Asked on 22 Apr 2019
Hi i am relatively old 37. Annual family income 320 k. I own a condo. (1.8 million value / 1.1 million debt). I have 300k in cash. Monthly expenses 15k( Savings 11k)
Do you have any kids currently, if you do how young are they? As this is an important factor to consider while manging your portfolio.
When deciding on the strategy of your portfolio, you can consider going for capital appreciation at your current age and slowly rebalance it towards a pure income asset as you age, it's good if you start putting some surplus cashflow into such asset class now too.
A pure income assest is not simply an asset that generates passive income. Its an asset that gives income without becoming a liability.
Imagine if you are 70 with 3 properties to generate income.
To ensure they generate income you have to find tenants, continue with mainteance of the properties and also manage your tenants at 70. (Imagine at 70 your tenants calling and saying the water pipe broke, you have to get it fixed as it is your property.)
At this juncture, your property might become a liability to you.
This is why the rich hire a property manager to manage the many properties they have for them and also don't rent out all their properties.
There is also the risk of default from tenants. Hence property might not be the best option depending on your desired outcome. (Properties are still good investments and should have be in one portfolio, as they are a good hedge with the market!)
In cash, I recommend you to hold, up to 10% of your networth or 1 yr of income. (Split between emergency and opportunity cash)
Etfs are good but they will always be around the market growth. (Will you be okay with that? It’s back to your desired outcome)
Ultimately asset allocation of your portfolio should be aligned with your desired outcome and accordingly to your life stages and needs.
Split your portfolio, into the 6 common asset classes.
I know what I shared above is not detailed as I do not know your situation and goals fully, so if you have any questions, feel free to ask or we can meet and see if we are able to work together.
Blessed week ahead!
A few rule of thumbs:
Only 40% of your net worth should be in property. 30-40% in Equities. 10-15% in Bonds. You should only hold 6 months of your expenses or 5% of your net worth in cash (whichever higher).
In this scenario, you have 70% of $1m net worth in property, and 30% in cash.
Of course we can't easily sell your home, and that may not be the best idea, but more of your future savings and current cash can be deployed into a Equity and Bond portfolio.
It is also important at this time, that you start building income accumulation and not just asset accumulation. You want to be able to generate passive income from your assets that will help you retire a little more everyday until you're financially independent and have your passive income be more than your expenses.
We live in an era where income accumulation, preservation, and distribution, is more important than asset accumulation, preservation, and distribution.
It's also important to make sure that during this period, you have enough income protection should the unfortunate happen and you get hit by a Critical Illness where you'll be forced to stop working involuntarily. So do make sure you have about 5 X of your annual income as CI cover.
Also, in the event of death, you should cover for 10X your annual income + outstanding mortgage on your home + future estimated education fees for your kids.
You're currently saving 41% of your income. 20-30% should be going into income accumulation assets and 5-10% for your kids education planning if you have any that is.
If you're hiring an advisor, do make sure that they are independent at the very least.
I just ended a tour educating 3000 financial advisors in the region on how to better plan the retirement of our clients' and I'd like the chance to see if we're a good fit to work with each other. I'm very active on this platform so please check on other answers I've provided on personal finance and the like.
Have a good week ahead.
Q) How should i start saving/ investing. How should my portfolio look like. how to go about building it
I'd start by dissecting this with a few questions for you:
A) If you haven't invested yet what has been stopping you?
B) If you've invested before, how has the experience been and what do you want to avoid?
C) What do you heard before that is ideal?
This requires a discussion for investment planning.
Q) Buy another property
There's absd for residential, that's a hurdle to consider hard.
Even if you own current place on a singular name and can buy in your spouse's name, is it better to pay down your $1.1m loan first?
If you want to find out more on dividend income vs property rental income, I've this video for you [more on the 4 insider tips....]
Q) How to split between cash bond and equities
I suggest following this guideline for how much equities you should own.
1) Little or No investment experience: 10x your monthly income.
2) Have some investment experience: 30x your monthly income.
If you want to find out why as well as how much cash to hold, I've this post for you