the stock market for hopefully decent returns over the next 24 years until age 60.

I certainly wish I had invested in higher beta names in the stock market at the beginning of the year. Because the active portion of my stock portfolio is underperforming, plus the fact that I'm not utilizing any of my investment gains or dividends on life, I don't feel even a hint of wealth increase from stocks. Stocks continue to feel like an amorphous entity that provides no comfort. Here one day, gone the next.

Stocks are the most volatile part of my asset allocation review.

Real Estate Asset Allocation Review

Every wealthy person I know owns real estate as part of a diversified portfolio. Real estate is supposedly up around 20-32% in San Francisco, depending on which analysis you believe and which price segment you follow.

Real estate was about 35% of my net worth last year, but due to price appreciation it's grown to 40%-45% of my net worth which is partly why I'm thinking of offloading at least one rental and rebalancing. The problem I have is where to put the proceeds. I'm certainly not going to dump even more money in the stock market when I'm having a difficult time deploying capital in my active rollover IRA!

Because Zillow updates their zestimates 3X a week now compared to just once a month a couple years ago, I've got into the habit of constantly checking my property values like I check my stock portfolios. Not good because one of the reasons why I love real estate is that I don't have to think about the asset much at al. I like to buy things, forget about them, and wake up 10 years later to hopefully much more wealth. Just be careful because the online real estate pricing estimates are often wrong.

Real Estate Still Very Attractive

I've got to admit it feels amazing to see property prices go up so much because I've got multiple properties that are all levered. You're only really long real estate if you have more than one property. If you rent and own nothing, you are short. If you only own your primary residence then you are neutral.

A 10% property price increase is a 50% cash on cash increase if you only put 20% down for example. Unfortunately I've got over 50% equity in all my SF properties so I'm not that levered. But I can't wait for my poorly timed investment/vacation property purchase in Lake Tahoe to start recovering lots of its equity again. Vacation properties are the first to go down and one of the last types of real estate to go up. But when they do recover, they can go up quick because of excess liquidity.

Receiving monthly rental income really makes me appreciate rental property despite its occasional hassles. A rise in real estate prices does the most in terms of making me feel wealthier, even to the point of fantasizing about buying a new automobile to replace Moose.

Real estate is my favorite part of my asset allocation review.

Risk-Free Investments

I've got a chunk of change invested in CDs producing roughly $3,000 a month in interest. They are scattered across three banks which is partly the reason why I use Empower to keep track. All of the CD interest is reinvested to principal, which means I haven't spent a penny of CD proceeds in over 10 years.

I asked one of my banks the other day if I could withdraw some of the YTD CD interest penalty free to pay for property taxes, and they said I couldn't without a penalty because I didn't elect the option to deposit interest proceeds to another account. This is an important detail to consider when you first open a CD so take note!

At a ~5% blended annual return, I'm losing big time compared to the stock and real estate markets. At the same time, the 5% annual return is risk free. I sleep well knowing that if the world ever falls apart again, I'll still have $3,000 a month to live on until I can get back on my feet. Protecting your financial nut in retirement is crucial and my $36,000 a year in income is like a pension that I hope will last forever.

Earning only 5% annually doesn't make me feel poorer since it's still a positive return, but it doesn't make me feel any richer since I see the opportunity cost lost of not investing more into the stock and real estate market. I've been practicing allocating 30% or more of my savings/bonus towards CDs since 1999 given I worked on Wall St. The last thing I wanted was to lever up more into the stock markets given my salary, bonus, and career depended on the whims of the market. After 14 years of CD investing, old habits are hard to change.

The only thing that makes me feel poorer is having cash in a checking or savings account. This is the reason why I hardly ever have more than one month's worth of living expenses in cash.

X Factor

Your X Factor is an important part of your asset allocation review. A large part of the reason why I don't feel so bad about not making a day job income anymore or having such a large allocation towards low returning CDs is because of my X Factor. Business revenue is up about 40% YoY. But operating profit is up anywhere from 150%-170% based on the financial analysis conducted during the company offsite.

