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All Weather for % of Net Worth

Discussion in 'Investing/Trading/Cryptocurrency/Altcoins' started by RichieG, Nov 9, 2018.

  1. RichieG
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    RichieG Contributor

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    The All Weather Fund by Ray Dalio made popular by Tony Robbins.

    Designed with Non Correlated Assets in mind to get a balanced return

    What are people's thoughts on this for wealth preservation and if so what % of net worth would you allocate to this?
     
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  2. Kak
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    Kak Capitalist Swine Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    55% bonds makes me want to run. This is a terrible time to buy the bond market. There is almost no return on them and rates have nowhere to go but up.

    The more you balance and diversify, the more like cash your investments will start to look. It sucks, but the more diversified you are the more lazy your investment.

    My suggestion is get good at one or two pieces of the market and be able to read the market climate for them. Master what you do and play it confidently.

    Remember big growth can also take the bite out of downturns.
     
    Last edited: Nov 9, 2018
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  3. RichieG
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    RichieG Contributor

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    Thanks Kak. Deep down I agree with what you say. I have posted a few things on here as I would like to start trialing a few methods to learn potential ways I can preserve and possibly grow wealth via this asset type.

    We have cash, we have property , we have a cash flow funding business. We will continue to add to these - we just want too expand our assets and learn

    I know the basics of the market but really don't understand options or buying long and short ( as you probably can tell by my phrasing )

    Am I best to start with a blank canvas and learn stock fundamentals inside out or pick a specific type of investment within the stock market and learn that.

    Any advice, book recommendations, courses would be appreciated.
     
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  4. Kak
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    Kak Capitalist Swine Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    The Intellegent Investor is a must read for anyone interested in the markets. From there, build your specialty. Hone your craft. Become the expert in something.

    This is not to say there is something wrong with a balanced portfolio. You might not want to put all your chips on red and that is fine. I don't either, but what I think is balanced and diversified and what a money manager type might are two different things.

    That fund is extremely conservative and more than likely way too expensive if it's coming from a hedge fund.

    The iShares ETF "AOM" has about the same exposures for a very small expense ratio by comparison with a hedge fund. Go look and see if you like how it has preformed over the years. I expect your reaction to be "meh."
     
    Last edited: Nov 10, 2018
  5. Raoul Duke
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    Raoul Duke The .45 longslide, with laser sighting. Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass Summit Attendee

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  6. Duane
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    Duane Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    90% of my net worth is my business.

    I save 10% of everything I make from it and end up investing it all back into my business. Why? Because the returns are much higher than investing it into anything else.

    When the business is worth a nice 7-figure sum, I'll sell and invest that money into a passive channel that gives me a small percent return on the money, but the monthly income from it will be large enough to support my lifestyle.

    Risky, but a fast way to FU money.
     
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  7. RichieG
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    Thanks Duane. When you say when you have a nice 7 figure sum you will sell and invest in passive income.

    What channels will you use though? Gerneral Stocks, Index Funds, Real Estate Mortgage Free, Real Estate Mortgaged, Bonds............

    Only asking as I always thought when I have funds I will go down the passive income line but when you think of what to do its a lot more difficult
     
  8. RichieG
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    I have that Benjamin Graham in my Kindle Library. I held off reading as people have said it is old and outdated and doesn't relate to today's markets. Would you say the fundamentals in there are worth reading?

    The balanced portfolio would be run through index funds and 2 ETF's so % fee's are low.
     
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  9. RichieG
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  10. RichieG
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    Hey Kak. If you get 5 could you have a read of this please. 9 Portfolio's built index and ETF funds. This is UK based but gives you an idea of what they are trying too do.

    I like the idea of the balanced portfolio so when some stuff goes down then certain things go up. Does this actually work or are the figures manipulated to suit back dated data.
     
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  11. Duane
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    Duane Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    My current business is heavily involved in the real estate industry. Buying houses in cash will probably be my direction.
     
