I am a fan of tracking things in my life, and I love a good spreadsheet. For a few years now I’ve tracked my monthly progress with overall financial standings (i.e. a ‘net worth check’) and also have tracked my points/miles balances too. I’m a person that is really motivated by forward progress, and I have a philosophy of attempting to get rich slowly. So, it really motivates me seeing small (or large) incremental growth. Of course 2022 was a rough year for the stock market so I didn’t see forward progress but I still tracked it!

One new thing that I started tracking was my investment allocations. I was curious to understand where I had my money (i.e. cash vs. stocks vs. real estate) and if that was a good thing or not. I have started tracking this twice a year, and have done it 5 times now (so 2.5 years). I’m not sure if there is a right or wrong allocation, so I haven’t done much research into this. I think your allocations are a reflection of your current situation in life (i.e. if you don’t own a house your real estate allocation is probably close to zero, and that’s not a bad thing it just means you’re not in a spot or don’t want to own a house) and also what’s important to you. I do compare with a few peers and it’s interesting that we’re all decently aligned despite valuing different things and being in different financial positions.

I started by breaking this into 3 categories, and then when I got into crypto I added a 4^th (face palm emogee). My 4 categories are:

• Cash. ‘Cash is king’ as the old saying goes and I think it’s important to always have cash on hand, for emergencies, big purchases or even just because. Sure cash doesn’t really earn much, when I started this exercise my ‘high-yield’ savings account was paying like 0.5%, but now it’s paying 4% but inflation has also jumped to like 9%, so on the whole I’d say that cash generally loses value but there’s just something to be said to having something so accessible (i.e. ‘liquid’) and available for anything that pops up in life.
• Equities. Also known as ‘stocks’ or ‘index funds’, this is money that I have in the stock market. This money is either held in my 401(k) or IRA retirement account, or it’s held in a general brokerage account. A general brokerage account allows me to pull it out into cash if needed without penalty contrasted with the retirement accounts I have. I expect this money to grow, on average at 8% year over year (that’s the average over the past 100 years of the market).
• Real Estate. This bucket is much less liquid as selling a house will take quite a bit of time and effort. I include; rental properties, my primary residence and any REIT (real estate investment trust) type investments I have. Some people might not include their primary residence but I view it as an asset that in theory I could leverage if needed, and I do have a lot of money tied up in it. As I’ve mentioned in this blog, Mrs. Money and I enjoy real estate and have been a landlord for a few years now across 2 houses. We have a tiny house lot that we are hoping to start construction on in 2023. We enjoy the work (most investments require some level of work) and find security in something less volatile (compared to stocks which as we’ve some go down 50%+ over the past year).
• Other. I struggle to classify this bucket, at first it was crypto, then I named it ‘alternatives’ but really as of now I don’t have much ‘alternative’ outside of LendingClub which is currently winding down. Maybe one day I’ll get fancy with some sort of entrepreneurship investment ala an angel investor but not today. I suppose once LendingClub winds down this will just consist of my crypto which is 98% bitcoin. Perhaps then I could call it “Safety” or something like that. I personally view bitcoin as digital gold, and so for the same reason people buy gold (for security in case the world runs amuck), I am holding bitcoin. I don’t currently own any gold, and do have a few silver coins that I got when I was younger and it was cool for grandparents to give you silver.

So, here is where things stand at the end of 2022, with some commentary on the overall trend.

Cash – 6%. This has held fairly steady but is down from when I started tracking this in 2020 when it was at 10%. In 2020/2021 when the market was going CRAZY I felt silly for holding cash and tried to invest more of it. Wah wah now the market is not so good but honestly I feel ok with the cash on hand. I have an emergency fund and some cash in other accounts for bigger purchases (home repair / car fund) so between those I’m not sure what else I’d need to hold cash for. Of course a ‘rainy day’ fund would be nice especially facing what appears to maybe be turning into an economic slowdown, but that’s not guaranteed and if I needed it I could sell some equities. Perhaps they might be down in value but my cash is lowing 5% right now (9% inflation – 4% interest I’m earning). I think for now I’m ok with where my cash is!

Equities – 47%. Shocking despite the market being down, this has continued to seen an upward trend for how much equities consist in my portfolio. These are all the stocks and mutual/index funds in my brokerage/retirement account. I am adding to it each month at a rate of 15% of my paycheck, plus 15% for ESPP (working for a publically traded company) and then maybe a little extra if we have extra cash in the budget (which is rare!). Historically the stock market has returned on average 8% year over year and although we didn’t see that in 2022, we saw it a lot in 2020 and 2021. VTI, my favorite index fund went down 19.5% in 2022 but it was up 25% in 2021, up 21% in 2020 and up 30% in 2019. I like the liquidity (i.e. being able to easily buy/sell) that comes with equities and feel good about my position.

Real Estate – 47%. This has been on a slight downward trend, down from a high of 51%, but we’ve seen home prices dip a bit (thankfully not like 19.5% a la the stock market). During the time I’ve been tracking this we’ve (aside from a 9 month period of looking) owned a rental property and a primary home. With our mortgage payments each month our equity increases slightly each month, and then it’s at the whims of the market to increase or decrease in value. In 2020 and 2021 it was WAY up, but now it’s cooling off a bit. I do like the long term security that I perceive real estate to bring me. I like being able to touch an asset, manage it myself and not worry about it losing too much value because of a tweet, a dumb comment or because what the blah blah industry across the world in some random country is doing (which I find stocks of companies to suffer from).

Other – 0.05%. Honestly this is a rounding error and I should probably either put more money in or stop tracking this. Crypto has fallen like 50% in 2022 so I have lost a lot of what little money I put in (at the peak I had like $1,000). I’m a big talker and thinker about crypto, but I guess my actions (thankfully as of now) haven’t followed my talking. I still buy like $25 in bitcoin each month. To me it is a safety asset and I like holding (or hodling) even a little bit of it!

As mentioned, I’m not sure there’s a right or a wrong allocation for where to keep your money. Although I’d argue that too much in one area might be risky, and having 0 cash on hand probably isn’t the wisest either. This is a fun exercise for me to keep track of my overall portfolio and understand where my money is!

What about you? Where do you find your money living and how do you feel about it?