There's no better business than running an internet business. Its low cost, potentially unlimited demand curve, and flexibility to work from anywhere in the world make blogging awesome.

Spending four weeks in Hawaii reviewing the financials, coming up with a game plan for next year, conducting team building events, and doing research about Hawaii for future posts has truly been fantastic. I strongly believe in producing content based on first hand experience.

It may get expensive flying around the world to experience the culture and interview people about their perspectives. But I think it's absolutely worth it in the end. Being able to see the future of America through six weeks of investigative journalism in Europe last Fall is worth way more than the $10,000 expense.

If my online business was floundering, I'd probably feel like I was falling behind in this bull market despite my stocks and real estate. The online business keeps me busy during retirement by actively using my knowledge learned at my previous job. Being able to put theory into practice is a wonderful reward.


Although I'm not 100% leveraged into this recovering economy, I do feel modestly richer due to the growth of my business. I've got to remind myself that making money is a means to an end. Having the freedom to do what you want is priceless. It cannot be overemphasized the longer I experience this crazy journey.

One of the major concerns I have is the widening gap between the rich and poor. A bull market does a better job at masking inequalities despite math saying otherwise. The reason is because at least more people are benefiting from an improving economy.

It's when the rich are still rich during a downturn and the poor are just struggling to survive when all chaos breaks loose. It's my sincere hope that through discussions we have here on FS that more people will become financially empowered to live their lives the way they want.

We all need to find a comfortable balance with money. Hoarding cash and not investing in assets that have the potential to appreciate is not the way to go. My goal is to rebalance my net worth to around 20% risk free, 35% stocks, 10% bonds, and 35% real estate. I'll discuss in a future post on how I plan to get there.

Make sure you do an asset allocation review at least once a year!


The easiest way to do an asset allocation review is by signing up with Personal Capital. It is a free online platform which aggregates all your financial accounts in one place. This way, you can see where you can optimize.

Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing. I can also check how my net worth is progressing. I can also see how much I’m spending every month.

The best tool is their Portfolio Fee Analyzer. It runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying!

They also recently launched the best Retirement Planning Calculator around. It uses your real data to run thousands of algorithms to see what your probability is for retirement success. Once you register, simply click the Advisor Tolls and Investing tab on the top right and then click Retirement Planner.

There's no better free tool online to help you track your net worth, minimize investment expenses, and manage your wealth. Why gamble with your future?

Retirement Planner Personal Capital
Personal Capital's award-winning retirement planning calculator. Are you on track?

64 thoughts on “Asset Allocation Review – How Much Richer Do You Feel In This Bull Market?”

  1. Sam,

    I’m reading a book out by Tony Robbins where he interviews many successful investors, including Ray Dalio. Mr Dalio provides a template for an All-seasons Portfolio for the average investor. I am a novice at this and there are some many “expert” opinions out there – many sincere but misinformed. I was wondering what your thoughts on this allocation are? (Book “Money: Master the Game” page 384 onward).
    Thank you.

  2. Where can I possibly get a CD with 3.8% return? The ones I look on-line are like 1% top. Appreciate if you could send me a link to the banks with those CD’s that give you such a high return…