  12. Kak
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    Kak Capitalist Swine Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I totally understand the reasoning behind the balanced portfolio. That is the reason for, but also my exact reason against perfect balance.

    It's like putting your wealth on the middle of a seesaw.

    Now if you dive deeper into the asset classes... 55% bond allocation is my issue with that fund. The FED wants to raise interest rates and thus bond yields. Now pretend you are a lender and you lend your money our at 5% interest, but all of a sudden the market level interest rates go up to 7%. Now you are stuck holding 5% or selling the bond for a discount to someone to make it yield about 7%. Not a good place to be. Especially when rates have nowhere to go but up.
     
    Last edited: Nov 10, 2018
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  13. Kak
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    Kak Capitalist Swine Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Why? Leverage is the biggest asset in real estate investing.

    @JScott this is your wheelhouse.
     
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  14. Kak
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    Kak Capitalist Swine Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Yes. You should read it. It will get you thinking like an investor. Also, I didn't find it tremendously outdated.

    Take a look at AOM like I said. It's about 50/50 stocks and bonds. The average return since it was created is 6%. I doubt what you have laid out here would have done any better. 6% is not great.
     
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  15. Duane
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    Duane Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    At that point I would be looking for passive income that isn't dependent on the market.

    Buying properties to rent them out long term and giving them to a management company to manage the tenants is pretty passive. The problem is, the less that I put down, the less cashflow I get and I have to be mindful of the market. Plus I will have to buy more houses and there will be more management to make the monthly $ amount I want.

    With today's market the way it is, especially in my area, buying almost any property to rent it out long term just doesn't make any sense, the numbers just aren't there. So I'm watching all the long term rental properties dwindle down as the number of houses for sale is increasing.

    If I own a house outright in cash, sure I'm not leveraging other people's money and getting the most bang for my buck, but if I'm making the $ amount I want a month, and know exactly what that property will bring to me every month regardless of how the market is, that just sounds like more freedom to me.
     
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  16. The Abundant Man
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    The Abundant Man Silver Contributor Read Millionaire Fastlane Speedway Pass

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    ...including Hurricanes, Tornadoes, Earthquakes, Tsunamis, Volcanoe Eruptions and Meteorite Strikes?
     
  17. MTEE1985
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    MTEE1985 Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Never forget: Past performance does not guarantee future results.

    In other words, yes. Many financial gurus will manipulate systems to say “this would’ve made 5% in 2008 when the broad market was down 37%” Leaving out the fact that the same system would’ve only been up 5% again in 2009 when the broad market was up about 25% and then 15% in 2010. They prey off the psychology of risk aversion that humans have in the financial world.

    Few, if any investors deserve as much respect as Dalio, but don’t forget, he isn’t worth $10 billion by dollar cost averaging into the all weather fund. Him, Kyle Bass, Paul Tudor Jones...all these guys are looking for asymmetric returns where their upside is 5-10x.

    If you’re main goal is avoiding large losses it is a decent allocation, but don’t expect much growth. It’s exactly like you and @Kak said, when half goes up, half goes down, leaving you hovering around 0.
     
  18. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    None of them are. They're entrepreneurs selling you a money system. The money system doesn't make them billions, managing their entrepreneurial business (the hedge fund) does. It's frustrating for me that no one wants to point out this duplicity while these guys all sit around on their soapbox from their $15M Hamptons vacation home talking about the next great ETF that will peacefully make you 8% a year.
     
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  19. JScott
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    JScott Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    In my opinion, there are 4 reasonable reasons to use leverage in real estate:

    1. Scale
    2. Increase Returns
    3. Liability Protection/Insurance
    4. Cash Reserves

    #1 is the great reason (in my opinion) to use leverage during times of depressed real estate values. Leverage allows you to buy more assets more quickly, which is great when you want to take advantage of lots of deals, but you don't have lots of cash.

