Portfolio

[Anthony Rose]

#17298

Hi Sean, just a question. What percentage of our portfolio should be invested in stocks? Seems like a good time to be buying, just don’t want to be over extending from personal cash in hand. Although we do have some more to put in we just want to know how far to go. We don’t want to miss the opportunity.
Thank You

[Sean Hyman]

#17300

All of our positions are stocks. But I think you may be referring to the general, broader market, like the S&P 500. For that, see my latest (February monthly newsletter) and latest, Thursday Weekly video in the Members Area, where I give my detailed thoughts on that. https://logicalinvestor.net/members-area/

[JOY CHENNAULT]

#17842

I think he is asking of his investing $ what amount/percentage of cash should he have to buy your new recommendations as well as the designated price drops to buy in on with the portion that is invested in the stocks.

[Sean Hyman]

#17844

That’s all answered in detail in this video, which I email out to all new subscribers now. https://logicalinvestor.net/members-only/my-complete-investing-system-how-to-allocate-your-money/

I give them the video tour of the site so they know what is where and then,in the same email, I give them my system which covers how to allocate capital among the positions. I’d urge everyone to listen to it that hasn’t.

Thanks, Joy!

[JOY CHENNAULT]

#17864

Excellent, I hope that will answer his question.

[Sean Hyman]

#17868

Awesome. Thanks for chiming in, just in case I didn’t understand what he wanted the first time. Plus, the added video can be of great help.

[FusionDude]

#18182

Mark,

There are two possible interpretations of your question. One is an asset allocation mix. That’s what Sean answered. Basically, we don’t do asset allocation as “60% stocks, 30% bonds, 10% cash”. Rather, we invest all of our cash (eventually) according to Sean’s instructions. I just re-listened to the linked video, and I hope it clearly answers the allocation question.

The other is “how much of my net worth should I have invested?” On closer reading, I don’t think that’s what you were asking, but you won’t get a direct answer here. That is a very personal decision based on your individual circumstances, and you can’t get one-on-one advice here. But the basic guidance is that you should decide how much of your net worth you can be investing, and then allocate it as above.

One general rule of thumb is that you should have 3-6 months of your monthly expenses in cash/liquid investments (not stocks, but short term CDs, etc.) to cover a disaster. We are living right now in a time when people are seeing their wages evaporate as restaurants, retail outlets, and other service industries are basically shut down. The average person has NO savings, and I fear for the aftermath of this crisis.

The other criteria you should apply is that you not invest any money you will need in the next 3-5 years, since we never know how long we will end up holding any given stock/ETF. Sure, we’ve had some quick pops since the LI service started, but we also have some that have a very long way to go. So if you know you will need it in the near to mid-term (buying a house, paying for college in 3 years, etc.) then it should not be in the market.

Hopefully, that fully answers your question. Thanks for asking.

[Sean Hyman]

#18189

Correct. Portfolio allocations like 60% stocks 40% bonds are simply a mix that brokerage firms came up with for people who don’t know what they’re doing. You’ll notice, Buffett doesn’t invest this way. He’s not a fan of bonds. He’s a fan of stocks and cash. Raising cash when risks/valuations are high and deploying more of it into stocks when risks/valuations are low.

Yes, FusionDude is correct in that you want to have at least 3-6 months of cash set aside for emergencies that’s separate from your stock holdings. I don’t suggest CDs though because your money is locked up for certain periods. And to take them out early, there can be a penalty. I suggest cash going into a money market account, which is like a savings account with a slightly better degree of interest earned than just in savings alone. Your bank or stock brokerage firm will have those.

• This reply was modified 4 years, 1 month ago by Sean Hyman.

[Author]

Posts