My Portfolio: Production from Disruption

I rarely share my portfolio. It’s mostly because I don’t want anyone to follow my ideas which probably aren’t healthy for the long term. I used to be a stock-picker and I still own a lot of them, but new money goes mostly to index funds from here on out.

Screen Shot 2015-12-26 at 3.19.06 PM

However, this blog is about money and I believe in transparency, so I’ll spill the beans today. First though, I’ll tell you why I bought the stocks that I bought.

Production from Disruption

I’ve always thought of myself as the opposite of a dividend investor. Dividend hunters favor big, stable companies that return part of their profits every quarter. For a dividend investor, change is bad.

I like the opposite type of company. When buying a stock, I seek companies that are trying to disrupt the status quo. Here are some examples from my own portfolio:

  • Apple (purchased January 2007): I bought most of my shares when the iPhone was introduced. I knew the new phone was a winner and would change the world. It has. Where are you now Nokia? Blackberry?
  • Google (purchased at IPO, August 2004): Google is a company that wasn’t a household name 10 years ago, but is now ingrained in our lives. We use Google products every day: Gmail, Android, Nest and Google Maps. Google is changing the world.
  • Tesla (purchased October 2012): The Tesla story is still in its early stages, but electric cars are the future. However, Tesla is much more than an electric car company. Its battery technology and factory is much more important to its success.

I like disruptors because they have the potential for huge growth. Google is almost a 20 bagger and Apple is a 10 bagger.

Look to the Future

The best way to find disruptors is to think deeply about the future. Ask yourself what technologies are going to be important 10 and 20 years from now. Some of my thoughts:

  • Virtual reality: Facebook bought Oculus Rift for $2,000,000,000. Google has invested $542,000,000 in Magic Leap. Mark Zuckerberg, Larry Page and Sergey Brin are some of the smartest business leaders on the planet.
  • Alternative energy: The recent climate change agreement will be a boon for alternative energy. Also helping the cause is improved battery technology along with cheaper solar panels.
  • Electric cars: GM spent almost a billion dollars developing the latest small block V8 engine (Corvette!). Electric cars eliminate this cost and complexity by using a simple motor that was developed over 100 years ago. Battery cost and technology has held electric cars back, but the times are changing.
  • Autonomous cars: Apple, Google, Tesla, Uber, Ford, Toyota and Baidu are just some of the companies spending big on developing autonomous cars. Taking the human out of the equation (I’m looking at you guy in the lane next to me looking at your phone) will make driving much safer and efficient.
  • Battery Technology: Advances in batteries have the potential to change the world. Modern, lithium based batteries enable electric cars, smart phones, laptop computers and drones. They also have the ability to enable decentralized, alternative energy.
  • Alternative banking: I have a credit score of 822, healthy income and over $1,000,000 in investments. Yet, I can’t get a mortgage of any size because of silly banking rules implemented after the Great Recession. Ben Bernanke can’t get a mortgage either. No problem. Companies like SoFi are stepping in to fill the void.
  • Drones: Drones aren’t just for bombing the enemy anymore! They are finding new uses in everything from agriculture to package delivery (come on Amazon!).
  • Artificial Intelligence, cloud computing and robots are all worth paying attention to as well.

Uber and SoFi

Two companies that I’m fascinated with right now are Uber and SoFi.

Uber: If you think Uber is just a cheap way to get to the airport, think again! Uber’s CEO, Travis Kalanick’s dream is do away with car ownership for most folks. He’d replace your car with a fleet of autonomous, electric vehicles available with a touch of your smart phone.

SoFi: SoFi initially started out refinancing student loans. However, CEO Mike Cagney’s big goal is to change the way we bank. It’s no secret that Mike Cagney hates banks and would like to send most financial institutions in the direction of the dinosaur.

Not so Fast

The hard part of evaluating new technologies and companies is picking the winner. Warren Buffett said this about the American auto industry:

There have been over 1,000 American car companies. Of those, there are less than 10 now. When the car came out, you would have been better off shorting horses than investing in cars.

Also, technology and innovation move quickly in modern times. Apple disrupted Nokia and Blackberry. Google then disrupted Apple:

Android, before and after

Android blatantly stole Apple’s idea

Tread carefully friends. Know your circle of competence and don’t step outside it. For most folks, the best bet is a good old index fund.

