Sunday, May 24, 2015

Increasing cash position

Time flies and it has now gone nearly nine months since I wrote something. A new opportunity appeared during this time which has taken nearly all my focus for some time. Meanwhile, the stock market and the dollar have both rallied like crazy. The dollar rallied to the extent that I lost my HNWI status for many months (as I predicted would happen). Only now in the last few days/weeks has it again come to the point where I once again could qualify to be an HNWI.

As the stock market has increased so much I have chosen to increase my share of cash and short-term bond funds to slightly above 20% of the total portfolio value. It actually feels quite nice as I know I can support our family with that kind of money for about four to five years and still receiving dividend covering some 9-10 months of living expenses. I figured this is a balanced strategy where I could buy stocks again if the market drops (and reach 12+ months of living expenses covered), and if not, I still get to take part of the valuation increase to a large extent.

The savings ratio is about 87% currently. The 13% remaining cover expenses I have for working and the rent payments related to the loan on the house. All the savings are going into a separate investment account where I am building up a stock portfolio to match the remaining debt on our house. I figured this is the best long term solution to "pay off" the loan on the house. Instead of monthly instalments in these times of extremely low interest rates, I rather build a stock portfolio of the same size as the remaining loan. When that amount is reached, the stock portfolio should most likely cover interest expenses through dividends, while still increasing in value. Thereby, in the next 15-20 years (after having accumulated a stock portfolio of an equivalent value to the loan) I will be able to pay off all of the loan, while still keeping the stock portfolio.

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