I recently wrote about becoming a millionaire with just over $1M in Net Worth. Let’s take a look at my current asset allocation strategy as of mid-2023.
What’s New: No More Bond Indexes!
Short story: I’ve liquidated all holdings of bond indexes.
Within the past couple of months I have come to the conclusion that investing in index bonds is a terrible idea. The performance of my investments in bond indexes has been terrible thanks in part to inflation. My allocation up to this point has been about 10% following commonly recommended allocations. My conclusion goes against this allocation. At such a young age, there is very little reason I can see to put money toward poorly performing bond indexes. Perhaps specific bond issuances, but not a bond index. I liquidated my bond holdings to do tax loss harvesting this year and am throwing the free cash at an Options Wheel strategy that I hope to write about in the future.
The Big Picture
At high level, I’m split about 45/55 between Real Estate Equity and Investments. That 45% is based on latest Zillow valuations. If I were to go and sell those properties I would walk away with a bit less cash in pocket accounting for selling fees. Although I like the idea of doing a sold by owner situation. But this scenario is several years down the road and I do not have immediate plans to sell any of my real estate which are all locked into low-interest fixed rate 30-year mortgages just under 3%. This is basically “free” money from the bank with current inflation rates because my salary has kept pace with inflation.
Real Estate Breakdown
I am extraordinarily lucky and blessed to be able to do a house hack on my primary residence. That move is something that I am most grateful for. I do have a new construction in progress that will be turned into a future single-family rental when it’s completed in 2024. This new construction has been a saga that started in early 2022 and is the thing I most regret. Despite the sunk cost fallacy, I am continuing to pour more money into this new build to get it finished and certified for occupancy. I would not recommend doing a new construction again, at least not for rental purposes. I’ll write more about this experience in another post.
Investments Breakdown
Cash is asterisked because it’s not really just sitting there collecting bank interest, or worse, sitting idle. No. This cash was recently from liquidating bond indexes and is being used to cover Options trading. Last month I also transferred half my 401k holdings in Vanguard’s Target 2050 fund and put half of it in the Vanguard S&P 500 fund that was recently added as an option by my employer to the 401k plan. I made this change to reduce exposure to the 10% bond target that the Vanguard fund is following for my current age. Yes, yes, it’s not as diversified and makes me heavy in the top big tech companies, and that is one of the reasons I have built up so much equity in Real Estate.
Leave a Reply