After several years of quarterly updates, I stopped publishing regular updates to the PoF portfolio. My investments were basically on autopilot and unchanged, and I don’t know that my readers were getting a lot out of value from relatively frequent updates.
In those past updates, I also shared our spending habits, but after two to three years of tracking it closely, I stopped. I had a pretty good idea of what we were spending before I tracked it, using Mint and Personal Capital confirmed what I believed to be true, and I don’t see a need for continued tracking of every expenditure.
It’s not like there’s been much to spend on in 2020 with travel on hiatus and most high-dollar entertainment options shut down.
Those updates also included excrutiatingly detailed blog statistics, a section that other bloggers may have found interesting, but one that most readers would likely skim past, and I wouldn’t blame them.
Now that over 18 months have passed since the most recent 2019 2nd quarter update, enough changes to my investment portfolio have accumulated that I think it’s high time I share my current portfolio. No, that doesn’t mean I invested in a marijuana fund, although that would have made for a great segue!
The PoF Portfolio 2020: What I’m Invested in Now
A lot has changed in the last year and a half.
I left my anesthesia career. I moved to a different state. I spent time in Europe, South America, Central America, and Mexico. The worst pandemic in a century hit, bringing with it massive market swings and equally large financial uncertainty on a more personal level for many as our economies and employment models were disrupted.
Amidst the turbulence, I lost a million dollars and made it all back.
I do feel fortunate and have more than a tinge of guilt as I am able to ride this out comfortably and in relative safety. That’s not an option for millions of essential workers.
I continue to publish these non-essential blog posts, using the proceeds to support more essential efforts. In the spring, we donated $25,000 to COVID relief, and we granted a slightly larger sum to a wide variety of charities on Giving Tuesday. We continue to support the salary of a physician in Honduras via One World Surgery.
Before I lose the interest of the voyeurs out there, I’d best get to the investment portfolio. That’s why you’re here, right? To see our investments and find out what’s changed?
Here it is, with the balances divided by a factor to make it all add up to a cool million:
Below, I’ll give you an opportunity to download the template that I used to create this. If you’ve downloaded a spreadsheet from me before, I recommend upgrading to this one for several reasons.
One, if you add the no-cost “Stock Connector” extension to Excel, if you enter the number of shares you own, the spreadsheet will auto-update daily, or as often as every 10 minutes if you wish. There’s a bit of configuration in entering your ticker symbols and choosing the share value to display in the “Price” column, but it’s completely straightforward and shouldn’t take long.
Two, thanks to a reader suggestion, I’ve improved the formulas that add up all of your assets in each category so that if you add columns in the sheet, everything you add will be included in the summary. The old version didn’t work well if you added additional columns.
Three, I’ve added more account types, and you can add your own if you like by replacing what’s there with your own text.
Here’s the rest of the sheet:
Note that your template won’t have the “529 Global Equity Index” calculation box I’ve got in the lower right. I created that to determine the value of my kids’ 529 Plan investment choice. It doesn’t have its own ticker symbol, but it’s comprised of three funds that do, so I was able to set it up in a way that the spreadsheet would be auto-updated via the Stock Connector add-on.
The State of The PoF Portfolio
Looking closely at the data above, a few things stand out to me.
I’m Underweight in International Stocks
As I painfully described in some detail, I had a tax loss harvesting fail in March of 2020 that resulted in me being unable to get back into the asset class that I was attempting to exchange, all due to a massive overnight price swing.
I did some periodic investing later in the year, but I actually put most of the proceeds of that sale into a real estate fund and a startup venture (Rebublic.co).
Having learned that, despite the attractive foreign tax credit, a taxable brokerage account may not be the best place to hold international funds anyway, I could easily do some rebalancing in my 401(k) or Roth IRA to get the numbers back in line with what I’d like to see.
I haven’t felt strongly compelled to make that transaction, but the end of the year and start of another is as good a time as any to tidy things up. Expect a future update to show something closer to 20% international stocks as opposed to the 12.7% I’ve got at the moment.
529 Plans are Listed
I generally don’t consider money invested in our 529 Plans as part of our retirement assets. They are a part of our net worth, as it is our money, but our boys will be the beneficiaries, and most likely, those funds will be used later on for their education or maybe even their future kids’ education.
Like any money that’s earmarked for a future purchase, for now, it does belong to us, so I decided to include it in the spreadsheet. I also wanted the template to have that option for those who are investing heavily into 529 Plans of their own.
You can choose whether or not to include them in your own version. I think it’s reasonable to consider 529 dollars as part of your legacy planning, and the money will presumably lower your expenses later on if you have kids who have yet to graduate from college.
There’s also the possibility that the cost of higher education will decrease or that a higher proportion of it will be government-funded. Your kids might not be college material or they may be have tons of college credits before starting and/or qualify for a bunch of scholarships. The money may end up funding your retirement, after all.
There could be a penalty and some taxes due on the earnings, but you’d get to keep most of it if you were to withdraw the cash for purposes other than education in the future.
Sitting on Cash
9.5% cash. That wasn’t the plan (until it was).
When I left my doctor job, we moved into a small home, anticipating we’d spend at least half of our time traveling, splitting time between the $90,000 house and our lake cabin when we were home in northeast Michigan.
That was pre-COVID. Now, with the four of us spending roughly 23 hours a day together in this little house, we’ve been looking for something bigger that would give us the best of our two current homes in one place.
As is true in many markets, there are more buyers than there are sellers, especially for lakeside escapes. We’ve been sitting on way more cash than I’m normally comfortable holding, waiting to pounce with a cash offer when the right home comes along.
