Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have – or don’t have – in their portfolio” - Nassim Nicholas Taleb
Dear First Mates,
Talk is cheap and actions most certainly speak louder than words. I was inspired to write this month’s newsletter after reading the book “How I Invest My Money” by Joshua Brown. I could not recommend this book enough. This book offered insight on how leading figures in the financial services community are actually investing. Without further ado, dear reader, I reveal my personal portfolio to you. I view the investment universe today as six distinct, but broad, categories:
2. Capital markets
4. Private markets
5. Real estate
In this newsletter, I will explain what is included in each of these assets and my reasoning for the allocation.
Target Allocation: Around 6 months of expenses
I define "cash" as money in a checking, savings, or CD account. The goal of this money is to provide liquidity for emergencies or investment opportunities that I could never predict. How do I determine how much cash to hold? I estimate both my personal living expenses and business expenses monthly and aim to keep at least 6 months in cash. This affords me the peace of mind to know I will not have to liquidate my investments when I need it most. If I ever need to keep a much larger balance in cash for a short-term goal, I’d consider using a platform like Max My Interest.
Current Allocation: 38% | Target Allocation: 40%
I define the capital markets as popular paper assets, such as individual stocks and bonds. These securities that can be held individually or in fund wrappers like mutual or exchange-traded funds (ETFs) which are my favorite structures. This warrants the biggest allocation in my portfolio due to the safety and liquidty the public markets provide.
I use Charles Schwab and TD Ameritrade Institutional to hold my assets as my primary custodians. I invest in the same models offered to clients as I believe a chef should eat their own cooking. Specifically, I am invested in The WealthPlan Core 100/0 model, The WealthPlan Thematic model, The WealthPlan Yield Model, and The WealthPlan Top 10 Stock model.
I also recently started purchasing individual equities based on credible third-party research (and a few picks of my own). I enjoy reading about these companies and why they were selected. This avenue also makes investing a bit more fun and exciting for me. Some research providers I am using today include StockCard, Motley Fool, Hidden Yields by Contrarian Outlook, The Oxford Club, and Lyn Alden Investment Strategy.
Current Allocation: 32% | Target Allocation: 25%
As most of you know, I am extremely bullish on cryptocurrencies as an asset class and believe clients should have at least a 1% to 5% allocation here. I wrote three newsletters recently devoted to crypto. As such, I certainly hold a bigger allocation than most investment advisors would recommend. The moment I think of decreasing my exposure, I find my way back somehow to borrow from Al. It’s absolutely stunning to see how fast the landscape in crypto has changed from when I first invested in it back in 2013.
I break down my crypto strategy by investing in both funds and individual coins via private placements. I typically invest in private placements since I like the idea of a large institution custodying my holdings for improved security. I also am hoping I can earn an extra premium if there's a public OTC listing in the future. This strategy has worked well in he past, to say the least.
For funds, I am currently invested in the Bitwise Top 10, Bitwise DeFI, Grayscale DeFi, and Arbor Digital. The funds provide instant diversfiication which with professional asset management - two things I value tremendously.
For individual coins, I invest with firms like Bitwise, Osprey, Valkyrie, and Grayscale. The coins that I currently hold include: DOT, Solana, Chainlink, Algorand, Aave, and Uniswap. I also buy and sell my own cryptos through exchanges such as Coinbase and the Voyager App. Voyager is especially interesting since you can earn rewards on certain holdings I currently own Solana, Cardano, Polygon, USDC, and VeChain.
Current Allocation: 8% | Target Allocation: 10%
The world of private markets is a new asset class for me that I absolutely love. This asset class refers to investing in the debt or equity of privately-held companies not publicly-traded. I look at this space in two broad categories: 1. late-stage investing (private equity) and 2. early-stage investing (venture capital).
