3Q 2017 was a complete blur. After selling my rental house in June, I was mentally exhausted and decided to do a whole lot of nothing except try and be a good father and continue writing on Financial Samurai. The feeling was kind of like wanting to just sleep in after taking a final exam.
Having a lot of cash all at once is actually kind of stressful. Because I don't want to lose out on gains in a bull market, I'm anxious to put money to work. At the same time, since the absolute figure is much larger than I'm used to, I'm afraid any rash investment decisions might lead to regrettable losses.
Out of the ~$1,800,000 in proceeds, I reinvested ~$935,000 as detailed in my post: Ideas For Reinvesting Proceeds After A Home Sale. Then I invested an additional $174,872 in new money.
This post may provide insights into helping wary investors redeploy a large windfall and setting up an investing system during a bull market.
My 3Q 2017 investment objectives were the following:
* Redeploy ~50% of house sale proceeds with an overall return objective of 10% a year
* Keep the remaining proceeds liquid in order to have enough ammunition to buy a cheaper house with ocean views if an opportunity arises
* Buy the dips in the stock market to bring exposure weighting up by 5%
* Read perma-bearish websites to have a well-rounded perspective since I've been relatively bullish for so long
* Reduce wage income for the rest of the year to reduce taxes given the home sale
(audio version of post with some added nuance)
3Q 2017 Investment Review
Total July Investment: $317,580
Stocks: $82,000
$29,000 in large cap tech names
$20,000 in son's 529 plan (a 18-year target date fund that's essentially 95% stocks, 5% bonds)
$33,000 in an S&P 500 index fund
Bonds: $235,000 in various California muni bonds with YTM of 3.7% – 3.85%
Mortgage Pay Down: $580
$580 Lake Tahoe vacation property (I automatically pay $580 more a month)
Comment: After paying off $815,000 in mortgage debt in June, I wasn't motivated to pay more debt down. Instead, I focused on building a California municipal bond portfolio for low risk and high certainty. I didn't expect to invest as much as I did in stocks, but there was a sell-off in the beginning of the month that tempted me to deploy capital.
August Recap: $537,403
Stocks: $92,000
$42,000 in the S&P 500 index fund
$15,000 in my son's 529 plan
$35,000 in various large cap tech names
Bonds: $234,111 in various individual CA zero coupon muni bonds with YTMs of ~3.85%
Venture Debt: $72,712 in second venture debt fund
Mortgage Pay Down: $13,580
$12,000 to Squaw Vacation Property
$1,580 to Golden Gate Heights primary
Real Estate Crowdfunding: $125,000
The RealtyShares DME fund invested $600,000 in a preferred equity investment in Vernazza Apartments, a 168-unit garden-style apartment complex in Las Vegas, NV, only 3.5 miles from the Las Vegas Strip, 4.5 miles from McCarren International Airport and 8 miles from downtown Las Vegas.
Comment: During 3Q 2017, there were multiple sell-offs in the stock market in August, which made me invest more heavily in stocks than I normally do. Although I'm not excited about stocks, I decided to hold my nose and focus on asset allocation since I'm ~5% below my target equities allocation of 25% of net worth. I focus on tech and the S&P 500 b/c my rental house was a derivative play on tech.
I slowed my municipal bond purchases because the 10-year bond yield edged down to about 2.15%, which made yields unattractive. If the 10-year bond yield gets back to 2.5%, I will be aggressively buying again.
My b-school classmate launched his second venture debt fund, so I decided to invest $200,000, of which $72,712 was called in August. The first fund has returned about 12.5% a year for the past three years, with one year left to go.
I'm not fond of the multi-unit Las Vegas residential property by RealtyShares, despite the sponsor putting up $3.5M and this being a preferred equity deal. I'll be publishing a detailed post about this deal in an upcoming post.
Recall that I'm trying to diversify away from expensive coastal city properties and cities like Las Vegas, where prices are much more susceptible during a downturn. Instead, I'm much more interested in the heartland. At least there's no state income tax in Nevada, which will therefore suffer less if state income tax deductions go away under the Trump tax plan.