My Portfolio

Finally, let’s get down to business! Quick stats:

  • Total value of investments excluding cash: $1,026,335
  • Amount in funds: $551,148
  • Amount in stocks: $475,187

Funds

Screen Shot 2015-12-27 at 7.25.35 PM

*I’m classifying Berkshire Hathaway as a fund because of its conglomerate nature
**At least part of this holding is part of my Asset Class Experiment
***Why don’t I own all Admiral shares? The Vanguard solo-401(k) doesn’t allow Admiral or ETF shares.

Stocks

Screen Shot 2015-12-27 at 7.22.28 PM

 

2016 Plans

Solo 401(k) investments: For at least the first half of 2016, I’ll continue to invest in foreign holdings. This is simply part of a planned rebalance. Once foreign investments make up at least 15% of my portfolio, I may direct money elsewhere.

Stock sales: This year, I sold 100 shares of Apple and 250 shares of Facebook. I’ll sell more shares of both in 2016:

  • Apple: Apple is consistently underestimated, but no one can argue that its growth came from the iPhone. Because of less meaningful upgrades and market saturation, iPhone growth is going to slow. 2015 may have even been the peak year for sales. Apple has more tricks up its sleeve including a car (!) and transitioning to services as a major profit center, but I don’t have the same level of confidence in the company that I once did.
  • Facebook: Mark Zuckerberg has done amazing things as CEO. Instagram and WhatsApp were expensive acquisitions, but are showing loads of promise. Oculus Rift hardware (virtual reality) launches in the first part of 2016 and I believe that this will be the next big computing platform. However, as much as I like Facebook, I don’t like having one company (a very speculative one at that) taking up almost 20% of my portfolio.

More cash: I have $30,000 currently in cash. I’d like to get my cash pile up to $80,000. This shouldn’t be difficult with the stock sales and Mrs. 1500 working. Here is why I want a bigger cash pile:

  • Powder keg money for real estate: I’d like to invest in real estate in 2016. $80,000 would go a long way to funding a purchase.
  • Powder keg money for market crashes: As long as one of us continues to work, I’d consider putting some of this money back to work if markets drop 20%. If the markets drop 40% of more, I’d most likely put it all back in.
  • Smoothing out rough spots: $80,000 is two years of spending money for us. If both of us were retired, we could live off cash for at two years if the market takes a spill. Never forget: Buy low, sell high.

No more stock purchases: I didn’t purchase any stock in 2015. The last stock I purchased was Lending Club in 2014. Before that, it was Facebook in 2012. I’m not going to say that I’ll never purchase another stock, but the great majority of all future money will flow into index funds.

At times, I have been able to identify disruptors like Apple and Google. Much harder is knowing when to sell. Apple may be stronger than ever in a decade or it may be a shadow of what it is now. There is just too much risk for me to continue to pick stocks.

My litmus test is 10 years. The question I ask myself is this:

Do I have a high level of confidence that the company will be in a stronger position in 10 years that it is now?

Here is what I think of my top 5:

  • Amazon: Yes
  • Apple: No
  • Facebook: No
  • Google: Yes
  • Tesla Motors: No

Two out of five!

Again, index funds are the way to go.

Money is nothing more, and nothing less than Power

Money is a beautiful thing because it gives you a position of power. Once you have enough to never have to work again, your life is yours to do with as you choose. If you’re already living a good and satisfying life, I suspect that not much will change. Maybe you’ll even continue to work. Never forget that it’s always better to do things because you want to, not because you have to.

The best way to predict the future is to create it. -Peter Drucker

Why wait around for life to drag you around by the scruff of you neck? Slack off and you could end up as the chew toy in the mouth of the Doberman.

Start working, start planning, start saving. One day, it will all come together and you’ll be happier and more content than you’ve ever been. Then, you’ll really be able to start living.

Join the 10s who have signed up already!

Subscribing will improve your life in incredible ways*.

*Only if your life is pretty bad to begin with.

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50 Responses to My Portfolio: Production from Disruption

  1. Team CF says:

    Hello Mr. 1500,

    Seems like a very “secure” strategy. Personally we would sell off way more share of FB and Apple. Primary reason is that they are also included in your index funds, so you would still maintain exposure, but with better diversification.
    Considering that valuations are (or are close to) all-time highs, the Buy Low – Sell High, would be right about now ;-). The cash could be also used to beef up the REIT’s a bit, which would generate some additional dividend as well, which is great for cash flow.

    Good luck and have fun with the reinvestment strategy.
    Team CF recently posted…The best way to see your money go up in smoke!My Profile

    • 1500 says:

      “Personally we would sell off way more share of FB and Apple.”

