Proper portfolio asset percentage

 Hello brothers and sisters. I've been getting a lot of questions; especially with the state of the US economy. While I normally concentrate on the importance of silver and gold being in your portfolio; for numerous reasons; I've received many questions about how the rest of your financial portfolio should look. That's actually a great question.

Allow me to speak on this. Besides using silver and gold to preserve our wealth, we all would like to preserve all of our wealth as well as help it grow when possible. There are many ways to make profit or interest on your investments. Some ways are riskier than others. Allow me to break down and explain the 4 Asset Classes you should have in your portfolio, and then I'll describe suggested percentages. Mind you, there are SOME people who claim to be great "Financial Advisors" that will only mention 3 asset classes. My advice right off the bat, is that if a financial advisor doesn't mention all 4 of these asset classes, then they are idiots and you need to stay away from their advice. And as always, the information I provide to you here should never be taken as professional financial advice. I am simply providing you with information and my opinion. Definitely take what I provide and do your own research. If you do so, you'll know what to do.

So, let me first start by mentioning the 4 asset classes:

1. Equities

2. Fixed Income/Debt

3. Money Markets and Cash reserves

4. Real Estate and Tangible assets

(Note: Some of the less educated advisors will only mention the first 3 asset classes I listed. They don't believe than the 4th one is an actual asset class. Stay away from these people.

Before continuing on an describing in detail these 4 asset classes, and then the percentage of each your portfolio should be in, let me mention the BEST TOOL to financial success.......... READY?????? OK, here it is........ ELIMINATION OF DEBT!!!!!!!!!!

You've got that right. It's fairly simple. If you have a 4% car loan, and you can PAY OFF that car loan, then you are INSTANTLY MAKING 4% on your money. How??? Because you are NO LONGER PAYING 4% to someone else. Now, I understand there is some debt that you simply must have. Like a mortgage. Most people can't afford to buy a house in cash. But that doesn't mean that you must take a 30 year mortgage and spend the entire 30 years paying it off. When times are good, if you can pay forward on your mortgage, that is INSTANTLY MONEY SAVED. Quick math example: Easy numbers for educational purpose. EXAMPLE: $1500 a month mortgage payment. $200 of that per month is escrow for property tax. $150 of that per month is escrow for your home insurance. That leaves $1150 a month going to the actual mortgage/loan. In the earlier periods of the loan, a large portion of that payment is towards INTEREST. Lets say 50%. So, of the $1150 towards the mortgage, $575 is for lowering the actual mortgage loan amount, and the other $575 is towards interest. Now; let's say you received an $1150 tax refund; or you sold an old riding lawn mower you didn't need for $1150. Or somehow, you came up with $1150 you didn't really need. When your mortgage payment is due, if you ADD this additional $1150 to the payment (Make a payment of $2300) that additional $1150 will pay 2 months of mortgage AHEAD OF TIME, which means you won't pay ANY INTEREST for those 2 months. Meaning; your $1150 investment just MADE YOU $1150. It's $1150 that you did NOT HAVE TO PAY. Same thing with car loans. Pay them off SOONER. Put an extra $100 a month towards your bills. Whatever you can do. And obviously, don't spend beyond your needs. Don't charge anything you can't pay off when the bill comes in. If you pay off your credit cards every month, then it doesn't matter if they charge 15%, 19% or 25% interest. You'll NEVER PAY INTEREST on those cards. Get cards that have great money back, points, etc. You won't have to worry about the interest rate; as long as you pay off the credit card each month.

OK, back to the 4 asset classes.

