Hi, excited to join this forum as I've been a casual reader of this website for a few years now (thanks Sam for all of the work that you do!).
Eager to get some collective advice regarding recommended net worth allocation (https://www.financialsamurai.com/recommended-net-worth-allocation-mix-by-age-and-work-experience/). The allocation approach in this post definitely resonated - particularly the concept of diversifying into multiple asset classes, not "just" stocks and bonds, and I'm seriously considering taking some action accordingly.
Some quick background: my wife and I are 35, no kids...yet, have a mortgage with a principal balance of ~$238k for a home we bought for $300k @ 4.25% (maybe time to refinance? Separate topic.), when it comes to the rest of our net worth, ~36% is in a Vanguard 2050 target date fund, about 8% is invested in a private real estate syndication, and the rest is spread out among various equity index funds (Vanguard total stock market, some small cap, emerging markets, etc.).
Regarding taking action, I'm thinking about liquidating some assets I have, in some USAA index funds that I consider sub-optimal, and applying them towards more real estate investments (probably in another syndication). I consider the fund (USMIX) a bit sub-optimal because, with a .43% expense ratio, it's a bit expensive for an index fund IMO. The only catch - I've got ~$13k of capital gains in this account. While the gains are all long-term, it would still leave a 15% tax hit if I sold.
Another quick thought - I can't help but think that, as we're in uncharted territory with the longest bull market ever, it might not be a terrible idea to take some gains off the table and invest in some alternative assets (aka real estate)...but, would I be leaving the top of one market to enter the top of another market?
No easy answers of course, but in essence my two-part question is:
* Am I thinking about this in the right way?
* From a quantitative perspective, how can I best analyze this action to determine, even with paying capital gains, whether or not this move "makes sense?"
Eager to hear everyone's thoughts and thanks for the time. For the record, I am glad that the discussion here is more nuanced and thoughtful then what you might see in other places (i.e. "100% VTSAX and yolo"). Thanks!
You still have a very very long time horizon. In general, I would try to reducing an asset allocation percentage by increasing contributions to another asset class.
Real estate is going to look more and more interesting now that people flee from the stock market and interest rates collapse. I'm personally aggressively looking for a bargains in the San Francisco Bay area.
I took some money out of the market in 2017 and invested it in cash flow rentals. And despite the fact that the market has co to he'd to rise the rentals have done better. I don't think that's a guarantee as the deals in real estate have to be right, but I think that stock market valuations are crazy high and bond yields are crazy low, so seeking an alternative investment is worthwhile, but there doesn't seem to be an easy answer as far as I know. I'm considering emerging markets and global stocks with more reasonable valuations or another rental property.