September Recap: $254,889
Stocks: $46,000
$15,000 in an S&P 500 structured note with a 15% buffer and 100% upside participation
$31,000 in an S&P 500 index ETF
Bonds: $74,116
$74,116 in an individual CA muni bond yielding 3.25%
Mortgage Pay Down: $9,773
$7,773 to Lake Tahoe Vacation property
$2,000 to Golden Gate Heights primary residence
Real Estate Crowdfunding: $125,000
The RealtyShares DME Fund approved an investment up to $825,000 common equity investment in River Ranch Apartments, a 104-unit multifamily community located in Canyon Lake, TX. The property is centrally located between Austin and San Antonio (an equidistant 1-hour drive from the CBD’s of both cities) and just minutes from New Braunfels and Interstate 35, providing access to major employment hubs. The property was built over two phases in 2011 and 2017 and features Class A construction, with amenities including a swimming pool, fitness center, laundry facility, BBQ/picnic area and covered parking.
Comment: Nothing looked good in September. It was only in the last week of September that I invested some money in the stock and bond market due to small pullbacks. There's now excitement about Trump's tax cut plan, which boosts earnings for large corporations, its shareholders and small business owners. If tax cuts pass, public companies are trading at ~10% cheaper valuations than current forecasts. Further, my online media business's bottom line might increase by 5% – 10%.
The 10-year bond yield climbed back to 2.37%, but still not high enough for me to get excited about putting significant money to work.
The RealtyShares domestic market equity fund bought another property in Texas, which is what I want them to continue doing. Now I've got exposure in Houston, San Antonio, and Dallas. The latest is a three year deal with a target 16.3% sounds good. But to be conservative, I'm modeling an 8% IRR instead.
3Q2017 Investment Total: $1,109,872
Remaining cash balance: $1,090,000
Unfortunately, RealtyShares is no longer accepting new investors on their platform. I suggest taking a look at Fundrise, the pioneer in eREITs. They are also currently working on an Opportunity Fund to take advantage of tax-efficient Opportunity Zones. Fundrise was founded in 2012 and is open to all investors – accredited and non-accredited alike.
Concluding Thoughts On 3Q 2017
The reason why I continue to hoard so much cash is because I'm addicted to owning physical property, even though being a landlord pains me to no end. I was going to offer $1,500,000 for a fixer, but the agent said don't bother. It ended up selling for $1,700,000 after being listed for $1,300,000. I was going to offer $1,600,000 full ask for another house if they agreed to cancel their upcoming shows, but the agent declined and the house also sold for $1,700,000.
I keep going back and forth with whether I should just buy a $1,700,000 house that may be worth $2,000,000 three years from now. It's a lot of money, but it's $1,040,000 less in SF housing exposure than I had before I sold my rental. But every time I write up an electronic offer, I start to dread having to hire contractors and eventually find tenants. As a result, I'm motivated to try and earn an extra $100,000 a year in business income instead.
For the rest of the year, I plan to continue buying the S&P 500 any time it corrects by 1% or more up to $100,000 each time. If the 10-year yield gets to 2.5%, I will invest an additional $250,000 – $500,000 in bonds. Finally, I'm having dinner with three people in October from the RealtyShares investment committee and will ask them to explain their investment rationale in a couple existing projects and hear what they have to say about future investment plans.
If no corrections occur, I'll just continue to invest at least $10,000 a month in each asset class and hold the rest in cash just in case a sweet house pops up or a big correction comes along.
3Q 2017 Investment Results
Finally, I ran my investments through Personal Capital's Investment Checkup feature to see how I was doing and also analyze my current investment asset allocation compared to their recommendations based on my profile.
According to the chart below, my public investments are up 9.78% YTD, which is underperforming the S&P 500 by 3.9% and outperforming the US Bond index by 6.74%. I'm happy with the results so far, because I'm shooting for a 10% annual return with my new investments, and a 4-6% annual return in my overall net worth. Because I reached my target retirement figure in 2012, it almost feels like any gains since is a bonus.
What my You Index doesn't capture are the returns from my physical real estate, real estate crowdfunding, and online business. The online business has fortunately been my best performing asset this year.
Here is a chart highlighting my current public investment allocation versus Personal Capital's recommended investment allocation based on my financial objectives. The 16.6% weighting in Unclassified are manual entries of my private fund investments in venture debt, private equity, and real estate crowdfunding. Therefore, my Alternatives weighting is closer to 17%. Because I just sold my house, my cash portion is much higher than recommended.
