The truth is, they all have their purpose. A lot of investment sites tend to prefer one over the other. For example, a lot of investor websites talk about mutual funds. Some even focus specifically on index funds. To find a site that suggests using multiple tools is, in my humble opinion, a bit rare.
I might have given the wrong impression with some of my articles that I value some vehicles more than others, given the number of times I mention my primary stock, Vanguard Natural Resources. I like VNR, and it provides a good medium to discuss different wealth building options, but it’s not my primary asset.
The way I track my wealth involves adding a new row to my spreadsheet every month for every asset and every liability. But I also have a secondary worksheet where I track groupings of various assets. This lets me observe how my portfolio is distributed.
- 51.3% of my holdings are rental property
- 31.7% is personal property (personal home and vacation home)
- 6.3% Vanguard Natural Resources stock
- 1.1% other stocks
- 3.4% Roth IRA and 401K
- 3.2% exercisable stock options
- 1.5% cash
- 0.9% EIUL
That may not add up to 100%, but it’s pretty close. One thing I’ve seen mentioned by others is to not invest too heavily in your own home. A tip was to have no more than 25%. This breakdown doesn’t account for liabilities such as mortgages, so it doesn’t track the fact that I have HELOC-based cash invested in VNR. It simply has the value of my properties and my stock holdings grouped together, divided by the total value of my assets.
The point of this article isn’t to steer you towards a certain asset allocation. And it isn’t to tell you that you must also put half of your assets into real estate. Frankly, it’s the way my portfolio has come together. When I withdrew my 401K holdings, I plowed them into rental properties, and bought what I could. The left over cash was put into reserves to back my play. I have used some of that cash to buy some stock positions, and I have also used HELOC cash to increase my position in VNR. The EIUL was set up so that I could fund it with the same money I was using to fund my 401K.
Essentially, I didn’t start with a top-down plan to spread my money into percentages. Instead, I built things from the bottom-up, picking opportunities as I saw them. I just put together this spreadsheet so I could keep a bird’s eye view on things. And ever since I put this in motion, I’ve seen 89% total growth. This says I’ve already made back the money I lost in early withdrawal penalties. I’m cautious to throw that out there because part of it is tied to estimated value of my rental properties. But I can tell my wealth building plan is doing much better than before with the monthly cash flows I am now receiving.