Having a big plan in place is a good thing. But it does not mean that I do not need a more detailed plan on my personal investment accounts. This is equally important as the big picture. So, for my personal investment account, I now need to figure out my asset allocation based upon my risk profile. To be honest… I have no clue what my risk profile is.
I think I know what it is: dynamic leaning towards aggressive. Meaning I want to get the maximum return, accepting major volatility. Why do I think that: because I believe in the numbers. The numbers say that over the long term, the returns are positive, despite the odd crash and correction. And I have time, meaning that I can envisage the long term. But I don’t know for sure that I truly have that risk profile. I have not yet experienced a major crash that whipped away 35-45 pct of my investments.
They say you can only know what your profile is after such a crash. So, what is my solution for that? A layered approach. Let me explain.
The first layer are my insurance products. They are capital guaranteed, they offer a fixed minimum return (like interest) they make me sleep at night. For now, they make up 37 of my portfolio but they are going down fast (by the end of the year I expect them to be lower than 30 pct, and in 5 years from now they should be 20 pct or so) I consider them for now the bond part of my portfolio.(With the current low interest rates, I have no interest in bonds). They offer stability, peace of mind and something to fall back on when all else is down…
A second part of my portfolio is my core funds portfolio. This is a collection of mutual funds that have one goal: return about 4-5pct per year over the long run and have a lower volatility than pure index funds. I based my selection on this mixer fund. A website that has a methodology I believe in. this part now has 44 pct of my portfolio. This should slowly decrease over time as I stopped putting money towards this portfolio. It is now on auto pilot, I will rebalance regularly.
The third part of my portfolio is a pure index fund. This is under construction for now, having only 11pct. It should grow to about 20-25 pct of my portfolio and then be rebalanced every now and then. I will detail my asset allocation on this one later on. If part 4 does not get started, This will grow to around 50/60 pct
The fourth part of my portfolio should be dividend growth portfolio. I am interested in this type of portfolio for the yearly dividend that it pays. It means I can get a yearly amount of money to cover some part of my expenses. But I do have to admit that I still need to study this. First there is the tax penalty in Belgium on dividend compared to accumulating trackers, secondly there is the time needed to set this up. Luckily, there is some great help out there.
At some point in time, real estate will become part of my portfolio again. Either via a rental propoerty or via trusts. Not sure yet what route to go. Note that I do not count my main house as being part of my investment portfolio.
And then there is cash… It is waiting to be invested either via the monthly buy plan, or waiting for a better moment to invest a lump sum.
What is your approach on asset allocation and risk profile?
amber tree leaves 
I have life insurance through my work, but I haven’t looking into term insurance. The one that costs $100/per month or more. It sounds like a crazy amount for me. That is why insurance companies have been making tons of money. It’s good to bet with them, instead of buying their products?!
In the past, I don’t want to buy healthcare related stock, but I might consider them for long term. As many of them are consumer stable.
Good luck with future investments!
LikeLike
Interesting way to show your portfolio holdings and asset allocation. For me, my primary tool for generating income is via dividends which I classify as a passive method and with your insurance products you kind of hit the nail on the head when you state that it helps you sleep well at night which really is what all this investing is all about. Finding your maximum tolerance to risk and to do whatever it takes to make you feel comfortable.
LikeLike
Sleeping well at night is indeed a key element in investing. Without this, yo will make irrational actions… to be avoided. Just today I got the confirmation in the mail of one of the insurance products… Not that much as a yearly return, but far above inflation. And for a safetynet, that is quite some achievement.
Next on the agenda now is to fill up my index investments as much as possible and than throw in some dividend stocks. Mainly for the sport of investing, rather than the wish now to have passive income
LikeLike