The last time I did a breakdown like this, I hinted at the fact that I might want to start doing this on a quarterly basis, depending on how much I’ve shuffled around my investment allocation. I figured I would follow through with that and do a breakdown for the third quarter of 2021.
Like usual, keep in mind that I am not a registered investment advisor, and even if I was, I would not be your advisor—I am nothing more to you than a guy on the Internet writing on his website. This blog post is intended to be strictly anecdotal, and I am in no way suggesting or implying that you should copy my strategy. Everyone’s situation is uniquely different, so be sure to consult with a certified professional if you have any questions or need any guidance.
With that being said, here is a revised breakdown of my investment allocation:
I like to hover around 5-10% in cash reserves, so 12% is a tiny bit over my target.
This quarter’s cash reserves are about the same as last quarter’s. As a reminder, “cash” here includes stuff like my savings and checking account, but also includes settlement funds, i.e., money waiting to be used to purchase stocks, or money set aside in a cash reserve mutual fund in case I need to use my HSA debit card.
Since I set off on my cross-country road trip, I also keep a few hundred dollars of paper cash with me in case I run into a situation where credit cards are not accepted (such as exchanging for quarters to use a washing machine), which is not something I have ever done before until now.
Index funds – Domestic
I have put a marginal amount of more money into United States domestic index funds, but overall have avoided doing so because I spent this past quarter focusing on other investment objectives. You’ll notice that the percentage that domestic index funds take up in my portfolio has decreased because I have put a substantial amount of additional money in other categories.
Within domestic index funds, 39.48% of it is in the total stock market, 36.31% in stocks geared specifically towards growth, and 24.21% in stocks geared specifically towards high dividend yields.
Index funds – International
If you scour the Internet for investment advice, there’s a lot of speculation out there. One thing that I do believe is that the United States stock market is unusually high right now, and I am slightly concerned about putting more money into domestic index funds in case there is a sudden crash. However, I also believe in the fact that you should not try to time the market, because even professionals will miss more often than not.
With that being said, I still wanted to keep a steady stream of money going into investments, so I decided to diversify a little bit more by opting to put more money into international index funds. My allocation went up from 6.28% to just shy of 10%.
Target retirement funds
I make marginal tweaks to target retirement funds based off projected income, and I incrementally add more money throughout the year depending on how much I think I will be able to put into my SEP-IRA. However, this category generally only gets a hefty increase twice a year—on January 1, when I dump several thousands of dollars in for the new year, and when taxes are due, once I know precisely what my net income was and how much in qualified SEP-IRA contributions that translates to.
Real estate investment trusts (REITs)
This category was my biggest increase, up from just 2.56% last quarter. In a similar vein to the topic I touched in the section about international index funds, I want to diversify and not commit too hard to domestic index funds.
In a stock market crash or a recession, there are a few categories of investments that are more resistant to the drop than others, and real estate is one of them. No matter how bad the economy is, you still need a place to live, and REITs will continue to pay dividends as long as people continue paying their rent and transacting in real estate.
Buying actual real estate (i.e., a physical property) is something I considered, but I decided I wasn’t ready for that yet, so I concluded REITs are the next best thing for my current situation. I mentioned websites like Fundrise last quarter and how I didn’t follow through with using their platform; I’ve maintained that same strategy for this quarter as well, and have my exposure through the Vanguard Real Estate Index Fund Admiral Shares (VGSLX) instead.
I’m not one of those religious believers in cryptocurrency, but I think that’s mainly because I don’t really know that much about it, so a lot of it still seems borderline foreign to me. I’m also not a non-believer either, so I’m continuing to invest a small slice of my portfolio into crypto.
Since last quarter, cryptocurrency prices have recovered a noticeable amount. Since last quarter, I also invested into a new cryptocurrency, Ethereum Classic, which now composes 1.44% of my cryptocurrency allocation (i.e., a microscopic sliver). The remainder of my cryptocurrency allocation is composed of 58.54% Bitcoin and 40.02% Ethereum.
I’ve more than doubled my investment allocation in speculative stocks, but it’s still a tiny portion of my total portfolio—not even 2%. If anything, this should be considered my “gambling budget,” where I pick stocks that I think will do well, and trade them more for fun than for profit. Like last quarter, a majority of these holdings remain mostly with companies in the travel industry.
I bundle together the shares of publicly-traded companies that I hold in the “speculative stocks” category, but there are a few private companies whose stock I have purchased as an early investor.
Again, this should mostly be considered my “gambling budget,” but this specifically is on the extreme end of “high risk, high reward.” This is money that I am pretty much expecting to lose, and if one of these companies happens to make it big, I will get back an astronomic return.
One thing to note is that this does not include stock options for my current employer; I have opted not to include those stock options at all as part of this investment portfolio breakdown, and will likely continue to avoid doing so unless the company hits some milestone where they become liquid. I’d say this is sort of like how I don’t include the value of my paid-off pickup truck in this either—I don’t really consider either of those assets as something I would include in an investment portfolio.
I can’t promise that I actually will end up doing this every single quarter, but if I have any notable portfolio changes, I’ll make another breakdown… if anything, mainly for me to be able to look back and see how my investment strategy has evolved over the years.