Overall, I'm quite happy with my investment allocation in the current environment. You can find your custom Personal Capital Investment Checkup under Planning -> Investment Checkup to see if your investments are matched up with your financial objectives.
Readers, how did you invest in 3Q and what are you expecting for the remainder of the year? Will this bull market ever end? Disclaimer: Unless you are me, or your finances and risk tolerance are exactly like mine, don't invest like me. Graphic by https://ckongsavage.com/
I’m continuing to invest in my skill-set to double my wages. For the next few months, that is still the best route. Once that changes, I will be saving heavily for a condo and investing in the SP500. Simple, but good for life. I’m too young for a bond allocation. i’ll wait until my stocks grow way past 100K
Also if you’ve got an interest in opening a side venture that is physical asset heavy, still got time to set up a pass through company and take a business loss, a SEC 179, or both to reduce taxes…considering if the capital gains you are sitting on are going be taxed on your personal income or another entity you have set up. That’s how I got my toys to start my manufacturing business, don’t have an exotic car addiction, got an expensive cnc machine addiction ROI calculated in hours the machines run. Way I see it the fed subsidizes business to spend. I saw it as every dollar spent was $.30 I got back that was left on the table to taxes. When my tax liability was $69k for the year it was time to buy some expensive toys for the business.
Honolulu still got some of the lowest property taxes in the nation as along as it is your residence. Don’t fall into the mistake of not filling the papers and get your status changed from Hotel/resort status to owner occupied, looking to attack the investors that own but don’t live on she island or doing air bnb. Property taxes jumped from $2600 a year to over $10k when it got classified as “hotel/resort”.
Indeed. Hawaii property tax is about 1/3rd that of California. I’d be buying my retirement dream home when it comes time. Probably within the next three years.
I am currently only investing in Realtyshares and Fundrise. Still waiting for that 10% S&P correction!
Nice update on your investments. Wonderful detail in the comments also.
Like you, I sold an investment property this year. I was not interested in a 1031 exchange for another property, but did investigate various real estate funds that were eligible for exchange through a Delaware Statutory Trusts or DST. Unfortunately these funds had low, 6.5% returns. So, I’m taking a tax hit. Because I held the property for 24 years, the depreciation recapture is, kinda big. The long term capital gains tax is also a nice chunk.
I have other properties, how are you handling the recapture and capital gains?
Have ya considered private notes for rehabs and fix and flips? I’ve been doing pretty good with these in TX, TN and NC for 10 years now.
Kevin
Nice update on your investments. Wonderful detail in the comments also.
Like you, I sold an investment property this year. I was not interested in a 1031 exchange for another property, but did investigate various real estate funds that were eligible for exchange through a Delaware Statutory Trusts or DST. Unfortunately these funds had low, 6.5% returns. So, I’m taking a tax hit. Because I held the property for 24 years, the depreciation recapture is, kinda big. The long term capital gains tax is also a nice chunk.
I have other properties, how are you handling the recapture and capital gains?
Have ya considered private notes for rehabs and fix and flips? I’ve been doing pretty good with these in TX, TN and NC for 10 years now.
Kevin
Nice deployment! I understand the Realtyshares get’s exposure to the real-estate market in a more passive manner than renting out property. But how passive would you define this investment in terms of reading and staying up to date on the development of the apartment units you are invested in?
Very passive. 10/10 passive. The only reason why I stay on top of the investments is because it’s a new investment for me and interesting to write about. I have more money to invest, so I’m evaluating performance etc.
One day I will receive an inheritance and would like to invest that money into state muni bonds. I live in Kansas and not really sure what investment vehicle I should use. I currently have a roth IRA which I contribute the max and of course a 401k.
Don’t wait for your inheritance to start investing. In fact, don’t expect a inheritance at all.
A question for investors. I own 8 single family rental homes that net $6000/month. At what wealth point should the scenario change? For example, with his net worth, would Sam even buy a single family home for $80K that nets $800/month or is that too little for the effort? Right now, I intend to keep acquiring, but should I be doing more with that money as my net worth increases? Multi-family units to increase leverage? I have a great army pension and free healthcare so I don’t have to consider those costs. Is there a stopping point where enough is enough? I own some silver and gold, but have nothing in the markets. I knew I had the pension and leveraged my money to pay off the rentals. Each house adds 800 more per month and I don’t know anywhere else I can get those same results. Be honest if you have a great suggestion.
