In short, yes. My asset allocation is appropriate to my risk tolerance and my situation. Besides this, I have insurances that suit my risk and situation.
This does not necessarily make what I did appropriate for you. In fact, it probably isn’t. Your risk tolerance is not necessarily the same as mine, and your personal situation is almost certainly different.
An asset allocation is the end of the story, the start of which is situation, risk, etc. So I’ll start with my situation.
- Working, no kids, no plans for kids.
- Flexibility in “retirement” date and workload – I can afford to go half-time, take on less work than I currently am, adjust my retirement date to suit circumstances, etc.
- My future plans and goals – lifestyle block with a stream and some sheep, among other things.
- High risk tolerance, both as a matter of personality and due to my financial situation.
- Personal preferences
Thus, my asset allocation is as follows.
- A decent portfolio in buy-and-hold, which I think everyone should have if they can.
- Rental properties, so far so good. I usually recommend at least one property, either owner-occupied or owning an IP while renting. More than one is a personal decision I can’t make for you. But it’s good to have somewhere to live (owner-occupied), or to hedge against rent inflation (IP) and/or housing market inflation should you wish to buy in the future.
- My business. Starting or buying a business is an intensely personal decision. I can’t make this decision for you in either direction, but only advise on how best to allocate your money given the decision you made.
- I am looking to leverage the portfolio if possible – not all brokers have good enough interest rates for this to be worthwhile. I won’t recommend this to anyone, it’s finicky to manage and even then the risk is outsize for all but the most risk-happy of people.
- I am putting together NZ-available equivalent funds to create a TAA portfolio – there will be drag, it’s timing the market, etc. This doesn’t come recommended because it’s finicky, higher-risk, and takes more effort and willpower than most people have. (Staying the course is harder when it involves actively doing something you don’t feel good about with large amounts of money, compared to just hanging on for dear life as in buy-and-hold portfolios.)
- Cryptocurrency, options, etc in a small allocation (barbell). Not practical to recommend on account of the amount of research involved – my fees would have to be immense to justify doing other people’s research in this sector.
- Angel investing, on the scale I can afford. This includes friends-and-family stuff.
As you can see, #1-3 are things that are included in my advice process and portfolio, and they do form the core of my portfolio. #4-7 are high-risk hobbyist investor things, which don’t form the core of my portfolio. I don’t bet money I can’t afford to lose, and I don’t tell anyone else to. (When I can afford to lose the money, I tend to swing for the fences after lining everything else up in my favour. This philosophy doesn’t suit everyone.)
And then there’s estate and legal planning. You should talk to your team about that. I have a family trust that cost me $3000 to start up and $1000/year, besides the hassle. It’s well worth it for reasons I deemed good and sufficient, which I won’t go into here.