This is the final 2016 overview and today we will take a bit more of a helicopter view of the portfolio. The data behind the Cheesy Index is obviously based on net worth. Our network consists of three types of assets:
- Income producing assets (by dividend, cash flow or capital gains)
- assets that do not produce any income (cash, our home, certain belongings)
- Depreciating assets (i.e. our car)
If you add the value up for all these assets you get your net worth, when you then divide each category by this net worth value you get some idea how well your net worth is working for you. Ideally you want to have your income assets as high as possible, limit your non-income assets and have no depreciating assets (when possible). Our asset allocation for 2016 looked like this:
We are actually pretty pleased that we are now above 80% with our income producing assets. The ultimate goal is to have this exceed 90%, perhaps even get to 95%. For this we would have to rent our own home and find some small rental for ourselves or a very cheap property (perhaps abroad?).
Income Producing Assets
The income producing assets are obviously also able to be distributed into various sub-categories. For us these include:
- Our real estate;
- The dividend shares;
- Our Index funds; and finally,
- The various Crowdfunding loans.
Looking at the above graph you can see that we are heavy on real estate and dividend paying companies. Which we are ok with, but we are considering two options:
- From now on adding only new capital to index funds and dividend share; or,
- Cashing in on the Index Funds and/or some dividend share and purchase more real estate.
The first option is pretty straight forward, income from work and rentals is use to purchase more individual share and ETF’s. This would diversify our portfolio and also improve liquidity (i.e. we can get to money faster). Considering cost averaging, this could be a nice way to get to FI in the coming years.
The second option is interesting because you can use leverage of a mortgage or loan to increase your number of rentals and get relatively high yields. But this would also mean more management and some head-aches with related to issues that need fixing and/or high bills from contractors (which is not helping cash-flow). Considering we would like to be location independent at some point (with potentially periods of long-term stays abroad), real estate is doable, but dividend shares and ETF’s are definitely preferred options for us.
We have not decided what to do at this time and are considering various scenarios. What are your ideas about our portfolio? Which one has got your preference from the above two options?
Oh, and crowd funding will be brought down in both scenarios, as noted here earlier. This money will be reinvested as it comes available in the next few years. Fortunately it’s only a minor portion of the portfolio.
How is your portfolio allocated? Are you happy with it?