  3. Sam, on the one hand your huge CD portfolio seems ultra conservative, at the same time, you don’t need more money so you can afford to be safe.
    I am retired (age 65) and have real estate, stocks, and a pension. I have been reading and hearing about asset allocation/rebalancing for a few decades but it never makes sense to me. Theory okay, practice not so much.
    I have a large % of my net worth (57%) in real estate because I live in a very expensive city. I have been invested in real estate in this city for 5 decades (with a couple of booms and busts) and have always made money by choosing good property in good locations. I have a couple of rental units for income to offset my housing expenses now.
    I also have stocks (37%) and cash (6%).
    With pension income I don’t feel the need for a larger cash stash. This is enough to go 5 years with dividend income if the stock market crashes.
    My portfolio earned 20% or so in 2013 (including return on the cash which averaged 20% of the portfolio throughout the year). I was 2/3 Canadian stocks and 1/3 US, but it’s more US now. With new cash, I let it sit there while I find suitable stocks. I don’t speculate and I don’t buy lots of any one thing. I don’t buy any funds or ETFs.
    I sold all my bonds and REITs in spring when the tapering scare started them on the downward spiral. I will load back up on rate sensitive stocks when interest rates go up.
    Sam, you are spending your time on your business, which requires effort and time to think. I quit my business to focus on thinking, mainly on the stock market, and travelling.
    My intention is to de-risk after about 3 years, when my portfolio is large enough so that I can easily get through a 30% crash without curtailing my income.
    I reevaluate all this constantly (spreadsheets), because I am still in learning about stocks and don’t have decades of hands-on experience like I do with real estate.
    Any comments and suggestions on my plans would be great.

    1. Dunny,

      If I had a pension, I would be much, MUCH more loose with my money. I’m assuming that pension is guaranteed for life. I would aim to spend 100% of my pension every single month and just save my other assets.

      I would stick with what you know, real estate and just keep your stock allocation at a level you feel comfortable at.


  4. I am feeling richer going into 2014. Solid returns in stocks & real estate have helped, but I’m most looking forward to further improvement in the economy and consumer confidence. I’ll continue to allocate into stocks and real estate, but I feel investments into my business and taking time to invest in new relationships should pay off even more.

  5. Sam-

    Regarding your questions above:
    -Is this your first year of managing your portfolio?
    No, have done so for about 15 years.
    -Is that your main portfolio?
    Yes, my main taxable portolfio
    -What did you do before?
    A mix of things but mostly a combo of Stock funds and individual stocks. Dabbled w/ some bond ETFs. But nothing thought out or disciplined. Did ok, but wanted more of a structure that made sense to me. Didn’t want to be all stocks, and then as I was debating various split of stock and bond funds I can across the PP idea.

  6. I look at my life as an entire business and create an Income Statement, Balance Sheet and Cash Flow Statement for myself.

    Most of of my revenue comes from my day job, some from equity investments and some from rental properties.

    At the end of the month, I take the excess cash the business of me generates and decide to either increase the CEO’s pay (me), reduce expenses (debt), or increase investments (with a portion being focused on cash generating investments).

    Since the majority of my incomes from my day job, I focus on that and how I can improve those returns. This means that I don’t get too hung up on market returns and would actually prefer another 2-3 yrs of poor performing markets (equities and real estate)!

    So to answer your question…do I feel richer, nope…not in the least. Having my portfolio(s) worth x% more doesn’t change my Income Statement or Cash Flow Statement one bit (Balance Sheet…maybe but that only helps if I want to increase leverage).

  7. I’ve spent more money this year than I have in a while. I’m not doing crazy spending, but I have been buying more in the last six months than my norm. A lot of it is due to finally buying some things I’ve wanted or needed for the last several years and have finally gotten around to it. I need to dial it back but I’m glad that at least the things I’ve bought recently have all been on sale. Even in a bull market, I still find it hard to pay full price for anything!

  8. BTW…. I’m a product of the seventies….. The stock market did nothing in the seventies and….. We actually had inflation! You don’t have any inflation today!

  9. Sam,

    Interesting post….. I took the time to evaluate my asset allocation (not including the value of my business). I’m actually much more conservatively invested than I realize.

    I have about 13% cash, 11% stock, 26% real estate, and 50% bonds/annuity. I have very little leverage in real estate; I own about 70% equity.

    Actually….. I think this really isn’t out of line for upper middle class folks in my geographic area.

      1. I’m old! Lol! I’m much older than you!

        There is no point in doing CD’s at this time. The interest rates are unreasonable; so, why lock up your cash.