      Yep, great point, especially since my largest fund, VGT, is a tech one. If I wait until retirement though, my taxes would be much less. I realize that there is risk in this. At times, I feel like I’m playing a game of chicken on some days, so we’ll see how it plays out!

  2. I use that Warren Buffett quote above all the time buddy…..usually in reference to electric cars and solar farms…..each will dominate one day, but which companies will be the leaders?! Thanks for sharing your portfolio and investment breakdown. I will also be shifting our portfolio from individual stocks to mostly passive index ETFs over the next couple years. There just aren’t that many individual stocks “wonderful” enough to deserve our capital. Happy New Year to you and the family!

    -Bryan
    Income Surfer recently posted…2015 Wrap-up and 2016 GoalsMy Profile

    • 1500 says:

      Yep, every major auto manufacturer including Porsche (!) is working on an electric. Tesla has a huge advantage though in that they’ll very soon be a battery supplier. The battery is by far, the single most expensive part of the car. Bringing down this cost will give them a huge advantage. Also, they have one of the most brilliant people on the planet running the company!

      “There just aren’t that many individual stocks “wonderful” enough to deserve our capital.”

      Berkshire may be the one company I’d purchase down the road. Even with that though, I’m worried about who takes the reins after Buffett and Munger are gone.

      Happy New Year Bryan!

  3. Hannah says:

    Interesting that you gave only 2 of the 5 tech stocks the thumbs up for the next ten years. I think all but Apple will be stronger, and Apple will only be weaker because they face tougher competition abroad, domestically they will be as strong as ever in 2026 (in my opinion).

    Facebook is speculative, but they are easily the most penetrated provider and I think it will be tough for competitors to monetize as well as Facebook.

    • 1500 says:

      I hope you’re right because I’m selling these stocks off in small increments. It will probably take at least 5 years to get down to where I want to be.

      Just to clarify, I am confident in all of those companies, especially in the near term. A lot can happen in 10 years though.

      I always go back to the railroads. A railroad is almost undisruptable (is that a word?). They are very expensive to build and a core part of the economy. I’m extremely confident that Union Pacific and BNSF will be strong for years to come.

      The exact opposite of a railroad would be something like Snapchat. The attention span of a teenager is short…

  4. I used to be a stock picker as well. As of 12/31, I’ll be divested from all of my individual stocks, except maybe one (due to tax reasons). I’ve spent a lot of time this year selling out of these individual stocks and plowing money into my student loans and cheap index funds. Great job diversifying and having a solid plan for the future. I think it’s perfectly fine to keep a part of your portfolio (less than 5%) for fun money investing. I’m not saying I’ll never buy an individual stock again either, but much less of my portfolio will be allocated to them.
    Fervent Finance recently posted…2015 Year in Review & 2016 GoalsMy Profile

    • 1500 says:

      Nice job Fervent!

      “I think it’s perfectly fine to keep a part of your portfolio (less than 5%)…”

      Because I still haven’t learned my lesson completely, I’ll probably always have a bit more in the markets; maybe 20%. I’m trying to get to a point where no single stock takes up more than 5% of my portfolio though. Except for Berkshire. I’d go 10% there. Like I said, I’m still learning. 🙂

  5. Mrs SSC says:

    I like the idea of building up cash. I think 2016 is going to be another investing year for us, but then in 2017 we will start building the cash reserves. I also it is a way to smooth out a bumpy road – whether the market or personal crisis. We had to replace an AC this year – and it was only ok because we still are working. I think large expenses like that may hurt us more when we FI and don’t have a paycheck coming in every two weeks. Having a bit of a cash stockpile I think will be how I handle the stress of being unemployed!
    Mrs SSC recently posted…Our Excel planning worksheet – a gift for you!My Profile

    • 1500 says:

      “I also it is a way to smooth out a bumpy road – whether the market or personal crisis.”

      Yep, my thoughts exactly. I don’t have any income producing investments, so if I don’t have cash, I have to sell stocks no matter what. Having a couple years of cash on hand is a great way to ride out the rough times.

      Another thing that I think about often is that the first 10 years are the most important: http://www.madfientist.com/safe-withdrawal-rate/

      Having that cash on hand will go a long way to making those first 10 years a success.

