Tweet
I am 29 and made my AA and investment policy 2 years ago, but I am worth over €400,000 more now so am unsure if I should invest less in stocks.
Below is my situation as of 2 years ago and as of now;
Net worth was €600,000 and is now €1,080,000.
I was a 27 year old professional gambler and the very maximum I can see myself losing in one year is €80,000. As my average expected profit per bet is just shy of 10% and I have 10,000 bets per year it is unlikely for a losing streak like this to happen, let alone continue. I spend €40,000 per year.
Now I am 29 but I can only have about 5,000 bets a year, so gambling is less volatile and also earning less.
For my AA, I knock €100,000 from my net worth and go 60/40 in favour of equities with the remainder. The €100,000 is an emergency fund (it covers 2.5 years of expenses or a maximum loss year plus 6 months expenses).
When I cash out over €10,000 from a gambling account, I will invest it accordingly, bringing my AA back to 60/40 and if I need to withdraw on rebalancing day to take my short term reserves back to €100,000 I will also withdraw accordingly, keeping my AA at 60/40. I will do this regardless of the market.
I will rebalance on the second Tuesday of January, beginning in 2016. If I have between 55% and 65% stocks, I will do nothing. If my portfolio is out of this bound, I will rebalance to 60% stocks 40% bonds. I will also re-evaluate how much the higher bound of 2.5 years of spending money or 6 months of spending money plus maximum possible loss in a year is, as I would expect this to increase with inflation.
This AA and rebalancing has been consistent over the past 2 years until the present.
In my country the life expectancy is 81, so lets say I have 52 years left.
Currently I spend about 30k per year but like to say 40k in case of medical emergency or if I start a relationship or family. With bonds earning close to nothing at the moment, I will call €2 million my magic number where I don't need to take any risk (20/80 is as low as one should go I have read).
With my net worth currently only at 1.08 million, at what monetary or age positions do you recommend I move towards the risk free position? If I decided to stop working now what AA would you recommend?
Below is my situation as of 2 years ago and as of now;
Net worth was €600,000 and is now €1,080,000.
I was a 27 year old professional gambler and the very maximum I can see myself losing in one year is €80,000. As my average expected profit per bet is just shy of 10% and I have 10,000 bets per year it is unlikely for a losing streak like this to happen, let alone continue. I spend €40,000 per year.
Now I am 29 but I can only have about 5,000 bets a year, so gambling is less volatile and also earning less.
For my AA, I knock €100,000 from my net worth and go 60/40 in favour of equities with the remainder. The €100,000 is an emergency fund (it covers 2.5 years of expenses or a maximum loss year plus 6 months expenses).
When I cash out over €10,000 from a gambling account, I will invest it accordingly, bringing my AA back to 60/40 and if I need to withdraw on rebalancing day to take my short term reserves back to €100,000 I will also withdraw accordingly, keeping my AA at 60/40. I will do this regardless of the market.
I will rebalance on the second Tuesday of January, beginning in 2016. If I have between 55% and 65% stocks, I will do nothing. If my portfolio is out of this bound, I will rebalance to 60% stocks 40% bonds. I will also re-evaluate how much the higher bound of 2.5 years of spending money or 6 months of spending money plus maximum possible loss in a year is, as I would expect this to increase with inflation.
This AA and rebalancing has been consistent over the past 2 years until the present.
In my country the life expectancy is 81, so lets say I have 52 years left.
Currently I spend about 30k per year but like to say 40k in case of medical emergency or if I start a relationship or family. With bonds earning close to nothing at the moment, I will call €2 million my magic number where I don't need to take any risk (20/80 is as low as one should go I have read).
With my net worth currently only at 1.08 million, at what monetary or age positions do you recommend I move towards the risk free position? If I decided to stop working now what AA would you recommend?
Comment