Our criteria are fairly strict and lake homes aren’t often listed in the winter, so we could be sitting on this cash for some time.
Cruise Line Stocks
I picked these up mainly for the onboard credit for life. If you don’t know about that perk or know what it means to try and “catch a falling knife,” you should read this cautionary tale.
Fortunately, I bought more shares when the knives were laying on the floor, and my overall return has been decent on these. I’m not an individual stock picker, and this experience exemplified why I don’t like to go that route.
But hey, I’ve got complimentary cruise cash for life on all of the major cruise lines. I’ll see you on deck, free drink in hand when it’s safe to do so again!
Since the last update, I made one change in my desired asset allocation, shifting 10% of the portfolio from U.S. Stocks to Alternatives. Now, the target for U.S. Stocks is 50% (down from 60%) and the allocation to alternatives increased from 10% to 20%.
I switched things up as my appetite for both risk and cashflow has increased since leaving my day job.
I’ve always had a healthy (i.e. high) tolerance for risk. I’ve never held more than 10% in bonds. I normally don’t hold more than a few months’ cash reserves, either, although that’s clearly not the case at the moment.
I have found that, having exceeded what we need to feel comfortably financially independent, it’s easier to take chances from a psychological perspective. I can afford to invest money that I could lose completely, and if there’s a reasonable chance of impressive gains (as in the startup investment), it’s a risk I’m now more willing to take.
I used to say that 5% of the portfolio is plenty of “play money” for investing in single stocks, startups, breweries, or whatever you fancy. Maybe 10% at the most. However, that was assuming one is pre-FI.
Once you’ve got your 25x (or 30x or whatever number helps you sleep well) of expenses saved up, anything above and beyond that is superfluous. The extra can all be play money. Your worst case scenario if you make 100% awful investments that crash to zero is that you’re back to just being financially independent.
However, if some portion of your play money turns into a 10-bagger (an investment that returns 10x) or better, you could be contemplating how life might differ with an 8-figure net worth and perhaps one day find yourself signing the Giving Pledge. One can dream.
When working, I had plenty of cashflow. I didn’t want cashflow from my investments, especially the tax-inefficient kind (like dividends from a brokerage account).
I don’t have that consistent cashflow from a paycheck any longer. I’ve got a detailed drawdown plan, but I’ll admit that I’m more than OK with delaying that indefinitely.
From a behavioral finance perspective, it’s easier to spend money that shows up in your checking account than it is to spend money that results from the proceeds of selling some investments. Cashflow eases that burden.
I’ve long had cashflow from my brokerage account, but I’ve also added alternatives that provide steady cashflow.
I invested in a real estate fund from Origin Investments that aims to provide 6% in tax-neutral distributions annually. Soon, I’ll be adding a real estate fund focusing on single family homes (with a projected IRR of about 25% and substantial cashflow) to my holdings via an access fund offered by Republic.
I’ve also had good luck with my crowdfunded real estate investments, and I expect a couple more of those to go full-circle in the coming months, including the Alpha Investing deal I wrote about in the summer of 2019.
What I Left Out
Donor Advised Funds
In the past, I’ve left out the 529s, but it’s a bit of a gray area, and I wanted to show others that the option to include them is there.
What I didn’t include in this update is the balance of our donor advised funds. I have them with both Vanguard Charitable and Fidelity Charitable. The Vanguard DAF easily and quickly accepts appreciated funds from my Vanguard brokerage account, and I can make grants from it to my Fidelity DAF, which allows for smaller grants and has a better user interface.
December is an outstanding time to start a donor advised fund if you haven’t yet. Donate some appreciated Tesla shares before the end of the year and take the deduction on this year’s tax return.
Those balances are about $100,000 higher than they were when I achieved my DAF balance goal prior to retiring. This, despite having made about $70,000 in grants to various charities throughout the year in 2020 alone. Again, I thank you for your role in our charitable mission here at Physician on FIRE.
There is definitely value in these small businesses, but it’s difficult to gauge exactly what that would be. It’s not like shares are publicly traded. Most websites that are sold go for something in the range of 2x to 6x earnings, although there have been outliers.
If I were to include the value of these businesses on my spreadsheet, it would make me even more overweight in “alternatives.” I don’t necessarily view that as a bad thing, as I’m comfortable with a higher proportion of “play money” these days. However using something in the 2x to 6x range could give me a 7-figure valuation in this category, and I don’t want to count these chickens that may never hatch.
In the meantime, they do provide cashflow, and I can’t argue with that!
Download The Spreadsheet Tracking Template
Here’s what the template looks like without my increasingly complex collection of investments. There’s room for nearly three dozen individual positions. I entered the info for a modified three-fund portfolio with the addition of a REIT fund, investment real estate, and cash.
Email subscribers received a link to download this newest version of the spreadsheet in their inbox. If you’d like a copy, enter your info below, and I’ll send you a link to download your own copy to fill in with all of your investments.
You’ll be subscribed to receive emails from me, at least temporarily. If you don’t like that, you can easily opt out with a mouse click once you’ve got the file saved. But I recommend you stick around. You just might learn something!
The Chase Sapphire Preferred is an excellent first (or only) card. Flexible rewards good for cash, travel, or transfer to travel partners. $50 grocery store credit, great travel protection & new Peloton, Lyft & DoorDash perks! $95 Annual Fee
The Chase Sapphire Reserve offers great travel perks including Priority Pass lounge access, a credit for Global Entry or TSA Pre✓ and a $300 annual travel credit. Elevated Peloton, Lyft and DoorDash benefits. $550 Annual Fee