  6. Tara says:

    I would be careful with Uber or any other “gig economy” corporations. Uber is currently tied in a big lawsuit over driver pay, and like state governments catching up to gambling-lite online fantasy sports betting sites, profits are going to be lean for companies like Uber with increased state and local regulations. While some people can claim great Uber pay, many drivers are not raking it in (nor doing great) so the model is need of some updates. (One thing drivers are arguing for: Uber insurance only covers drivers when a passenger is in a car, but if they get in an accident on the way to pick up a fare, Uber currently doesn’t cover them but neither will their personal insurance. (I’m not a cabbie and I’ve used Uber so I’m not a plant by the taxi industry, lol)

    • 1500 says:

      You are right on the money there. Note that I only said I was fascinated by Uber; not that I’d actually buy the stock when it goes public. 🙂

      Uber’s grand plan is to eliminate the driver altogether in favor or autonomous cars. Of course, this has WAAAAAY more hurdles than any of the ones you rightfully mentioned.

      I can see Uber being a massive company in 10 years, far bigger than it is now. I can also see it flaming out and going bankrupt. Either way, it sure is fun to watch!

  7. Mattattack says:

    Thanks for sharing. I’m interested in picking stocks but I still have a lot to learn, so I’ll just continue to plug away into the index funds until I’m confident enough to dive in the the wide wide world of stocks. Solar and electric cars do look like promising industries. I wonder if there are any funds devoted specifically to those. That way you can let the fund manager try to pick the winners. If they do exist they probably have high fees anyway.

    • 1500 says:

      You have it right with Index Funds! Don’t follow my silly strategy!

      As far as an actively managed fund, it’s no secret that most of those guys don’t beat the indices.

  8. I think you own too much technology – at the individual holding and ETF/mutual fund.

    I would think that there is a lot of overlap between different holdings – for example VTI has a 4% exposure to REITs – which eliminates the need for 2-3% allocation to VNQ.

    The stocks in SCHD are all part of VTI as well.

    I think it is smart to own some international stocks, just in case. However, I would also consider some fixed income exposure helpful as well just in case. Perhaps 10% – 15% would be fine for a retired Mr & Mrs 1500.

    As I mentioned in another post, you may be able to sell Jan 2018 calls on companies like FB at say a strike price of 20. You will essentially lock in a sale price of about $104/share. And you can use that option money to invest in say a VTI/VXUS/ JNJ etc. If FB goes above $104/share by 2018 you forfeit the gains. If FB ends up below $104, your end result is as if you sold at ~$104/share.

    This move will defer taxes for about 2 years ( when you will be FI), and you will have locked in the sale ( assuming you want to sell FB today)

    Either way, good luck to you in your investing!
    Dividend Growth Investor recently posted…Dividend Kings for 2016My Profile

    • 1500 says:

      “I think you own too much technology – at the individual holding and ETF/mutual fund.”

      Yeah, understatement of the year! Looking at my portfolio, about half is pure tech. Scary. I don’t have to tell you about my investment biases!

      “If FB goes above $104/share by 2018 you forfeit the gains.”

      So this is the risk, right? If $FB goes to $150, I have to sell it at $104. However, my bottom is $104. So, I’m locking in a sale at the current price.

      I really have to read up on all of this. So much to learn and so little time. Want to teach a class? All expenses paid trip to wonderful Colorado? 🙂

      Really, thanks for your suggestion and comment about the holdings of the other funds. I always appreciate your insight.

      • My comment on FB was assuming that you want to dispose of all individual holdings, and want to buy index funds/etfs with the proceeds ( and taxes were the only obstacle in your way).

        I understand it is tough to break away from a strategy that has worked for you so well. By switching to an index you are foregoing much of the upside in the stocks you sell. 🙂

        Anyway, good luck in 2016. I know absolutely nothing about direct real estate investing, so I am looking forward to learning from you!

        DGI
        Dividend Growth Investor recently posted…Dividend Kings for 2016My Profile

        • 1500 says:

          Yeah, tough decision. Thanks for your advice!

          Real estate investing! You should see the hoarder hellhole I just looked at. Future post…

  9. You sure you don’t want to move to San Francisco, make some big bucks in technology for work and for investments with your portfolio composition?

    It’s raining billions here!

    Sam
    Financial Samurai recently posted…The Best Personal Finance Articles Of 2015My Profile

    • 1500 says:

      I’m a software developer and San Francisco is my playground. I idolize the companies like Google that are innovating like mad. It amazes me how much Silicon Valley has changed the world. Incredible, really.