Private equity is the more conservative strategy because you're investing in later stage companies with strong revenues, solid product-market fit, run by an experienced management team. The investment thesis here is: (1) the public market is shrinking, (2) companies are staying private longer, and (3) unicorns (private companies worth >$1 billion) are increasing globally.
To read more on private equity, check out this piece here.
Venture capital is the more speculative strategy of investing in startup companies one hopes will become the next Apple one day. An entertaining mainstream TV show that I'd highly recommend to watch on venture capital is Shark Tank! Venture investments investments are my attempt to hit home runs – the ultimate Hail Mary pass. In addition to that hope, I also am passionate about the idea of helping to fund a company that can improve the lives of people all over the world.
I am currently invested, alongside clients, in the PrivateShares Fund (PIIVX). I also invested in individual companies by following syndicates such as Forefront Venture Partners, The Syndicate, as well as platforms such as InvestX, AngelList, Republic, and others. Finally, I invested in funds by AMG Pantheon, EquityZen, and Primark.
Current Allocation: 17% | Target Allocation: 20%
My grandparents, may they rest in peace, loved investing in real estate. And they did well in it. As such, I hope to continue the family tradition by investing in bricks and mortar. It also helps that the research suggests that real estate is a favorite amongst the wealthy. I do not necessarily have the bandwidth today to own properties directly because the idea of managing them seems stressful. I am not a handy guy, to say the least.
Because of this, the preferred method of investing for me is through sponsors that do all of the work for you through private placments. I started by investing in a friend’s deal. Since then, I have expanded to other larger companies who offer individual properties or funds open for investment. I am currently using companies such as Arborcrowd, AHP Servicing, Asym Capital, CityVest, Elevation Capital Group, Fundrise, Gelt, Modiv, and RealtyMogul. I also recently dove into the farmland asset class by investing with AcreTrader and FarmTogether.
Current Allocation: 5% | Target Allocation: 5%
The world of alternatives means different things to different people. Many investors would include real estate, crypto, and private markets in this space. For me, alternatives refer to anything I cannot categorize above. This includes my investments in currency with the ArtofFX, sports betting through Contrarian Investments, litigation finance through LexShares, wine through Vinovest, and some offerings through Yieldstreet.
Before I bring an investment to clients, I want to try it first. A lot of these investments (and the companies themselves) are new with no long-term track to show. I should also point out that it hasn’t been all sunshine and rainbows. I've made mistakes which have helped me grow as an investor. I have lost money, even all of my principal, with some investments that went sour. Three deals that stand out in my mind were 1) losing all of my money in a real estate deal 2) losing all of my money in a crypto scam and 3) doing a real estate deal where I earned no return after a few years - just got my principal back.
These costly mistakes have humbled me and taught the value of performing heavy due diligence on each deal and the importance of consulting with other specialists. This is one reason why I try so many things – and limit my exposure in each. I like to start small with an investment and add more as they earn my trust! Please note, I am in no way recommending or endorsing any of these investments. A few things to keep in mind here: 1) this content is meant for educational purposes only, 2) some of these investments are only available to accredited investors, 3) my situation is different from yours and 4) I serve as a fiduciary so I lean more conservative in what I offer clients.
There you have it folks. This is how I am investing today. I hope sharing this with you offered insight similar to what I gained by reading Joshua Brown’s book. I am excited to come back to this newsletter in the future to see what has changed (and what hasn’t). If you enjoyed reading this, I strongly recommend reading Meb Faber’s three part investing series: (1) The Get Rich Portfolio, (2) The Stay Rich Portfolio, and (3) How I Invest My Money. You will likely learn a lot. If you have questions after reading this, don't hesitate to ask. Just book a meeting with my calendar here.
P.S. Here is my YouTube vid o’ the month!
David Warshaw, CFP®
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk (including the loss of principal), and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The WealthPlan LLC or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from The WealthPlan LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. The WealthPlan LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of The WealthPlan LLC’s current written disclosure statement discussing our advisory services and fees is available upon request.