You can diversify by reinvesting some of the cash flow from your rental homes each month into a low cost S&P 500 or total market index fund.
This way, you don’t have to sell any of your properties and you’ll slowly build a position in the market over time.
People are saying the markets are expensive right now but if interest rates stay low for the foreseeable future (10-15 years) there’s still a reasonable expected return.
Good luck! Your blog looks great. Hope you keep at it and write a bit about your financial journey.
Thank you for the compliment and advice. I have several financial posts partially written. I took Sam’s advice about starting a blog, and intend to mirror his 3 posts per week. It is more challenging than I thought. I am strongly considering an index fund, but it does seem high right now. Of course, people have been saying that for the past few years and are doing well. I suppose if you contribute monthly, it averages out over time. I like the idea of real estate crowd funding, but am hesitant to let go of the real thing. My cash flow is currently tied up until the end of December building a house for my father so I have time to make a decision.
Army pension and free healthcare means you can afford to take more risks. The one thing I found was that I hit my limit of 3 rentals and no longer wanted to deal with more tenants and maintenance issues then. Do you have a property manager? If so, then that’s great if s/he is doing a great job for you.
I just found an easier way to make money w/ no headaches: online income. Therefore, I decided to simplify.
Where are you investing?
Related: https://www.financialsamurai.com/real-estate-investing-rule-rent-luxury-buy-utility/
Love these posts Sam. They are so unique and we all get a lot out of them.
My Q3 investment recap was almost nothing: a whole lot of dividend reinvesting (it’s amazing how these can become meaningful if you just leave ETFs alone to grow over time), a small initial entry into SNAP and some selling down of BTC.
The rest of it was cash generation :)
Ah, I was so close to buying SNAP at $12.50, but didn’t pull the trigger after announcements. It still seems like a silly business fad. But who knows. BTC! Wish I went all in when we spoke!
Well, SNAP just tanked 20% after their Q3 earnings report. You’ll have your chance to buy it tomorrow for $12.50 after all.
Well, SNAP is back around $14 today.
If you bought SNAP at around $12.50, that’s a 12% return in less than a month. Not bad!
Yeah, I did actually. $12.35 and have a transaction snapshot to prove it whoo hoo! But only bought $10,000. I’ve been buying a lot of dog meat stocks.
Nice! SNAP “snapped” back to $16 today.
That’s a 30% return in less than two months if you bought SNAP at around $12.35 or $12.50.
Yeah, it’s been a good trade. I got in below $12.50. Highlighted it here: https://www.financialsamurai.com/how-to-invest-in-speculative-investments-like-bitcoin-without-huge-losses/
Just sold half.
But at the end of the day, it’s only about a $3200 profit. It’s not going to move the needle. Just doing this for fun.
It’s been a wild ride, but SNAP knocked it out of the park with their latest earnings report. With SNAP trading at $19 today, that’s a 50% return in less than three months.
Wish I had more!
I like owning physical properties too! But I really don’t enjoy being a landlord either. I had two vacation properties (a cottage and a condo in the Caribbean) but I found it really hard to manage from a distance. It is not always easy to find the right people on site to assist you when problems come up. I sold both last year, made a nice little profit on one of them and really happy they are gone. I still have three rentals in town and can’t help to check the real estate market every week. It’s an addiction!
The Caribbean sounds lovely. But aren’t the islands susceptible to hurricanes? I’m not sure if I can own in that region. Feels too stressful. I’d rather just rent a villa there.
Lol, yes but many areas are susceptible to natural disasters. In the 7 years I owned it , I never had an issue due to hurricanes. I made a real nice profit on it and since it was in Euros, I got an additional 14% in FX.
Hi Sam! I looked through the comments and didn’t see much feedback on the recording of your post! Just wanted to say it’s great and I really liked hearing you talk out loud. I hope you keep doing that for future articles
Thanks Liz! It’s good practice and I figure it adds a new dimension. Let’s see how long it lasts. Everything takes time, and I’m often tired after the little one goes to bed ~9pm – 9:30pm. It’s weird being perpetually tired.
