Asset Allocation 3/2016

By asset class Allocation Fees
Cash 0.1% 0.00%
Home Equity 25.2% 0.00%
Private Equity (Real Estate) 9.5% 1.00%
Muni Bonds 0.9% 0.50%
S&P500 Index 37.0% 0.05%
US Total Stock Market 7.2% 0.06%
US Small-Medium Stock Index 0.3% 0.00%
ACWI ex US 1.6% 0.00%
Options Trading 18.2% 0.20%
All 100.0% 0.16%

By Account Type Allocation Fees
Taxable 63.8% 0.22%
401k 11.4% 0.00%
Deferred Comp 6.7% 0.11%
IRA (post tax) 2.2% 0.05%
IRA (rollover) 12.9% 0.05%
Roth 1.8% 0.05%
529 account 0.6% 0.12%
Health Sav Account 0.6% 0.14%
All 100.0% 0.16%

 

Notes:

  • We started investing new money in private equity real estate funds. We also shifted money to an option trading strategy that benefits from sideways moving markets.
  • We max out our 401k contributions, but taxable accounts grow much more because most of our savings come from bonus money, which is after-tax.
  • Home equity is Zillow estimate less 7% for selling cost less mortgage
  • Private equity is two investments in multifamily housing funds, projected rental yield ~8%, plus some modest capital gains
  • Funds in the 401k are all no fee, apparently subsidized by the employer. Nice!
  • Deferred Compensation is bonuses from prior years (already vested) that we voluntarily deferred
  • Options trading: I will write some additional detail in a later post, but for right now, this is mostly exposure to US large cap equities

 

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6 thoughts on “Asset Allocation 3/2016

    • Thanks!

      We took a dim view on international stocks. Europe and Japan have low growth rates. That takes up a large chuck of Developed Markets equities. Same with EM. So we found that US stocks are the safe haven for our equity portfolio.

      We invested in multi-family housing through several private equity funds. We found that this is the only acceptable way (for us personally) to invest in real estate. We don’t want the hassle to be landlords and we are concerned that REITs are very overvalued and too correlated with equities. Hence the private funds. These are very illiquid investments ($100,000 minimum investment each, for a duration of 7-10 years). You become a shareholder in an LLC and those shares are non-tradable. The money is tied up for a long time, but you get the rental income of the properties as a quarterly dividend. Hopefully some capital gains in the end as well. And some tax write offs throughout.
      All funds are for “accredited investors” (https://en.m.wikipedia.org/wiki/Accredited_investor) only. We are planning to write a future blog post about our experience so far and the pros and cons of these kinds of investments.

      Liked by 1 person

      • Awesome! I’d love to read more about the funds. I agree with your assessment of REITs and the hassle of being a landlord so that seems like a very good option to get exposure to real estate with equity valuations being so high and bond yield being awful. Unfortunately it seems like all of the good investments are only for accredited investors and I’ve got a ways to go to get there.

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  2. I view International the same way. It hasn’t out performed the U.S. In a long time, the fees tend to be higher, and we live in a world where the worlds economies are becoming more globalized every day. I know there is a bunch of historical data saying international and domestic equities are inversely correlated but its historical. In my gut feel that won’t be the case in the future, or the the inverse correlation will be less and not worth the additional cost to invest in international funds.

    I’d love to hear someone’s argument for International though.

    Liked by 1 person

    • Thanks! I think that all U.S. stocks already have plenty of international exposure (as you mention) and I like the mix of the U.S. market sector-wise. And U.S. will be the growth engine going forward. So, we will stick with mostly domestic stocks for now. Unless someone convinces me to shift to more international stocks…
      Thanks for sharing!

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