2023 PortfolioAs we enter 2023, I will lay out how my portfolio allocation will generally look based on my research and a sound approach to wealth building. We are now well into what we call the “Raging 20’s”. This is a time of several macro changes in the world that will effect investing and building wealth that I will describe below. 2023 is a transition year that I would characterize best as back to fundamentals and the setup for great technological shifts. Those of us building wealth need to recommit ourselves to the fundamentals of frugality, budgeting and investing based on a there that is there. No more meme madness, government fueled infusions or crypto based on BS. Investments need some meat on the bones and need to represent sound businesses that are actually delivering value. My 2 Portfolios First let me describe the basics of my portfolio going into 2023. The concept here is that this will generally constitute my asset allocation and I will try and keep it to this over the course of the year with minor adjustments as needed and a little bit of risk taking to jump on opportunities. I prefer Vanguard funds and ETF’s, but there are many other great companies with low cost investing access.
- 5% Vanguard Small Caps Fund or ETF. It appears that after the market carnage of 2022, small caps can have an opportunity to beat the S&P and deliver some higher gains. But of course this comes with increased risk, therefore I am sticking to a 5% allocation.
- 10% Vanguard Value or BRK-B: Value is another place I think there is now great opportunity. These are those tried and true long ball hitters that have stood the test of time. These are companies that deliver products and make profits, but the stocks seem to have temporarily fallen out of favor.
- 10% Vanguard International Fund: International seems to be another area of greater opportunity this year to gain some greater gains. But, I have always found International to be more risky, so again going with 10%. International seems even more risk on as the world grapples with Russian and Chinese government behaviors that are contrary to trade and global stability.
- 30% Vanguard Bond Fund: I am going with corporate and municipal bonds and I prefer B or higher graded. Bonds are another area that may do well finally. It appears that 2022 was an anomaly where both bond and stocks suffered.
- 25% Vanguard Total Stock Fund or VDADX: I still believe in great US companies to deliver over the long run and why not own a basket of them in a VOO or VDADX.
- 20% Money Market/Cash: This provides opportunity money and also smooths out any major dips through the year. We may be in for another volatile year, therefore some cash seems prudent for risk tolerance and sleeping well at night.
- Rental Property. I like rental property in this world because it cannot vanish on screen like other investments. There are of course many risks, but also many rewards. real assets like this can be a ton of work. But again, they cannot disappear on a screen. But I am sure to look at quality, location, condition and other factors when deciding on physical real estate investments.
- Real Estate Investment Trusts. REIT’s are a great way to diversify a real estate portfolio and generate cashflow. They are some of my favorite passive investments because the companies are obligated to send 90% of revenue back to the shareholders via dividends.
- Fundrise eREIT. Fundrise admittely probably belongs in the REIT category, but I find it to be a kind of hybrid approach. I also mention it because the returns and consistency have been fantastic. I have invested with Fundrise for over 5 years and it has only steadily appreciated, even through 2022.
- Some crypto (BTC and ETH). I am frustrated with the way crypto has behaved but I am not totally against it. 2022 has been awful for crypto and we are for sure in a deep freeze winter. My personal belief is that with some common sense regulation this asset class grow and thrive.
- To expand on these ideas here is my description of the Raging 20’s and other things we can do to manage through it.
Raging 20’sI coined the term “raging 20’s” a few years ago as I realized this was going to be a turbulent decade. Part of my prediction came from my studies of international relations and globalization as an undergrad. Here is a quick history lesson for some insight into my thinking: After WW2, the US emerged as the preeminent power based on design, principles and fortuitous geography. Our design was superior with a healthy balance of power, capitalism with rules, and well functioning institutions. Basically we had the secret sauce of this new era that would make us the most prosperous and powerful nation on Earth. We also possessed relatively sound principles of human rights and rule of law. No system is perfect, but ours was a lot better than others, and is in fact still one of the best in the world. Finally, our geography gave us advantage since we were protected by oceans and peaceful neighbors to the north and south. A Shifting Global Order & Existential Risks BUT, as other powers emerged in the world and globalization went on overdrive, we are now experiencing turbulence. There has been backlash against technology and global trade that left many workers behind. In addition, there are the existential threats like climate change and pandemics to contend with.
Basically, what I am saying is to buckle up, for there is no sign of the raging 20’s to stop, well, raging!