How I'm invested Dec 2019

Published on Dec 08, 2019 in How I'm Invested

Last update: Dec 13, 2019

Dec 2019 Update

The largest change in my investment strategy over the last month has been a push into crypto. I think that next year crypto could take off and I’m bullish on crypto as an asset class in the long term.

I personally believe crypto has spurred a technological shift analogous to the internet back in the 90s. It might take a decade for the full value to become evident, but I do think we’ll get there, which is why I’ve upped my crypto portfolio allocation.

*This list doesn’t include equity I own in private companies since it’s hard to value (and nearly 100% illiquid)

22% cash

I’ve built up a large cash position over the last two years. Normally, I like to be more fully invested, but it’s been hard to find investments that will clear my 20% annual return hurdle rate. We are saving a good amount of money each month, so it’s difficult to find good investments to put new savings into, let alone the cash that’s sitting idle. I have a money market account with a private bank that’s paying me 2% APY.

21% in micro-cap stocks

I love the micro-cap space. The source of alpha is the fact that the companies are too illiquid to be traded by institutional investors. Micro-caps have also historically grown faster than the market. I’ve gotten ~30% annual returns in this space and hope for that to continue.

20% in value stocks

This is a combination of index funds (which I only own because there’s no other choice through my 401k) and illiquid international value plays. Again, the illiquidity is the source of alpha. I set my target return for this category around 20%. Most of it is managed by two value investors who I trust and have a strong track record of generating alpha.

15% in primary residence

You gotta live somewhere. Luckily we live in Boulder, CO, so we’ve seen decent price appreciation over the last five years and are comfortably above water.

10% in private multi-family class B/C real estate

Multi-family real estate is one of my favorite investment classes and I’m continuing to grow my position here. They average about 25-30% compounded annual return when you take into account tax advantages. I also like to have them in my portfolio because in recessions, demand for lower-cost rentals usually goes up. All of the investments I do are in the B/C class (not premium/luxery A), so in theory they might actually be negatively correlated with the broader market.

10% in US-gov/municipal debt

I bought these mostly at the start of 2019 because I thought interest rates would top out, which they did. I might add more if rates rise again. These are also likely negatively correlated with the economy, so in a recession their value should go up (as bond yields go down). I only make 2.5-3% return on these, but it’s better than cash.

1% in life-settlement fund

Another negatively correlated investment. This is a portfolio of life insurance policies. Pretty morbid investment class, but once I learned about how the system works and how it’s beneficial for both the seller and the buyer, I got over it enough to invest.

1% in crypto

My newest holding that went from an experimental project to a full asset class in my portfolio in the last month. I’ll continue to invest throughout the next year.

0.25% in Gridiron AI sports betting

Two friends and I are trying to beat vegas. This season is a bit of an experiment as we’re tuning our strategy. So far, we’re up quite a bit, but we haven’t done it long enough to know if it’s luck + variance or if we’re actually making predictions at high enough accuracy to dependably win over the long term.

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1. How I'm invested Dec 2019

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