A Proper Investment Mix

When it comes to investments, the world is full of different asset classes. You have stocks, bonds, mutual funds, cash, bank certificates, real estate, commodities, cryptocurrency, art, and derivative investments just to name a few.

When I first started this portfolio, I didn’t think much about that. I was mainly interested in dividend stocks. I also have some mutual funds and CDs/GICs.

In the past week or two, I’ve been slowly getting into bonds more. Bond prices have crashed (alongside stocks) this year, and perhaps there is now some justification for owning some. Right now, I have about 3.5% of my portfolio in bond-focused Closed-End Funds.

I have to be careful with this. The funds promise yields of 8-12%. That sounds very attractive. It might be a yield trap, however. I might find myself with a fund whose share price keeps declining each year and needs to be recapitalized every once and a while.

So what should my ideal investment mix be?

One of my goals explicitly is to have about 10% in cash. That might be too high, and someday I might lower that. But 10% seems about right.

I am aiming for a portfolio that mixes growth and income. Sometimes that is called “Dividend Growth”. Some people try to find companies that are growing AND also paying a dividend AND also growing that dividend. But to me, I can find companies growing without a dividend, and also companies that are paying a strong reliable dividend. I get the growth and the income.

I have read a lot from people who recommend stock index funds exclusively. I am still predisposed to invest in indexes. The S&P 500 is hard to beat. That could be a good foundation for a portfolio. It also contains growth, with this 8%-10% per year average long-term return.

I do enjoy picking stocks, and so there is some entertainment value in that. I want to have a small amount of money that can be used to invest in any stock. I currently have some money in NIO, and that stock goes up and down 5% every day.

I also am getting into bonds now that the return is starting to show up. I have to be careful about not getting to far into bonds until interest rates have peaked.

• 45% long-term stock index funds (total stock market or S&P 500)
• 20% high-quality individual stocks, dividend payers (or ETFs containing these stocks)
• 10% cash and cash equivalents (bank CDs/GICs, etc.)
• 10% high-yield bonds (junk bonds)
• 9% speculative stocks (could be 10X or 0X in 10 years)
• 5% high-quality bonds (investment grade)
• 1% crypto

I really have no idea if that’s the best mix. I think I will do OK with this. It’s pretty defensive, and I will not lose a lot of money with it. And it has the income side as well as capital appreciation.

I should find a tool to backtest this.