      However, I’m too old for that scene now. I’d just get fat and lazy from the Google free lunches. If I were 22…

  10. I think that those building up and holding a large % of their investable assets in cash will feel like geniuses over the next 1-3 years.

    On average my brokerage accounts have sat 50% or more in cash. As we end the year it is more like 80%. The S&P 500 via the ETF SPY is currently down -0.2% on the year. My stock/ETF portfolio is up 3.9% for a little better than a 4.0% out performance. And that was with 50% or less invested of the available capital (about $124K).

    On top of the $80K in cash in my brokerage accounts, we are currently sitting on about $70K in cash in our checking/savings account…which in January is about to get a whole lot bigger.

    However, I will not be in a rush to put that to work. My hope is that 2016 proves to bring back volatility in a sustained fashion.

    Just make sure you have a plan and stick to that plan. Maintain courage under fire. Your plan to deploy capital at -20% and -40% is great.

    That is similar to my own plan. Mine is just broken down into a 4 tier system. I will still make contributions to pre-tax accounts and what not. But I don’t have a problem with it sitting in cash for a while.

    Here is to an opportunistic 2016.

    Cheers,

    Dom
    Dominic @ Gen Y Finance Guy recently posted…Opportunity Looks A Lot Like Hard WorkMy Profile

    • 1500 says:

      Hey Dom-

      Wow, that is a lot of cash! Isn’t it just a bit painful with interest rates where they are at?

      “Maintain courage under fire.”

      I have absolutely no problem with this. When the market took a dump in August, I threw the $30,000 I had in my brokerage account into the fire. I was lucky and caught it almost at the bottom for the year. Here is the trade to prove it: http://www.1500days.com/?attachment_id=9149

      I’m curious about your 4 tier system. If you’ve written a post about it, please direct me!

      With all of that said, I don’t try to market time as much as you. As soon as my case pile is built up, I’ll be tossing money back into the market with great enthusiasm. The way I look at it, my money will be tied up for many years, so what happens with the market now won’t matter much decades down the road.

      When I first started working on the blog at the end of 2012, I remember reading several other blogger who said they were keeping money out of the markets because valuations were high and we were at the end of a nice run. Those guys missed out on awesome returns.

      “Here is to an opportunistic 2016.”

      Right on brotha’!

      • Too be honest it has not been very painful at all.

        I don’t get too hot and heavy like others do about inflation eroding my purchasing power. I actually don’t think inflation is our main concern over the next few years…instead I think deflation is the big risk on the horizon.

        Look, we are 7 years into a bull market, which is the average of most bull markets. Not sure, but I think I remember reading that the longest bull market lasted 10 years…but the market fundamentals were much different.

        We struggled to tread water all year. With a couple days left in the year the S&P 500 might eek out a small gain. My portfolio as of yesterday was up 3.9% (with 50% or less invested), I had CD’s earning 3%, a commercial REIT earning 7.5% quarterly dividends, and a P2P portfolio of loans earning about 6%.

        Oh, and I paid an extra $10K on my mortgage saving me 3.635% for the remaining term of the loan. I don’t see the difference in this and investing in dividend paying stocks. Think about it, once you have your house paid off, you are essentially earning a dividend into perpetuity in the amount of your old mortgage payment.

        I am actually working on a piece that compares a paid off house to that of a dividend paying stock.

        Yes, a big chunk of cash was only earning 0.5% to 1%…but that gives me a lot of optionality.

        Like anything in life there are trade offs. I risk under performing the market…which I have not…but in return I won’t be forced to sell anything to raise cash…and I will have the firing power to take advantage of much better deals.

        As far as a post detailing my 4 tier strategy…I wrote something way back in April…only my cash stash has only grown since then due to new contributions, but is still just as true.

        http://www.genyfinanceguy.com/2015/04/27/plan-63000-cold-hard-cash/

        You will notice a comment I left here on this blog cited as well.

        Cheers,

        Dom
        Dominic @ Gen Y Finance Guy recently posted…Opportunity Looks A Lot Like Hard WorkMy Profile

        • 1500 says:

          This is a long bull market, but we also came out of one of the worst financial events in history.

          In general, I’m not too worried. Everything is cyclical and we’ll have a 20% correction one of these days/years. I fully expect that I’ll be kicked out of the Double Comma Club many more times and like said, it’s just opportunity.

          I’m surprised though that you’re putting extra money into the mortgage. I look at it as very cheap leverage. I’m not sure we’ll ever be able to borrow money this cheap again. I still remember the good old days when my Internet bank account paid 5%.