        When I say cash….. I mean “write a check” cash. Cash is always king. Liquidity is blood to running a business.

      2. Sam,

        Just wanted to add here….. I have a greater concern for deflation at this time.

        Historically, real estate crashes lead to fairly long periods of deflation. That said…. I think we have bottomed, but I feel better with inflation up near 2.5 to 3%.

        I believe the Federal Reserve will continue to be very careful in regards to pulling out supports!

  10. Ryan @ Impersonal Finance

    Right now, I’ve got some heavy exposure to risk, but since my wife and I are in our 20s, we can bear to ride it out for the next 35-40 years. Since I’ve spent loads of time learning about investing, I’ve done okay. I use our employer sponsored 401(k) plans to invest in low cost index funds, and do the same in my wife’s IRA. I split my IRA between index funds and, as you say, unicorn hunting. It only takes one good find to generate boatloads of wealth. That being said, I don’t feel richer in this economy, simply because I know in my investing timeline, I’m going to experience several crashes (can’t avoid it). I also don’t take my long-term retirement accounts into consideration when calculating my net-worth or anything like that. They don’t belong to me right now. They belong to my future self, sippin champagne on my yacht, while listening to old 45s and reading some good books. That’s when I’ll be thanking myself… I hope.

  11. Asset allocation is a very interesting topic. I did a ton of reading about a year ago and found an interesting (if a bit unusual) allocation strategy known as the “permanent portfolio”. Its quite simple: 25% each into stocks, long term treasuries, t-bills, gold. You rebalance when any one component hits 35 or 15%. I liked the theory behind it and i liked how its pefromed throughout various up and down markets (notably 2008). So basically the idea is to be well diversified, and “you can’t know the future”. So you always have 1 or 2 horses wining and other losing.

    Historically, such a portfolio has shown similar growth rates as a “traditional” 60/40 stocks/bonds approach with much less volatility.

    As a I was researching and thinking about allocation strategies, I wanted the following:
    -relatively low volatility and protection from a 2008 type crash. Not that I don’t think the odds of recovery would be bad, but i just know pscyhologically how tough that was. Also makes it easier to stick with in bad times
    -Have cash on hand for emergencies and for rebalancing
    -Own more than just stocks and bonds
    -Didn’t feel like a “slice and dice” type complicated allocation that backtests well; would also make it more likly for me to constantly try to time the market and second guess myself which is what i’ve done in the past
    -Simple to keep up with
    -Didn’t seem to try and predict the future. I’ve never been particularly good at it, and most professionals can’t reliably do it either.
    -Didn’t involve real estate. I already own my primary residence and the equity in it is already about 50% of my total worth, so hard to stomach adding even more. Plus, I’m not comfortable w/ being “all in” in one particular local market or dealing w/ long distance ownership + managaement fees. The “leverage” aspect with a mortgage just adds even more risk in my mind. There are REITs and REIT funds, but they’re so closely correlated with the broader market its simpler/cheaper just to own the market with a broad index fund like VTI.

    Curious to hear your thoughts. Your own portfolio is somewhat similar in allocation percentages, but with real estate instead of gold and CDs instead of short term treasuries.

    I’m not a “gold bug” or “survivalist” by the way, and find it to be the hardest to stomach aspect. Plus I’m aware of the arguments against it. But it does help in certain market conditoins and its not highly correlated. I like the idea that there will always be peices of the portfolio i’ll love and others i’ll hate. Makes intutive sense that sometimes the shiny things (no pun intended) you want more of are exactly the wrong things to be buying and stuff you don’t want to buy is the stuff you should be buying. Right now, for example, I’m close to the point of needing to buy more Gold to rebalance. But with the stock market going crazy, its tempting to buy that instead.

    Unfortunately for me, my first year w/ the portofio hasn’t been great. With dividends included, I’m down about 1.5%. So with all the hype/high returns in the stock/real estate market and the fact that the big loser is gold (which even when it does well is kind of embarassing to hold) its a big hard to stomach. BUt for once, I’m not chasing returns and am sticking to the plan.

