A millennial with a knack in stock markets had a query on investments. The person with eight digit cash was confused were to put it as 70% of his money were invested in stocks. He then encountered Moneymindz, the best free financial advice.
Stocks are too volatile as a retirement portfolio. People will suffer mentally when their portfolio drops 10% in a single day and then it keeps dropping. It is fine when sitting in their eight digit and they can tell themselves that it is alright, the market always bounces back and people are still left with their job.
I have a friend in a similar situation as he sold his business and keeps 100% in stocks he has watched his net worth halve 2 or 3 times since he sold his company he has not enjoyed that ride.
Real estate is the right place to keep the bulk of a person’s portfolio but buy to own 100%, live from the income and, never plan on selling.
Sure property can also correct – many people has been victim of that, more than once – but, in every correction, people still need somewhere to live and must pay rent. Since people are never planning to sell, however, the notional value of their property at any specific point in time becomes moot.
Here is how to put it all together:
1. Keep the cash in place for now. Instead, move the stock market holdings into real estate. How much is the move and how quickly you move it depends on how bullish they are on the stock market. I would be comfortable with a maximum of 20% or 30% of net worth in stocks. Now, it is much less, but I still have too many even riskier assets in my portfolio, so my opinion does not count, here.
2. Start buying a balanced portfolio of smaller residential and commercial properties in prime, established areas. Avoid new areas & new (e.g. off the plan) properties. I always buy small, entire buildings (e.g. quadruple apartment blocks; self-contained office buildings on own title; etc.). Look for current (e.g. modest rehab) and/or future upside potential to increase long-term returns.