This blog is supposed to be about money, but I haven’t shared my portfolio since the end of 2015. Today, I lay it all out for you.
Before we get to the juicy details, note the following:
- My portfolio has lots of individual stocks. These are mostly a relic to my days as a stock picker. I’m mostly an index investor now.
- This isn’t investment advice! You’d be crazy to follow the lead of some crazy dude on the Internet. If you dare consider following in my footsteps, remember that I play with toy dinosaurs:
Let’s get on with it.
There has been a significant change in my portfolio; real estate! No, I haven’t bought any new properties. They are just too expensive in my neck of the woods. Instead, I’ve been buying them for others. We have four real estate holdings:
- Hard money loan #1: $95,000
- Hard money loan #2: $100,000
- Private equity (syndicator): $50,000
- Hard money loan #3: $50,000
Hard money is basically a private loan to an individual. We are in the first lien position, so the worst case scenario (borrower default) is that we own a home in Washington state. Two loans are short-term (one year or less in duration) and the third has a term of 8 years. I funded all of them through my self-directed, solo 401(k).
The private equity is a longer term investment. I helped fund an investor who bought an apartment complex in need of a little TLC. His goal is to fix it up, increase rents and sell within 8 years. We get quarterly income with a big payout at the end.
The reason I funded the real estate deals can be summed up in one word:
I don’t mind that the stock market indices are at all time highs. However, I do mind that P/E ratios are exuberant:
Jack Bogle, the founder of Vanguard, predicts stock market returns of 5% over the next decade. I expect my real estate investments to return at least 10 percent. I’m just following the money. If the stock market takes a huge dump tomorrow, future money will change course and start working for VTI instead.
Break it Down
Finally, let’s get down to business!
- Total value of investments including real estate and cash (excluding primary home and dinosaurs): $1,331,865
- Real estate loans: $295,00
- Funds: $572,083
- Stocks: $424,782
- Cash: $40,000
Funds (mostly index)
Funds are the core of my portfolio. BOR-ING. Don’t fall asleep yet. I still like to play a bit, especially with technology. My biggest fund holding is VGT, Vanguard’s information technology index fund.
I haven’t written about the Asset Class Experiment/Battle in a while. For new readers, here is what it’s about:
I rolled my 401(k) over in 2015. Instead of just putting it all into VTI, I decided to get crazy and roll it into different assets. Nothing like experimenting with almost $300,000, right? What could possibly go wrong!?! Why do I do this!?
For you, the Readers.
Always for You.
Bleh! I hope you didn’t lose your lunch. This isn’t a cheesy Hallmark movie. Hell, I’m not even drinking. I am thinking about it though. Hey wait, look at the time:
Sappy sentimentality and beer aside, I did this because I’m curious to see how these assets play out (pay out?) over the long term. It’s one thing to say, “Buy VTI!” It’s quite another to see how it performs in real time. And here are the results:
VTI (same thing as VTSAX), which represents the Total Market strategy espoused by Jim Collins, is proving its value. Only the dividend and information technology funds are doing better while the managed fund (Fidelity Contrafund) is lagging. Over the long term, I expect VTI to remain near the top.
And then there is VXUS:
There is a huge
elephant dinosaur in the room and it is Facebook:
Facebook, at over 15% of my portfolio, has grown out of control. I originally bought 1,000 shares shortly after the IPO. My hypothesis was that Mark Zuckerberg would be able to monetize the platform and when he did, the money would flow in.
Something wonderful happened shortly after the IPO; the stock price dropped through the floor. I bought another 1,000 shares. The average price for my shares was just under $30 for a total outlay of $60,000. I have since sold 550 shares, but Facebook continues to fire on all cylinders. I’ll continue to sell my shares, but will do it slowly to keep the tax bill in check.
I have the most confidence in Google and Amazon. I’m holding these two like they’re my firstborn, maybe even tighter (firstborn has been cranky lately). Both companies have incredible moats. Consider Google. It not only controls information (indexing the internet), it controls how you access the information. If you use the Chrome browser, have an Android phone or use a Chromebook, you know what I mean. Google is incredibly powerful.
And I can’t talk about success without talking about failure too. I sold all of my Apple shares back in January. Since then, Apple has gone from about $120 to $144. I’ve missed out on over $20,000 in gains. I sold Apple because its moat has been eroded by Android. However, I should have held the stock through the next iPhone refresh cycle which will be massive. Apple may still be the first company to attain a trillion dollar market cap. I’m not perfect.
I already mentioned my hard money loans and private equity investment:
We’d like to own more property directly. I have some ideas including a home in Florida (Hello snowbirds!) and building a cabin in the mountains near Nederland, close to my primary home (Hello Airbnb!).
The Future (and Dinoriffic Advice)
If I was starting over with a blank slate, I’d stick to indexing. I love technology stocks, but the ever quickening pace of disruption makes them a risky proposition. As much as I like Google, I have no idea if it will be relevant in 10 years.
People ask me all the time what my investing strategy is and I always defer to Jim Collins. If you haven’t yet, take a look at his Stock Series or consider purchasing his book. I asked the dinosaurs their opinion of it and they had the following to say:
Translation: Jim’s tome is the definitive source for learning about sound investing. He manages to present dry subject matter with wit and humor. He’s a gifted and thoughtful writer. Buy it now or we’ll eat you.
Join the 10s who have signed up already!
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