          We’re probably more alike than we’re different overall. You’re doing a lot better than I was at your age and I expect you to fly by me some day in terms of net worth. It’s all good as long as you don’t forget the little guys!

          • I won’t argue with you that rates are a historic lows.

            Almost 3 decades ago Japan thought they were seeing once in a lifetime lows in interest rates too…and they are still at essentially zero percent almost 30 years later.

            In my opinion they are the furthest along this quantitative easing/money printing experiment.

            I think I have mentioned this on the blog before, but I am a big believer in reversion to the mean. With the spectacular performance since the March 2009 lows there are only two ways we are going to normalize the returns:

            1 – A long period of lower than average historical returns.

            Or

            2 – Another Massive correction.

            I don’t know and don’t really care how it plays out.

            Cheap money it may be, but when risk/reward doesn’t look great I would much rather go for the sure thing then chase something a little higher, taking on out sized risk.

            What is the difference between investing $370K in a stock that pays a annual dividend of $20K/year and paying off a mortgage in the amount of $370K that saves you $20K/year in Cash Flow (based on a mortgage payment with a 3.625% interest rate)?

            Too me they are both synthetically equivalent 5.4% dividend plays.

            They both provide a cash flow stream. One is actual cash inflow…the other is just a savings.

            I can invest the savings just as easy as I can from the dividend income from the stock. It spends exactly the same.

            There is an issue of liquidity…but the trade off is you have a free and clear place to live (with the exception of property taxes of course).

            I actually have an interesting piece that turns this topic upside down…but unfortunately it is not scheduled to go live until late March.

            As always the conversation is always thought provoking.

            Cheers!
            Dominic @ Gen Y Finance Guy recently posted…Opportunity Looks A Lot Like Hard WorkMy Profile

          • TheMoneyMine says:

            Actually, if you use Warren Buffett’s favorite “yard stick”, it does show that the S&P500 is likely to return 0% or less over the next 10 years.
            Not only is his yardstick highly correlated with future 10-year returns, but it’s also relatively easy to project in the future.
            If you are curious how the S&P500 would look like in this scenario, I graphed it in one of my recent posts.
            http://www.themoneymine.com/how-to-forecast-a-market-downturn-like-warren-buffett/

            Having Powder Keg money to be able to invest in stock or real-estate is a great idea.
            TheMoneyMine recently posted…The Fed’s Rate Hike explainedMy Profile

          • 1500 says:

            Yep, I agree that valuations are high and the next 5 years won’t be the party that the last 5 years were. My timeline is decades though, so it doesn’t mean a whole lot. It has pushed me to have at least 2 years spending cash before I call it quits to ride out rough spots. I may go higher.

            One blog which is pretty awesome is Philosophical Economics. Check out this post from him: http://www.philosophicaleconomics.com/2013/12/shiller/ It still makes the case that valuations are high, but perhaps they aren’t as high as you may think.

          • TheMoneyMine says:

            Thanks for the link, this was a very informative read.
            The author concludes “The historical record leaves no other option but to admit that something about valuation has changed”, which sounds like ‘it’s different this time’ and makes sense in his analysis, but makes me cautious about drawing conclusions.

            Since I also have decades in front of me, I could keep 100% invested in the stock market and reap the benefits in 40 years.
            But if I see that I can get 5-10% in assets like real-estate rentals or LendingClub, does it still makes sense to keep investing in the stock market?
            TheMoneyMine recently posted…The Fed’s Rate Hike explainedMy Profile

          • 1500 says:

            “…which sounds like ‘it’s different this time’ and makes sense in his analysis…”

            I HATE it when people say, “it’s different this time.” Just like you, I become immediately suspicious. Actually, I usually disregard the information completely and never listen to another thing the person says.

            However, I’ve been following that blog for a while now. It isn’t an easy ready, but the guy seems to really know his stuff.

            “But if I see that I can get 5-10% in assets like real-estate rentals or LendingClub, does it still makes sense to keep investing in the stock market?”

            This is something I think about all of the time. We’ve been looking at a property in my neck of the woods that would cost $500,000 (hopefully) and return $60,000 per year. If I can get those numbers, I’ll jump all over it without hesitation.

            Lending Club is trickier because returns are taxed as income. Also, the platform really hasn’t been through a recession, so no one knows how it will perform.

            The bottom line is just to be flexible and deploy your money in a way consistent with your personality and values. For example, if you can’t stomach a bad tenant, real estate isn’t for you.

