Current Asset Allocation: February 2018

To be honest, I haven’t paid much attention to my asset allocation recently. In 2017, I started saving cash for a down payment on a rental property, but I have also considered just saving enough to pay for an entire property up front. What I decide to do there will likely depend on when I find a deal that makes sense financially and how much I have saved in cash at that point. Due to saving for a rental property, I have a lot more money than I normally would in savings and checking accounts. Also in 2017, I made two significant personal loans to help out friends and family. One was for them to pay off high interest credit card debt, and the other was an investment in a friend’s business. Since having personal loans and having a lot of cash was never in my original financial plan, I’m interested to see where my current asset allocation actually stands. Since I’m not comfortable sharing actual dollar values with the whole world just yet, I’ll base everything on percentages. Here is a broad overview by percentage of my net worth.

  • 49% in index funds
  • 26% in cash
  • 25% in personal loans

Now of the 49% in index funds, let’s look at the breakdown between Traditional Accounts (Traditional IRA and 401k), Roth Accounts, and after-tax brokerage accounts.

  • 65% in traditional accounts (32% of total net worth)
  • 12% in Roth accounts (6% of net worth)
  • 23% in after tax brokerage accounts (11% of total net worth)

The assets in the index funds are split between several different asset classes, so let’s break those down as well.

  • Traditional 401k and IRA
    • 28% Large Cap (9% of total net worth)
    • 32% Mid Cap (10% of total net worth)
    • 33% Small Cap (10% of total net worth)
    • 7% Emerging Markets (2% of total net worth)
  • Roth IRA
    • 29% Emerging Markets (2% of total net worth)
    • 27% Real Estate Investment Trusts (1.5% of total net worth)
    • 24% Energy Fund (1.5% of total net worth)
    • 20% Precious Metal Mining (1% of total net worth)
  • Brokerage account
    • 100% International Stock Index (11% of total net worth)
      • 75% Contributions
      • 24% Long Term Capital Gains
      • 1% Short Term Capital Gains

I’m surprised to see that only 38% of my net worth is in retirement accounts, even after I’ve put so much emphasis on maxing them out each year. Also of that 38%, 12% are Roth contributions that can be withdrawn at any time if needed. That means that I’ll have plenty of cash as a buffer when I start utilizing a Roth conversion ladder, which could be as soon as 2019!

I definitely realize after looking at these numbers that if I can’t find an investment property that would produce decent cashflow soon that I should go ahead and invest my cash to start getting a better return. Currently my cash is mostly sitting in savings accounts earning about 1.5% interest, which isn’t terrible but could be much better.

Starting in 2018, due to reduced AGI, I’ll be able to harvest all of the long term capital gains in my brokerage account, while paying $0 in taxes on them! I’ll likely adjust some of my allocation over the next few months and update again at a later date.

What’s your current asset allocation look like? Are you staying on track with your target allocations? Leave a comment below or send me a message!

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4 thoughts on “Current Asset Allocation: February 2018

  1. Among my investment vehicles, I have 36.4% of my assets in a traditional 401k, 55.5% in a Roth IRA, ~7% in traditional IRA (preferring traditional IRA contributions these days since I got on the FI path) with the remaining ~1% in an HSA. All combined, my asset allocation is about 72% total stock market index fund and 28% small cap value index fund. I’ve been putting new contributions into total stock market index fund to gradually bring my small cap value down to a 25% target.

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    1. Awesome job, Adam! Having a lot of contributions in your Roth should be very helpful if you decide to start converting the traditional accounts to Roth accounts in early retirement. Are you planning to invest in international equities at all? Of course you get some exposure with the total stock market fund but I feel like international valuations are a little more attractive right now.

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      1. Yup, that is the future plan (traditional IRA to Roth) eventually assuming the ladder is still an option. I’ve wavered back and forth on international, and I did have some last year (luckily when it was growing super quickly). I think I played around on the Portfolio Visualizer site with domestic/international and was surprised at how well they correlated (100/0, 75/25, and 50/50 U.S. TSM/International), so I ended up just going back to domestic for the lower expense ratios. I’m guessing it’s probably not a huge deal either way with an increasingly global economy too. I might eventually add back some international exposure though, who knows! I try to remind myself that the amount I invest is probably more important than how I invest so long as I’m investing broadly and cheaply.

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