This entry is a little different from my others in that I’ll be laying out a step-by-step guide on how I actually rebalance my portfolio every quarter. For some of you, this may be pretty mundane – something you already know how to do – but perhaps for others, this could help build your confidence that you don’t need a financial advisor or a trading background to rebalance your portfolio. I will do my best not to get too technical, and I’ll use some simple examples to illustrate the math used.
Mini Retirement
Allocation: How I Invest My Nest Egg
“I want to learn how to invest like you. What do you invest in?”
I get this a question a lot. And I usually answer with a curt “You know…stocks and bonds.” In the off chance that this curious person follows with, “Yes, I want to invest in stocks and bonds too. But how do I know what to choose?” That’s when I share what I’m about to share on this post.
Portfolio Allocation is really what the question is about: how I allocate my dollars across the seemingly infinite options out there. And people get PhDs and win Nobel Prizes for theories that guide portfolio allocation. But that’s not what this post is about.
You don’t need a MBA or even a Finance class to learn a few important things about investing in stocks and bonds. But there’s something to be said about getting to the simplicity of things – having spent over two decades investing in the market, reading all of these investment books, talking to CFAs and financial planners, and yes, getting my MBA and taking Finance classes. And the simplicity of things is where I’ll start – principles of how I allocate my portfolio – before I give you the percentages of my allocation.
Funding Retirement: How I live on 100% passive income
I pay for my family’s cost of living in Thailand using two sources: 1) deferred compensation from my prior job and 2) cash withdrawals from my investment portfolio. My 2023 income from deferred compensation actually paid for all of the living expenses in Thailand, while the investment portfolio grew substantially. In other words, I am actually growing my wealth in mini-retirement! In this post, I intend to show how I was able to do this with my two sources of income.
First Income Source: Deferred Compensation
Almost a decade ago, I sat down with the Director of Compensation at my prior company. She described a benefit that I had as an executive: a SERP. She went on to explain that it’s a way to defer my compensation and reduce my tax exposure. At the time, I did not enroll in the benefit, thinking, ‘why in the world would I want to defer my pay? Didn’t Finance 101 say that money now is more valuable than money later?” But after seeing the effect that taxes had on my take-home pay, I reconsidered. Now mini-retired in Chiang Mai, I am very thankful for enrolling in this program and saving as much as I did before I resigned from my prior company.
Resigning: Why I walked away from a $800,000 job
“Why the hell did you quit your job?”
I get this a question a lot. I know it’s a blessing to have a job that pays so well. And I worked so damn hard to get to where I was.
The simple answer: I wasn’t happy. I was an executive at a Fortune 200 company for eight years. Sure, I had a positive impact on others’ lives, especially in helping to improve the bottom line for the company and shareholders, as well as employing others (including personally hiring some people I am proud to say are my friends). The money was great – and I was very blessed to have been earning that much. But at some point the costs outweighed the benefits. The equation tipped the scale towards the option of walking away in three ways: freedom, time, and purpose.