Passive investment strategy

[Chosenone]

Hello,

I tend to spend much less than I earn and was hit heavily by the inflation.
At the same time, don't want to dig deep in investing (besides RE) and think of a way just to put my extra money in few baskets on monthly basis and forget about them.

What do you think of the following investment strategy, based on monthly installments as follows:

20% of my income in real estate
15% in an index fund (SP 500).
10% cash
5% in phisical gold

 

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[Mathuin]

Sounds good, but why physical gold over an ETF like GLD?

If you aren't rich, every dollar should be easy to liquidate in case you need it to invest in your Fastlane venture.

Read this thread by @fastlane_dad on Investing from a Fastlane perspective. MJ also has some chapters in the books on it.

 

[Chosenone]

Sounds good, but why physical gold over an ETF like GLD?

If you aren't rich, every dollar should be easy to liquidate in case you need it to invest in your Fastlane venture.

Read this thread by @fastlane_dad on Investing from a Fastlane perspective. MJ also has some chapters in the books on it.

Physical gold is hedge in case things go really bad.
I will have cash and the index fund for liquidity.

The thread of fastlane_dad is great, but from what I saw, It focuses more on the tools than the distribution.

 

[andrewhook]

I only invest in Stocks, avoiding ETFs, Indices, Commodities, and of course cryptos.

I dumped all my positions on EFTs and indices back in December 2021.

The reason is, in my company we focus on few stocks and market niches and only invest into them.

Anyway I'm not against ETF / indices. If you have a lot of time and a stable income to invest on each month, it's still a good solution long term

 

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[Chosenone]

I only invest in Stocks, avoiding ETFs, Indices, Commodities, and of course cryptos.

I dumped all my positions on EFTs and indices back in December 2021.

The reason is, in my company we focus on few stocks and market niches and only invest into them.

Anyway I'm not against ETF / indices. If you have a lot of time and a stable income to invest on each month, it's still a good solution long term

Thanks for the answer!
Would you elaborate a bit more as stocks are also interesting for me.

Do you invest in big players from specific industries or you prefer growing companies?
Do you constantly keep the same portfolio or do adjustments periodically?
Do you keep cash (other than emergency fund) or it's all invested?
What do you think about other asset class like RE and phisical gold?

 

[andrewhook]

Thanks for the answer!
Would you elaborate a bit more as stocks are also interesting for me.

Do you invest in big players from specific industries or you prefer growing companies?
Do you constantly keep the same portfolio or do adjustments periodically?
Do you keep cash (other than emergency fund) or it's all invested?
What do you think about other asset class like RE and phisical gold?

Sure!

So, let's quickly reply to your questions:

1 - Actually, I have both small-caps and large-caps in my investment portfolio.

My portfolio is pretty balanced between growth, dividend, and speculative stocks.

2 - I have 17 stocks in my portfolio RN, occasionally I switch them, dump a part when I expect a correction, etc.

3 - Everything is invested between my company and my investment portfolio.

4 - I'm not an expert in RE so I stay away from it. Talking about gold, I have two gold miners in my investment portfolio. I prefer them over Gold as they put it on leverage.

Now, let's make a point:

This is my job, I'm co-founder of a Stock Picking Company so my partners and I spend our days studying the stock market and macroeconomic trends, choosing what stocks to put our money in.

It's a really hard-to-learn skill and it took us forever to learn it. It's not something everybody can do without putting in a LOT of dedication.

Warren Buffett always says diversification in Indices and ETFs is the way to go when you're a beginner.

I'm not 100% okay with his statement, but it's surely better than picking some random stocks when you don't know what you're doing.

 

[fastlane_dad]

Hello,

I tend to spend much less than I earn and was hit heavily by the inflation.
At the same time, don't want to dig deep in investing (besides RE) and think of a way just to put my extra money in few baskets on monthly basis and forget about them.

What do you think of the following investment strategy, based on monthly installments as follows:

20% of my income in real estate
15% in an index fund (SP 500).
10% cash
5% in phisical gold

This all depends on your age, time horizons, current assets, what your near/short term goals are (marriage/kids/house), and what you are planning and working on in the future.

All these numbers on their own are meaningless.

What kind of 'real estate' investing are you doing. Some cash/index funding is obviously good. This is a deeply personal financial issue that we can only guide you if you reveal significantly more of the financial picture.

Anyways, I did a brief write up on my current investing plan here.

And yes you are correct, don't 'wait' to start investing, the sooner you start the more you will learn of your temperament, risk tolerance, be able to identify time horizons, and figure out exactly how much you need to be able to 'take your hands off the wheel'.

Good luck!

 

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[Chosenone]

This all depends on your age, time horizons, current assets, what your near/short term goals are (marriage/kids/house), and what you are planning and working on in the future.

All these numbers on their own are meaningless.

What kind of 'real estate' investing are you doing. Some cash/index funding is obviously good. This is a deeply personal financial issue that we can only guide you if you reveal significantly more of the financial picture.

Anyways, I did a brief write up on my current investing plan here.

And yes you are correct, don't 'wait' to start investing, the sooner you start the more you will learn of your temperament, risk tolerance, be able to identify time horizons, and figure out exactly how much you need to be able to 'take your hands off the wheel'.