Hi Sam
Can you please write a post on performing DD on venture debt funds for individual investors? I haven’t found many articles that address this.
Sure. I wrote this post for you Danny: https://www.financialsamurai.com/what-is-venture-debt-higher-yields-with-a-lower-risk-profile/
Sam I would look at dropping the structured notes and look into buying long dated call options on the S&P 500 instead (SPY options go out to 2020). Thats all they are really doing with the notes but giving more upside to themselves than you. This way you can get a large amount of equity exposure without having to put up all the cash. Sounds like you are aggressive but also want some flexibility. This can be a good choice
It’s a good idea to save a little bit of money, but it’s just so much easier this way at the moment. I’m trying to optimize for time. And if you look at the $15,000 investment, it’s a tiny portion of what I’ve invested overall this year. It’s really all about asset allocation and saving time, time and more time. Any other red flags you see from my investments?
How about you? How did you invest in the third quarter and how are you positioning for the future?
I think the muni bonds are a good idea although I’m not real bullish on longer term CA munis (budget whoas will catch up). I like public REITs but you have the knowledge and cash to venture into the Realtyshares as you mentioned, so that will be interesting to see play out. I think you are a real smart dude, and your best investments will be outside the public markets!
Everybody is smart in a bull market Mark!
During the financial crisis, the CA munis held up. So if they can hold up to that time period, they are going to hold up to future downturns IMO. The default rates for AA bonds are tiny… like 0.01%.
Seems like you’re more interested in capital preservation than growth at this point. Makes sense given your goals and net worth. Given that, why make it complicated with all the slicing and dicing? Wouldn’t a simple 1/N type portfolio (where N is the number of unique asset types) serve your purposes and cause less headaches? (for example something like vanguard total market + commodites (or even just gold) + cash + treasuries + real estate)
Diversification and absolute performance. Do you member what happen during the 2000 downturn in the 2008 2009 downturn? You want to have assets zig when others zag.
How did you invest your money in 2000 and 2008 and 2009? What was your asset allocation?
Investing is not a headache for me by the way. I enjoy it. I spent my career in the investment industry.
I think it’s great that you don’t seem to sweat underperforming the S&P too much. You’ve effectively built your own private absolute return fund and, as long as the target return is sufficient for your needs, who cares what the market does.
Thanks for sharing on the Realty Shares DME as well. I’ve invested a bit with them to test the waters, but didn’t want to invest as much as the DME required.
Yeah, when I was younger, I would always try and shoot for the moon and outperform the S&P 500 and other benchmarks. Now, my risk appetite is much lower with a larger financial nut.
For example, let’s say you’ve got a $500K portfolio. Going for broke may be OK, depending on age, to try and get a $75,000 return (15%), and a potential $75,000 loss. But if you have a $10 million portfolio and are not working anymore with a family to support, it’s not necessary to try and earn a $1.5M return (15%) at the risk of maybe losing $1.5M, especially if you can happily live on much less. A 6% return on a $10 million portfolio is still a decent $600,000 return, especially if you can sleep well at night.
What are your investments for 3Q and what do you expect to invest in the future? How is your performance YTD?
I mentioned this in my article, but my largest asset, which is my online business, is performing much better than the S&P 500 index. It has been since 2009 inception, which is something I’m very excited about. But Personal Capital’s tracker doesn’t track this performance, and no problem. So don’t feel too bad for me. I’ll be OK!
A lot of happiness comes from being satisfied with what you have and meeting your own objectives.
My Q3 investments have been pretty vanilla: regular 401k contributions along with 529s for the kids. Already did full IRA contributions for the year. Anything extra each month gets swept to Betterment taxable. I’ve got a decent amount of dry powder in the form of an untapped HELOC, but just haven’t seen anything compelling enough valuation-wise to draw it down.
My other big investment this quarter has been in myself and finally getting a blog going. I’m jealous of your eight-year head start, but you know what they say: the second best time to plant a tree is today. Thanks for being an inspiration to us newbies out there!
Don’t worry. After more than 430 consecutive weeks of writing 3 posts each week, you will no longer be jealous!
I was prohibited from contributing to an IRA after my first year of work. It’s too bad the government has to arbitrarily decide who gets to save for retirement and who doesn’t.