          • TheMoneyMine says:

            If this blog has the 1500 seal of approval, I’ll keep it in my bookmarks then! 😉
            TheMoneyMine recently posted…The Fed’s Rate Hike explainedMy Profile

      • Hannah says:

        One thing that makes this discussion particularly interesting to me is that neither of you claims to have particular devestment plans which is to say if the market tanks, you’ll stay invested. Because of that, both of you could literally be the worst investor in the world and given the long time horizon of investment, you’ll earn booku $.

        Dominic has a slight advantage over 1500 because he’s got a projected 10 more years of earnings before he may (or may not) pull out of the earnings game. As such the true opportunity cost he faces from not investing today is much lower than the opportunity cost that 1500 faces.

        I agree with Dominic’s market assesment (+/-), but I’m behaving more like 1500 because I expect more volatile earnings over the next two decades, but I also don’t expect to have any desire to draw on my stock market portfolio before a traditional retirement age, so I gain more from have non-fungible wealth as opposed to fungible wealth that could be spent on things like home renovations.

        • Hannah – I don’t know if this makes it anymore interesting or not.

          But I actually have already executed my plan of divestment, which is a big reason I built up so much cash in my brokerage accounts. That was in the first half of the year.

          And since then I just have not been deploying much capital (but have still been making my regular contributions to cash). I did however hit a tier 1 execution when we had the lows in August.

          It’s also not really a fair comparison because I don’t necessarily invest in the traditional sense, because of the way I use options in my investments.

          I am pretty confident that in periods of undesirable risk/reward opportunities that I can earn 3-4% a year while putting very little capital at risk.

          This allows my army of dollar bills to be ready to seize “once in a lifetime opportunities.”

          I know this is confusing but just as I tell people I am an extroverted introvert…I also consider myself to be an actively passive investor.
          Dominic @ Gen Y Finance Guy recently posted…Opportunity Looks A Lot Like Hard WorkMy Profile

        • 1500 says:

          “One thing that makes this discussion particularly interesting to me is that neither of you claims to have particular devestment plans which is to say if the market tanks, you’ll stay invested.”

          Hmmm, I do have plans. I will sell off some assets every year to live on. With that said, sometimes you hear me say stuff like “I’l be holding my investments for decades.” I say this because I’ll only be selling off a small amount every year, so most investments will be held for decades. We need about $40,000/year to live on, so based on the 4% rule, we’re building a buffer now.

          My other buffers include is having at least 2 years of cash to smooth over rough spots and a potential real estate purchase. We may also flip a house now and then post-normal job. The money is just too easy for me to pass up and I enjoy the work.

          “Dominic has a slight advantage over 1500 because he’s got a projected 10 more years of earnings before he may (or may not) pull out of the earnings game.”

          Dominic also has a huge advantage because he’s kicking more ass than I was at his age.

  11. Tawcan says:

    I’m with you on Amazon and Google. I have my doubt about Apple staying this strong in the next 10 years. I still don’t quite understand Facebook’s overall business, that’s why I haven’t bought Facebook.
    Tawcan recently posted…Early 2016 Stock ConsiderationsMy Profile

  12. Magilla says:

    I’m confused, why wouldn’t you be able to get a mortgage if you have 20%+ to put down, great credit score, good income and lots of assets?

    • 1500 says:

      It’s because of the nature of my employment. I’m not a W2 employee anymore. Although I do the same job, I had to go corp-to-corp with them. Because of this, I need 2 years of tax returns.

      It cracks me up. I’m on the phone with the mortgage guy, who I’ve used at least 10 times: “So, I have $1,000,000 in investments, a credit score of 822, a 50% down payment and you can’t even loan me a dime?” “Nope.”

      Just to be sure, I called a couple other conventional lenders and they all had the same story. It is part of the new mortgage rules for government backed (Fannie Mae/Freddie Mac) mortgages. Since most mortgages are backed by the government, we’re scewed!

      We found that local banks will lend us money, but it’s at a higher rate.

      • Mattattack says:

        That really is a kick in the pants. I’ve don’t know anything about home equity loans, but do you think that might be an option? I don’t know how the rates compare to a traditional mortgage or if the same lending rule apply. But it was the first thing that popped into my head.

        • 1500 says:

          Yeah, a home equity loan/line of credit is exactly what we’re going to do. We only own about 120K in the home, but it’s probably worth close to 400K. The problem is that we have to finish the work on it first.