    1. I’m shocked that gold has done so poorly… b/c it did poorly when the market was having a small correction this year as well. There’s just no production value in gold. Then again, commodities like gold have been crushed this year and could very well rebound next year.

      I’ve got about 25% of my net worth in long term CDs yielding 3.8% blended. That’s my risk free allocation.

      1. Yeah- that’s the problem I’ve found. Just when we think we understand “the market” something unexpected happens. So I like having a well diversified portfolio where any one thing can’t ruin it and also where I have a stake in a number of different areas. Perhaps its perverse, but I took comfort in seeing gold fall 20%+ this year but my portfolio only take a ~2% hit. Could just as easily be stocks at some point. In this case, I think the sum of the whole is much stronger than any 1 part.

        3.8% CDs are very nice in this environment. Based on the reading I’ve done, I’m going to stick w/ short-term treasuries for my “cash” portion in the future other than a month or so of funds in my checking account.

        In the end, I’ve come around to the idea of “total return” vs passive income I think. Used to be enamored by dividends and interest payments but this low rate environment casue me to re-evaluate my thinking. And regardless of what the current nominal blended yield on my investments was, I don’t think i’d ever feel comfortable withdrawing more than 3% a year when I get to that point.

        There is a nice psychological aspect to still getting dividends/interest when the market is down though–helps you stay the course. But when I thought about it, it didnt make sense to only invest in dividend stocks or overweight 1 particular sector. The odds me or an active manager mucking things are up are too great. Would rather just buy the whole market with an index fund. And even if I invested in a fund that tracks “dividend achievers” or whatever, I still woudln’t bank on treating all of the income produced as spendable.

        1. Can you clarify one point. You said your first year of your portfolio you are down 1.5%. Is this your first year of managing your portfolio? Is that your main portfolio? What did you do before? I’m curious to know what’s going on here.

          Please respond in a new comment as this thread is over. Thx

  12. I feel richer this year. Our paper value went up 20%. That’s way above expectation.
    I’m still scared of a down year though. Our online income was a great cushion and I don’t know what will happen on a down year.

      1. Stock did pretty well as you mentioned. Our real estate value went up only 15%. That’s pretty good for our area, but can’t compare to SF. Of course, our bond funds went down a little bit.

  13. I am very happy with my stock market, real estate and even my other assets ‘performance! It is a tie regarding my hits. I have seen big increases in my biotech stocks and real estate. It balances out my lack of a teaching assignment. Still employed, but no permanent teaching position. I wonder if I can do this for 3 years? Of course!

      1. First, you would change everything. I need to work 3 more years to get lifetime medical. If I wait until 70, I am using Social Security and my pension to cover my needs. I am approaching it conservatively because I never want to come back to teaching or have to work. When I was younger, I never understood my mother being so concerned about having enough retirement savings, I understand now!

  14. Bryce @ Save and Conquer

    We son’t own any property other than the house we live in. Our asset allocation is 41/9/50 US total market/Int’l market/bonds+CDs. My wife and I are happy with that and plan to retire in 9 more years. We will probably keep that asset allocation even in retirement. With our incomes lumped in, we only need to see our portfolio rise by 4% nominal to get there. If it didn’t return 4% nominal, we could still retire with less, or work a little longer.

  15. I like your bucket process. More fun to save for a specific goal. Seems like a good conservative mix for your home fund.

    Congrats on the new job and salary! Will you be able to leave it by 40?

  16. harry @ 4HWD

    To be honest, I barely check my retirement accounts(although I do max out 401k, Roth IRA and HSA) – don’t see the point if I can’t touch the money for 40 years. If I would have re-allocated towards bonds after the 15% gain in the market this year, I would have missed out on the next 15% gain.

    I’m actually leaning towards not rebalancing altogether since lots of studies by guys way smarter than me are coming out that show re-balancing doesn’t alter outcomes very much over long periods of time.