Related: The Only Reasons To Ever Contribute To A ROTH IRA
Your public investments are likely doing better than you think. The “You Index” in Personal Capital is one of the few things I hate about the service because it is wrong and misleading. The “Index” doesn’t take into account your individual transactions or any investments you have sold. It simply takes the assets you currently hold in the amounts currently invested and then analyzes what that return would have been YTD. The only way the index return is actually correct is if you have a portfolio which you make no changes to for the entire year. It is painfully obvious how wrong this method is if you are a value investor and like to buy things that are out of favor. Buy a stock that is down 50% YTD because it is now a reasonable valuation and Personal Capital will now tell you that the YTD of the “You Index” is materially worse than it was before the purchase. That’s not how YTD returns work. Or if you sell an investment that has materially outperformed the market since it is no longer in your portfolio your You Index return will go down because it forgets that you made a profit. If you’re buying on dips in the market you’re definitely doing better than that 9.8% suggests.
This is especially dumb considering they have access to your accounts, they know when you trade and at what prices. Calculating an actual YTD return on your portfolio should be trivial compared to all the other work they have done. To me if you can’t make the comparison correct then it is misleading to make it at all and should be removed. Unfortunately the company abandoned their customer service department and shut down their own forum because it was embarrassing to see that they hadn’t responded to a single user in over a year.
Interesting point! I’ll ask them about this directly as I see them maybe once every six months. I just went into their office last week actually.
But, I don’t want to make any excuses for my performance. It is what it is. And I’d rather be more conservative in my estimates so I end up with too much, than too Little.
My biggest X factor is my online business. It is currently blowing all investments out of the water, and if there are a small business tax cuts, then even better. I will always be a proponent of encouraging people to start a business, especially a highly scalesbke online business That is so cheap to start.
Whoops – forgot that part of my risky assets is a put writing strategy for passive income. 2% of my total. 3% is for ultra risky stocks or warrants or whatever.
I do it differently. I have learned that having a return objective can make me chase investments I otherwise would not. I have a diversification objective across the major asset classes. I have requirements for my investments but at the same time I will invest in different types of stocks to ensure diversification. Some I am not even sure of but I want to make certain I am not in a bubble of my own making. I invest 50% in stocks, 70% of which are in 2 index funds. The remaining 30% are split between div stocks 15%, value stocks 10% and 5% go for broke. I am actually very light in the go for broke %. I have currently .05%. Need to work on that.
I have 15% in real estate. Like Sam, I have used Realty Shares. I also use Fundrise (I have double in that platform as compared to RS) and Peer Street which I think is a fantastic way to invest.
In normal circumstances, I would have 25% in bonds and the rest in cash. Instead, I have 35% in cash. I just can’t see value in these tiny yields with the risk of principal loss. Individual bonds are not a value to me because the rates I would be earning would be stuck at these very low rates. I have a stable value fund in an old 401(K) which gives me more than half my cash exposure at 2%. Right now the 401 is 50% stocks and 50% stable value.
I have found that if I focus on diversification, the rest takes care of itself. I still have some work to do especially on including more ultra risky into the portfolio.
Thanks Sam for a fantastic site. Probably the best personal finance site on the internet. Congrats on the baby!
No problem and thanks! Everybody needs to do what works for them.
Half the battle is just getting people to figure out a way to comfortably invest their cash. I know so many people who have a tremendous amount of cash and did not take advantage of this bull market or the last bowl market.
Sam, interesting read as always. Just thought I’d share one ‘lesson learned’ in case you and other readers find it helpful. Like you, I opened up 529 target funds at a very reputable brokerage firm when each of my kids were born and contribute to them regularly. I’m embarrassed to say that it took me 7 years to realize that the S&P index was trouncing the aforementioned target funds (and of course had much lower fees), so made the change about 4 years ago. As the kids get to withing 5 years of college age a few years from now, I’ll do a bit of re-balancing. Of course, no guarantee that this will always work, but given how infrequently managed funds outperform the S&P in a 10-year time period, I suspect it would be a fairly safe bet.
Good tip. I can simply just buy an ETF and just add positions according to an asset allocation target.
I just don’t want to think about too much anymore, I’m just have things on auto pilot once I decided this makes sense.
I remember during work, my boss is it always say oh it’ll only take five minutes. But when you have an incessant amount of things to take five minutes, it soon becomes overwhelming.