1. Equities: These are stocks. Just like it sounds like. The stock market. You are hoping to get an increase in value in the company that you partially own. That is what stock is. Partial ownership in a company. Some of these companies also pay you dividends for being a stock holder. Sort of like interest, but not a fixed amount. HIGHEST RISK

2. Fixed Income/Debt: These are bonds. They are debt that you are LOANING money to the government or a company and they pay you back interest. It could be I-Bonds, T-Bills, Treasury Bonds, Corporate bonds, etc. They usually pay back with fixed interest rates for a period of time. MEDIUM RISK

3. Money Markets and Cash Reserves: This is cash you have on hand in a bank, savings, checking, money markets, in other accounts, etc. This gets the least amount of interest. Some CD's can get 4-5%. Money markets and some high yield savings can get 1-3%. LOW RISK:

4. Real Estate and Tangible assets: This is obviously real estate, but also land, Silver, Gold, Diamonds, Collectables like art, etc. These are items that you physically can hold onto. Do NOT CONFUSE these physical assets with paper VERSIONS like silver/gold ETF, Real Estate ETF, etc. I don't trust those. If you can't HOLD IT in your hands or touch it, it doesn't exist. This is NO RISK. But it's purpose isn't to GROW WEALTH, it's purpose is to PRESERVE WEALTH. Land, Silver, Gold, etc. will ALWAYS have value. It can never go to ZERO. And it usually goes up and down with the economy. So, if you own a home; or have decent equity in it, then that is a good tangible asset. Same with owning physical gold or silver.

So.... what percentage of each asset class should you own. Well, that depends on you age. It all revolves around TIME. The more time you have before you're not able to invest any longer, the more risk you are able to take. The stock markets have ups and downs, but a well diversified stock portfolio will make money in the long run. But if you're 50 years old and have nothing really invested or saved, it's hard to take such risk unless you're planning on working until you're 70+ years old.

Many people have IRA's, 401k, 457b, and similar where their investments are diversified into stocks, bonds, and cash. That is good. But like the examples I give below, you can just invest a certain percentage in the portfolio when you're 30 years old and leave it that way forever. As you get older, you need to rebalance your portfolio. So I would say; when in your 20's - 30's you can be very aggressive. When in your 40's - 50's you need to balance less conservative so you can handle the other expenses in your life like kid's, their college expenses, home ownership, etc. When you're getting close to 60 years old, or within 5-10 years of thinking of retiring, you need to be a lot more conservative in your asset allocation. So below is what I believe in and suggest. Your income, savings, risk tolerance, etc. may require you to be flexible on this. And even though you may have a 401k, IRA, etc. that SEEMS BALANCED, you need to remember to also look at your real estate/tangible like silver/gold and make sure that is in the mix also. And to rebalance when appropriate. Say, at each 10 year mark. Age 30, 40, 50, 60. 

• Aggressive: 75% equities, 10% fixed/bonds, 10% tangible assets, 5% cash savings
• Moderate: 60% equities, 20% fixed/bonds, 10% tangible assets, 10% cash savings
• Conservative: 40% equities, 30% fixed/bonds, 15% tangible assets, 15% cash savings

Remember; cash savings is savings account, checking, CD's, high yield savings, etc. The tangible assets is mainly the equity in your home, silver, gold, and such. The fixed/bonds asset you may when you start moving from moderate to conservative, look into alternatives outside of your 401k, IRA, 457b, etc. Start looking at I-bonds, T-bills, and other government backed securities. You'll have to decide that when the time comes to rebalance. And of course, the equities is how heavily invested you are in stocks. This presentation is meant to get you in the mindset to understand your wealth as different assets, and that each asset has it's level of risk and requires attention occasionally. You can't just think you have money in a 401k and you have some savings and that all is good. The older you get, and especially when you stop working and can no longer contribute to a 401K or IRA, the more important FIXED securities become. I have my wealth/money in the category above I call conservative. That's because of my age. I haven't had to liquidate my 401k/IRA yet, but I have rebalanced them to be more conservative and less amount of equities. I have purchased CD's and I-Bonds that are receiving decent fixed rates. Figure out how much time you have, use my presentation as a guide to get you started, and you'll be able to find a balance that you are happy with.

Take care:
CYA
SE