    #2 is often referred to as "positive leverage," which just means that if you can leverage (borrow) at rates lower than what the investment is generating, you can boost your ROI. The problem with this is that you need large amounts of leverage at very low rates and long amortizations to see any non-trivial boost to returns. Here's a chart I put together a few years ago -- basically, unless you have at least 80-90% LTV at low rates and 30 year amortizations, you don't see much benefit from leverage:

    [​IMG]

    #3 is a secondary reason (in my opinion) to use leverage. Not having much equity in a property means that there is little incentive for someone to sue you in order to gain ownership of the asset -- when you have little equity, you essentially don't have ownership, you just have control.

    Now, given today's real estate climate, none of those options are tremendously compelling for leverage. In fact, given that values are likely to drop in the near future, leverage can be dangerous. But, the last reason on the list may be enough for most investors to want to use leverage these days...

    #4 is the best reason (these days and in my opinion) to use leverage. At some point in the near future, values are likely to drop and good deals are likely to surface. But, at the same time, lending is likely to tighten, and finding financing for your deals (whether institutional, commercial or private) is likely to be MUCH tougher. Those with cash will be the ones who get the deals. Those without cash will be scrambling and will likely lose out on a lot of great deals.

    All that said, while I'm a fan of leverage in the right circumstances, I'm not a fan of over-leverage. Figure out the worst case scenario for your properties, and leverage accordingly. For example, if you think the worst case scenario is that values will drop 30%, keep leverage below 70% so that you're never under water.

    If you're a landlord and you think rents could drop 20%, make sure you BER (Break Even Ratio) is less than 80%.
     
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  20. RichieG
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    RichieG Contributor

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    I appreciate the % recurring monthly commission is their fastlane. Does the stock market drive the economy? The world's biggest businesses will be listed on various exchanges. So people can buy individual stocks, managed funds or index funds. Each have varying commission rates.

    As the world gets bigger ( population ) and more "stuff" is purchased won't these businesses get bigger.

    More people = more money if it is being printed so in the long term more money will go into the market.. Yes they may "crash" but in the long term the stock market mirrors the economy?

    Isn't the stock market driven by how much people put in the market and how much people take out?

    It's easy to say stay away saying the system is for the fund managers. What happens if the Real Estate Market crashes 50%, or the government adds extra taxes to sales, buy to let, profits etc.

    Where do people preserve wealth?

    If somebody has 5m in index funds and draws down 5% a year.That is 250k a year.

    If the market tanks 50% there asset is worth 2.5m and generates 125k a year. Time has proven the market grows over a period of time?

    Not saying I agree with the above - it's just questions I have. To be honest I have written as I thought so hope it makes sense!
     
  21. Kung Fu Steve
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    Kung Fu Steve Platinum Contributor Speedway Pass Summit Attendee

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    Different strokes for different folks.

    I'm not an investor. I wish I was (just for the significance of the title). But in my mind business has always been the vehicle to making more money.

    One of my other mentors taught me (not Tony) "the most reliable way to wealth is to learn how to turn advertising into profit."

    For me -- marketing is my strength and I can get literally infinite returns on advertising at times.

    When I look at an 8% return on something I laugh because $100 in ad spend could potentially net me $10,000... consistently.

    But take that with a grain of salt because I am NOT a billionaire. I don't think that way... yet.
     
  22. RichieG
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    RichieG Contributor

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    100 into 10000 is a great return. What do you do with the 9900 profit ( even after tax it’s 6000 )

    That is what I’m getting at.
     
  23. Kung Fu Steve
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    Kung Fu Steve Platinum Contributor Speedway Pass Summit Attendee

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    More advertising!

    But I get what you're saying. A longer term plan for preservation. That's the intent of MMG. Asset allocation.

    It's funny I've been around this forum for long enough to see the trends. Everyone was on board with real estate until 2008. Everyone was into stocks until 2011. Both would have been fine if they just stuck it out (or had the ability to stick it out at least). Everyone was on board with gold. Everyone was on board with bitcoin... I guess my point is either stick with what you're good at or look at asset allocation so you don't get caught up in hype.
     

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