  13. BeSmartRich says:

    Investing about 20% of your net worth in Facebook is a brave move but you got paid handsomely. Things worked out great for you! I am realizing more lately that I want to simplify my investing by focusing more on ETFs than individual stocks. Although I see some good discounts on certain stocks that make me buy more stocks than ETFs ironically.

    Cheers!

    BSR
    BeSmartRich recently posted…November 2015 Dividend income update: $358My Profile

    • 1500 says:

      It started out at about 5%. I bought 1000 shares at IPO for about $40. The price then dropped to the teens. Since I still believe in the company, I bought 1000 more. So, I originally sank $60,000 into it.

      ETFs and plain old funds are the right choice for most. Happy New Year!

  14. Integrator says:

    I like your overall asset allocation, the Facebook position sticks out a little. While there could be further room to run there, probably makes sense to pair it back.

    I like your overall approach with a bunch of index funds. Our asset positions are about the same overall in terms of asset levels, but you have a much more diversified holding of index funds. Roughly 25% of our net worth is index funds, and it’s primarily in an SP500. I want to put some $$ in an emerging market index fund as well. We have another 25% in a property. The other 50% is in direct stocks, which I think is probably too much.

    I’m expecting to see more free cash flow over the next few years. I think some of that should be directed to bulking up emerging markets exposures.
    Integrator recently posted…2015 Wrap Up & Happy Holidays!My Profile

    • 1500 says:

      Emerging markets are where most of my money has been going recently. They have been beaten down tremendously. Time to buy, right? Everything is cyclical and they’ll come back some day.

      Facebook is interesting. Zuckerberg is a really smart dude, but the company has a crazy high valuation. Perhaps they’ll grow into that loft PE someday, but it will take a while.

      • integrator says:

        Any reason why you aren’t using VWO instead of VEIEX? VWO is the ETF that tracks VEIEX. It has a lower expense ratio and smaller minimum investment. Tracking stock rather an allocation holding of equity like the fund. I’ve been weighing up which way I go, the lower cost VWO seems preferable. Seems to be identical exposures though.
        integrator recently posted…2015: Portfolio Wrap UpMy Profile

        • 1500 says:

          Vanguard doesn’t allow ETFs or Admiral shares in their solo 401(k)s. When I quit my job and roll it all over, VWO is definitely where the money will go.

  15. Mortimer says:

    Interesting allocations. I think you’ve been smart with your tech investments—as far as tech investments go, these are actually pretty conservative bets. It’s not as though you’re engaged in putting up venture capital for unproven companies. The companies you’ve invested in have made it through some fire and lived to tell the tale, including Facebook’s botched IPO. Although I agree with you that Apple is probably over-valued over the next decade, I also don’t really see it going anywhere because the iPhone is still dominating luxury smartphone sales (even though Android has something like 80% of marketshare of actual smartphones). The iPhone and iOS, for now, is a better product that commands a significant premium.

    Moving into index funds for the foreseeable future is also a conservative move and a financially intelligent one with the buy and hold strategy. Even if the S&P 500 has a bad decade for valuation, much of the return from equity investment is from dividends, which means you’ll still get a significant return on your investment. And if your time horizon is many decades and you’re supplementing with a fixed-income asset class you should be fine. One thing I don’t believe you’ve mentioned is a bond index fund, especially one that invests significantly in TIPS. The other thing you might look at is buying and holding 30-year treasuries, a strategy recommended by the authors of Your Money or Your Life. If the S&P remains flat, an at least 2.9–4% return on your money doesn’t seem so bad!

    Thanks again for sharing.
    Mortimer recently posted…Talking to My Kids About Saving Money for FreedomMy Profile

    • 1500 says:

      I agree with your assessment of Apple. I also feel bad for the company because they invented it all and now have to fend off the copycats. I hope they stay strong for decades. I also hope that US law allows them to repatriate all those billions in the near future at a reasonable tax rate.

      You’re right; I have nothing in bonds or any fixed income. I hope to possible gain fixed income from a real estate investment, but that is a pipe dream right now.

      Before I invested in bonds, I’d probably pay off my mortgage. That would be an instant 3.25% return.

      For now though, I’m keeping the pedal to the metal on growth stocks. Perhaps this strategy will blow up in my face one of these days, but that would make for some good blog drama!

      Happy New Year Mortimer!

  16. I am an indexer myself these days. Far too may stock I bought are no longer around…
    No Nonsense Landlord recently posted…How to Fix a Delta Shower Faucet LeakMy Profile

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