    1. Sounds like you are ALL-IN stocks for your entire net worth? It depends on how much you have really. The more you have, the more you want to allocate to various assets to protect your nut.

      1. harry @ 4HWD

        Not quite. My retirement accounts are 90/10 stocks/bonds but I own property, plus active, passive income, savings, bla bla bla. Money is fungible though so you can really classify it however you want – part of retirement savings or not.

        1. Cool. Nice job diversifying Ino real estate. Would love to read more about your asset allocation strategy and real estate investments if you’ve got a post. I was under the impression you were a free spirit on the move.

  17. The First Million is the Hardest

    I’ll probably sit down and review my asset allocation and make my plan for 2014 in the next few days. One problem I’ll have is deciding what to do with a large chunk of cash. I hate holding it in a savings account, but putting too much new money in the market doesn’t seem like that hot of an idea with the run up we’ve had either. I think real estate is probably the answer, but I still have to bring myself around on the idea of being a landlord.

  18. I can’t handle the ups and downs of the stock market. I prefer to invest in rental properties with steady cash flow. Values may go up and down, but the rents are much more stable.

  19. Sam – I did take that new job/promotion! Now I’m left with $78k in the old 401k at Vanguard, and no idea what to do with it. My new job has a 401k plan with Fidelity. What do you think?

    1. I’ve had Fidelity for my 401k for 11 years and rolled it over to an IRA. It is a breeze. Fidelity is good b/c it also has offices where you can sit down with an advisor.

    2. I’ll second the vote for Fidelity being good. I have them for my 401k provider. Are you able to get access to the low cost funds (similar to what Vanguard provides) with your new provider? Investment selection in the new 401k and whether you personally want access to a greater selection of investments should drive your decision. The former for the Fidelity 401k, the latter for the IRA rollover. Just my thoughts.

      1. I suppose retiree is one of those defined words but still leaves much to ambiguity. But, by definition:

        “having left one’s job and ceased to work”

        I don’t think you fall within that category. Maybe if you only blogged occasionally or when you felt like it. But, you’re fulfilling your entrepreneurial dreams so I don’t think that counts as being retired.

        The only reason I bring it up is because you said you consider yourself in retirement. Running your own business is every bit “work” as is working for someone else. You’re working for yourself, but still working. It’s even more less retirement considering you brand it as your business and not your “hobby”. Am I making any sense?

        I think its awesome either way, but it doesn’t seem like true retirement to me. I don’t think retirement has to be strictly by definition and you’re only considered retired when you don’t work. I just feel like retirement is when you put work completely secondary or even on the third or fourth list of important things. For you I feel like working is still very important, thus I don’t think I would consider you retired.

        1. Sounds good. It is my sincere intention that readers see my work here as a full on commitment. That is the best form of flattery in retirement.

          I guess it’s all relative. I’ve taken down work by perhaps 70% compared to when I was working. So everyday seriously seems like a vacation. I classify my 4 weeks in Hawaii as business because that is what is required.

  20. I judge my financial performance against a goal. I want to have 1 million in liquid assets by 2017, and I hit the number I need to get to for 2013 a month ago. So, from that point of view I am on track.

    That said, I have 2 separate companies managing various parts of my portfolio. One is beating the SP500 so Im happy with them, and one is not. The former uses SP500 stocks and the other is more of a total market approach. I am trying not to get emotional with the company that is underperforming as I don’t want to make a rash decision based on 1 year.

    All that said, going forward I’m planning on building a self administered portfolio with my excess cash that is 80% stocks and 20% bonds using low cost index funds, and comparing that performance against the companies I use that manage the other parts of my portfolio.

  21. gary martins

    You said you hold no cash, what are your thoughts on holding cash in order to cash in on the next market correction to buy stocks at fire sale prices?