The fee is very tiny by the way, So I don’t mind.
Thanks for sharing this, Sam. It’s always nice to understand your thought process with deploying cash. It’s a nice problem to have, though it can certainly be stressful figuring out where to reposition it!
I recently got back some cash from my last realtyshare investments and decided to redeploy $30k of it into a private syndication. It’s a 190 unit apartment complex in San Antonio, TX with a ~16% IRR on a 5 year hold… we’ll see.
Also, your audio addition is pretty cool!
Good luck on the San Antonio investment! I figure why not create an audible version of each post and see if it makes a difference. One of my goals was to do a podcast this year, but time is so scarce nowadays.
Side note. Not sure if you been keeping up with the Uber news, know that we have had many disagreements on their course. There seems to be a buyback offer for early employees (ones that have options) from Softbank. Thought you’d like to know to keep an eye out on that since one of your thesis is that early employees will liquidate and buy houses.
Yes, there should be a huge liquidity event from Uber by 2019. I’ve kept up on all private investments in the Bay Area like Airbnb, Slack, etc. The SF property market is finally slowing down, but for how long, I’m not sure.
What are you doing with your money?
I forgot what our disagreements were on Uber. It’s a certainty they are going to go public and unleash billions of dollars in the Bay Area within the next 3 years.
re Uber: it was on their course to IPO or Bust within the next few years, which I think still holds true. The entire job of the new CEO is to get them to IPO within that time period.
My money. Barbell style approach with 30-40% in CDs, have about 1-2 years worth of emergency fund due to myself and aging parents, and using my retirement account to gamble / learn more about financial instruments like options (did my first option trades few months ago). 40% safe, 20% cash, 40% high risk.
I’m still in the early-mid portion of my career, still at the point where concentrating getting better at my job will benefit me greatly, and deliver greater/more stable ROI than deploying savings. That’ll likely only last a few more years though since savings is doing well. I’m weary of real estate and market for years now (I know, lost out on major bull market). Was looking into REITs for old folks home due to aging population.
Like this post. Not many sites have a good mix of financial subjects that ranges from basic savings to deploying 1M+. Interesting to hear how people on the latter’s wealth level invest and thought process behind it.
Sam, where do you look for new CA Muni bonds offerings and how do you invest in them? I could only find secondary offerings (resale) on my broker’s platform.
Thanks for advice,
AJ
I ask Citibank to let me know of new CA offerings. You can also see a large inventory on Fidelity, which is my other investment account. They are all existing bonds.
Thanks Sam.
AJ and Sam,
I run a Municipal Bond Desk in the Northeast and consider myself an expert in the field. I am more than happy to speak to both of you in regards to Munis whenever the time permits. 50% of our business is focused in CAL based Munis and i am sure there are items that you are not seeing from your brokers that would be a better fit for you both.
Being an NJ resident my portfolio is made up of 80% CAL paper as we have a niche in that market and typically trade bonds that are esoteric in nature while offering the highest credit quality. AJ, drop a response to this with your email and we can chat.
Sam, i know that we had a brief chat this summer before we got super busy on the desk. You should be reaching out to me as well.
All the best
Sean
Sam, you mention a sp 500 structured note. Can you elaborate? I want to get more bullish without much downside.
Every month I get a list of structure notes from my wealth manager at Citi. The note simply offers a 15% downside buffer and has a 5 year holding period with 100% participation.
So if in 5 years, the S&P 500 is down 15%, I end up flat. If the market is down 30%, I’m down 15%. If the market is up 30%, I’m up 30%. I give up dividends though.
I’m just allocating exposure to equities with a hedge. I structured note in 2012 is what gave me the courage to invest $200,000 in the market after I left my job b/c of the downside protection. Otherwise, I would have probably just invested in a CD b/c I had no W2 income.
Related: Examples Of Structured Notes
Not bad. The dividend yield of the S&P 500 is currently 2%, so you’re only giving up about 10% to 15% in total returns for significant downside protection over five years.
You could do something similar with a covered call strategy or by selling cash-secured puts, but a structured note can be more convenient than options trading.
Sometimes they have like 120% upside participation. But not this time. This was just throwing money at the S&P 500 in an unenthusiastic way.