Broad Outlook Asset Allocation

I believe our dollars should be broken down into three main categories. Present money, future money and retirement money. These categories should be contributed to after the elimination of debt, with the exception of mortgage debt.

Present money can be broken down further to include an emergency fund and cost of living fund/household budget. Present money is usually kept in cash in a regular saving or high yield saving account. What percentage of net worth kept in the present fund is going to depend on your monthly budget and how much emergency fund you desire.

Future funds are funds that are invested in order to get a return that is greater than inflation. It is usually invested in stocks and bonds in a taxable investing account. Future funds are meant to be invested for 10-20 years and are great for those seeking early retirement. If not used for early retirement then future funds can be used to make major purchases and each future fund portfolio should have a goal for which it was developed. It may be difficult at times to avoid selling down the portfolio during a bear market for planned purchases. If this does occur then the emergency fund can be used, but as long as you’ve still persevere your principal investment then selling down the portfolio during a bear market should not matter.

What percentage of network kept in future funds is subjective, but it’s generally best to contribute to and max out your retirement accounts first before putting money in future funds, unless you are seeking early retirement.

Retirement funds is meant for funding retirement and a traditional retirement would start when funds are able to be withdrawn from tax deferred retirement accounts penalty free. This age is 59.5. Most keep the majority of their net worth in retirement accounts. These accounts should be maxed out first when able to. These accounts should not be touched before age 59.5. No withdrawals whatsoever. That’s what present and future funds are for.

Once you’re in retirement then a portion of your nest egg/retirement fund will become your present money. Whether you plan on living on 4% or 8% of your nest egg is up to the individual and this will become your present money. The 92 or 96% becomes your future money and should be conservatively invested in a high bond portfolio or annuity.

At this point there is less need to put money aside for future purchases, especially if you have a big nest egg. You can just spend down more of your nest egg to cover the cost. If you have a smaller nest egg and a tight budget then building up a bigger 1-2 year emergency fund will be paramount as well as developing passive streams of income. Having a side gig or PRN type job to cover unexpected expenses might be something to consider as well.

Of all the categories, retirement money is the most important because it’s generally invested for the longest amount of time and benefits the most from compounding. The bigger your nest egg the more comfortable your retirement will be. Putting aside 15% of your income for retirement will generally give you a comfortable nest egg. If you can’t hit that percentage just contribute early and often and you’ll come close enough.

The Market Cycle


I recently read Robert Kiyosaki’s, the author of Rich Dad, Poor Dad, recent article about the seven stages of a financial bubble which was first mentioned in Nobel Laureate Hyman Minsky’s 1982 book titled Can It Happen Again. The seven stages of a financial bubble as Robert Kiyosaki stated in his post are

  1. A financial shock Wave
  2. Acceleration
  3. Euphoria
  4. Financial Distress
  5. The Market Reverses, and the Boom Turns into a Bust.
  6. The Panic Begins.
  7. The White Knight Rides in occasionally.

Stage 1, the financial shock wave occurs when a financial disturbance causes a crisis. Examples include a war, substantial interest rate changes or new technology.

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Preservation Of Capital

Preservation of capital is one of the most important rules of investing. Just like the physician’s oath is to do no harm,  preservation of capital is the investors oath. Abstaining from negative returns and avoiding loosing it all on bad investments is the golden rule. This is probably the top reason why so many individuals fear getting into the market and end up sitting on the sidelines. I’m sure we have all heard the horror stories of people losing their shirts in realestate investing and the like. Continue reading “Preservation Of Capital”

How Many Stocks Should You Own?

I recently read a blog post on investment basecamp blog that addressed the question of how many stocks should an individual investor own. We all know and have heard diversification is the best method to minimize risk in the stock market. Some say diversify across all asset classes including commodities and currencies. According to the basecamp article the academics say that 90% of maximum diversity is obtained by owning a portfolio of 12- 18 stocks. Benjamin Graham recommend 5-25 stocks with each company being large, prominent and conservatively financed. John Keynes recommends 3-5 stocks that you know well and in the management of which you thoroughly believe. Warren Buffett says 5 to 10 stocks if you are able to understand business economics and able to find sensibly-priced companies that possess important long-term competitive advantages. If not Buffett is actually a big fan of indexing and Seth Klarman recommends 10 to 20 stocks that you know very well.
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Cryptocurrency For The FIRE Minded Investor

I know cryptocurrency is a very controversial topic to discuss as it pertains to investing. It seems to have been embraced more by the millennial and younger generations and shunned by generation X and older. Some would even dare to say it has no right to be discussed in the same light with financial independence, but as I discussed in my pervious post on investment strategies, I believe that 5 – 10% of your portfolio should be in risky assets of your choosing.

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The Perils of Micro Investing

Micro Investing is a great way to gain exposure to the stock market with as little as $1. Options for micro investing include acorn, stash, stockpile, M1 Finance and many more. You can use these websites and applications to invest in individual stocks or ETF’s. Some charge fees as little as 1- 2$ a month or a percentage of your portfolio and others like M1 Finance currently have no fees, but they do offer other products that they use to make money like loans and high interest rate savings and checking accounts.

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