    1. I do have $150K earmarked to my friend’s 5% loan offer. I might just change my mind if the market “crashes” who knows. As long as I’m generating income, I’m generating excess cash that gets earmarked for stocks, real estate, or other. Nothing is earmarked to CDs anymore.

      You think the market has a big correction to provide fire sale prices? If so, why?

      1. gary martins

        The increase in the market has been from QE and low interest rates and the ~$85 billion/month the fed is pumping into the system. The extra borrowing allowed it to keep public services feeding the economy. Take away the extra Federal borrowing and QE, and think about what the economy might look like. The market is overvalued on a fundamentals basis, but it doesn’t mean it will not go higher in the short term. I think it’s wise to have trailing stop losses placed on securities you own.

        1. So the question is, if this is so, why would the Fed taper too soon if it knows that would crush the markets and put a big damper to recovery? We’re all in cahoots together.

          Share with us what is your asset allocation and how you are feeling about wealth this year too.


  22. I’ve been following the site for about a month now – congratulations on the success of your online business and thank you for the wealth of information.

    I’ve built up a 6-8 month emergency fund (6-8x total monthly expenses) that I currently hold in cash (savings/checking account), representing about 10% of my family’s net worth. I’d like to put most of this into a higher return investment but I’m not sure what the best option would be given the possibility of needing to liquidate in a hurry. I have no reason to question my job security, but the whole point of the emergency fund is that it’s easily accessible. What do you recommend?

    1. Thanks Chris. Hard to say without knowing more. I have less than a 1 month emergency fund as all excess income is divided relatively evenly into risk free, real estate, and stocks every year.

    2. I’d ladder out your 6-8 emergency fund by increments that equal on month of expenses. Choose 6 month maturities so there’s never a period where you have

      1. [hit submit too early]

        …a break in 1 month worth of expenses coming do. Perhaps keep 1 month of expenses in your savings account so you do have liquidity for the immediate month.

  23. Sam – I like your asset allocation goal of 20% risk free, 35% stocks, 10% bonds, and 35% real estate. I’m moving in that direction as well, although it’s scary to sell real estate here and put it into the markets.

    This year has been tough for me. I got out of stocks in March of this year. . obviously way too early. I then scaled back in a little bit and have made some paltry gains. I’m just trying to have gratitude that my SF condo has gone up a lot since the lows in 2011 and I didn’t lose any money in the stock market.

    Now the question is what do you do with any cash you have on hand? Real estate and stocks are at all time highs. Could bonds and gold actually be the right investment for 2014?

    1. I’m looking to increase my allocation in treasuries if the 10-year yield hits 3%. Other than that, I’ve got $150,000 still earmarked to a 5% loan for my friend’s hedge fund.

    2. Bonds, as long as you own until maturity won’t fail you. And if the 3-5% rates right now don’t appeal to you, you could always venture below investment grade.

  24. Asset allocation is an interesting one for me too. As a person who has FI but is still have my companies that I still work and get paid from, where to put the new dollars to work is a dilemma. (good problem) I’m with you though, do I really want to pour more money into a stock market that is at all time highs, but that I truly don’t understand? Everybody’s allocation plan is different, but for me the first rule is zero debt in my personal life or business (admittedly I have a line to allow for the short term ebb and flow of extra chunky receivables when they happen), beyond that I’m currently weighting a little heavier towards real estate and stuff you can actually touch or go see. It is not so much about chasing returns as is it is continuing to widen the base of the pyramid so to speak. At this point I have about 35% safe and liquid, enough to live a comfortable life in perpetuity if the end of the world hits (barring a zombie apocalypse). As new chunks of capital continue to roll in, I’m much more interested in purchasing small private cash producing companies outright (with my partner) that might be mismanaged at a 4.5-5.5 multiple than buying stocks at a 20X multiple.,,or worse yet ones with a 200X because its a “growth” stock that I completely don’t understand. I like actually producing a product vs. these intangible assets that you have to guess how to value.

Leave a Comment

Your email address will not be published. Required fields are marked *