Good luck!

You are right, let me give more information about myself.
I'm 35, high paid professional (no business yet), from Eastern Europe, married with two kids, fully paid house (no lawns at all).
My goal is to be able to sustain our current standard of living on passive income by the time I'm 45.

By real estate, I mean small rental apartments (currently have one), parking slots and eventually agricultural land.

Your thread is great, thank you for the value provided!

 

[Chosenone]

Sure!

So, let's quickly reply to your questions:

1 - Actually, I have both small-caps and large-caps in my investment portfolio.

My portfolio is pretty balanced between growth, dividend, and speculative stocks.

2 - I have 17 stocks in my portfolio RN, occasionally I switch them, dump a part when I expect a correction, etc.

3 - Everything is invested between my company and my investment portfolio.

4 - I'm not an expert in RE so I stay away from it. Talking about gold, I have two gold miners in my investment portfolio. I prefer them over Gold as they put it on leverage.

Now, let's make a point:

This is my job, I'm co-founder of a Stock Picking Company so my partners and I spend our days studying the stock market and macroeconomic trends, choosing what stocks to put our money in.

It's a really hard-to-learn skill and it took us forever to learn it. It's not something everybody can do without putting in a LOT of dedication.

Warren Buffett always says diversification in Indices and ETFs is the way to go when you're a beginner.

I'm not 100% okay with his statement, but it's surely better than picking some random stocks when you don't know what you're doing.

Thank you!
Obviously what you do is on professional level and hides a lot of risks for somebody (like me) without the right knowledge and experience.

As for Buffet's advice, I take it with a grain of salt as he is highly interested in money flowing into the market (and companies where he has invested).

I have found very interesting article about Michael Burry's (the investor who shorted the mortgages in 2007) opinion on the index fund and a lot of what he says makes perfect sense:

Michael Burry's Warning for the Index Fund Bubble - New Trader U

Achieving profits in the stock market and realizing those gains on the exit are very different things. The bulls of the early 2000s discovered this the hard

www.newtraderu.com

"This generation has gotten very comfortable dollar cost averaging into the stock market using these funds with the belief they will always go higher over time. The S&P 500 has averaged approximately 12% annual returns over its history along with 50% drawdowns. Even Warren Buffett has recommended the buy and hold S&P 500 as the best strategy for most passive investors. The long S&P 500 investment may have become a crowded at this point and it takes continuous buying power to keep it up at current price levels."

"Michael Burry believes that passive and blind investing into index funds is destroying the proper functioning of a market based on valuations, earnings, and future cash flow. True value is no longer priced in based on fundamentals. Another signal of a bubble."

Probably DCA is a good strategy for long term, yet we might experience a big drop in the near future.

Isn't it better if I increase the cash percentage and try to buy the index at lower levels after one or two years with the accumulated amount?

 

[andrewhook]

Michael Burry's Warning for the Index Fund Bubble - New Trader U

Achieving profits in the stock market and realizing those gains on the exit are very different things. The bulls of the early 2000s discovered this the hard

www.newtraderu.com

"This generation has gotten very comfortable dollar cost averaging into the stock market using these funds with the belief they will always go higher over time. The S&P 500 has averaged approximately 12% annual returns over its history along with 50% drawdowns. Even Warren Buffett has recommended the buy and hold S&P 500 as the best strategy for most passive investors. The long S&P 500 investment may have become a crowded at this point and it takes continuous buying power to keep it up at current price levels."

"Michael Burry believes that passive and blind investing into index funds is destroying the proper functioning of a market based on valuations, earnings, and future cash flow. True value is no longer priced in based on fundamentals. Another signal of a bubble."

Probably DCA is a good strategy for long term, yet we might experience a big drop in the near future.

Isn't it better if I increase the cash percentage and try to buy the index at lower levels after one or two years with the accumulated amount?

This ^^^^^^

This is exactly why we're staying out of S&P500 right now (even though we're expecting a further rally before the big drop).

As always, when a strategy is known by everyone, it stops working.

We'll probably enter the S&P500 again after it comes back to the "right" price.

It may take it 20-30 years to break even after the drop (as happened in the past) if it even does.

If it's ok for you, then DCA may be ok.

These are just our analyses of course.

 

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[Spenny]

Hi guys,

Cool thread, I've found portfolio allocation extremely difficult. A general rule of thumb I've heard (but dont follow yet) is apply allocations based on the allocations in the SP500 eg Information Tech: 28.1%, Healthcare: 13.3%.

this is my job, I'm co-founder of a Stock Picking Company so my partners and I spend our days studying the stock market and macroeconomic trends, choosing what stocks to put our money in.

Would love to hear more about your business [I'm always down for a DM! C: ]

 

[andrewhook]

Hi guys,

Cool thread, I've found portfolio allocation extremely difficult. A general rule of thumb I've heard (but dont follow yet) is apply allocations based on the allocations in the SP500 eg Information Tech: 28.1%, Healthcare: 13.3%.

Would love to hear more about your business [I'm always down for a DM! C: ]

Sure! I'm about to post an AMA about my little "success" story, as soon as I find some time to write about it