How I Invest

Hello sirs and madams,

It’s safe to say I fell off the writing horse, but the good news is that there’s no limit to the number of times you can get back on. Rather than a weekend review, I figured I would level-set with my audience of 82 people and share exactly how it is I invest (and have invested since age 18) my financial assets.

How people invest is deeply personal based on their own circumstances, goals, etc. and it changes over time as their life does. One of the things I dislike about research firms, pundits, commentators, and others without direct skin in the game is that they often fail to consider that “their” way of investing isn’t appropriate for everyone. And that “optimal” results means more than creating the largest number on the screen.

In fact, I know that the majority of people selling their research online don’t eat their own cooking. Or if they do, it’s a very small portion of their assets that pales in comparison to the “active” income they make by selling their thoughts. More often than not, they’re operating media businesses and selling “confidence” to people looking for certainty in an uncertain world. After all, it’s easier to talk about it than be about it.

Now, I don’t have to agree with how people operate; it’s not my business. And I’m not their customer. But I do believe transparency is the right way to operate. So as I share updates on my “trading” portfolio, I think it’s only right you have the full picture of my finances to know exactly why it is I do what I do.

A Look Into My Investment Accounts

First, let’s start off with my main 401(k). At my first non-corporate job I was an independent contractor, which meant setting up a Solo 401(k).

I initially had it over at TD Ameritrade, but when they got swallowed by Schwab I made the move over to eTrade because they’re one of the few major providers that allow 401(k) loans for self-administrated Solo 401(k)s.

This is where the majority of my assets sit.

As for how it’s invested, I’ve ascribed to a very simple asset allocation model since I started, with 50% US Stocks ($VTI), 25% Developed Markets Ex-US ($VEA), and Emerging Markets ($VWO).

Now I know there has been a lot of debate over the merit of international exposure, especially given the underperformance and continued dominance of U.S. tech stocks. Up until recently, this allocation has been a major drag on performance, but my logic is simple: I want exposure to the entire global economy, not just the U.S.

This level of diversification is important to me because my job is literally levered to the U.S. stock market’s performance and the general U.S. economy. Add a house to the mix and I’ve got real estate exposure tied to those same things. Given that, it seemed prudent at the time (and still today) to diversify at a portion of my investments and the easiest way to do that is simply increasing international exposure.

Why this exact mix? I did a bunch of research, backtesting, and asked smart people questions to ultimately conclude that regardless of the split, I’d likely end up in a similar spot at retirement…and that was good enough for me.

As for the portfolio, below is a screenshot of the ~$150k balance. The total gain column is not accurate, as it reflects when I moved the account over to eTrade from TD Ameritrade. I can go back and figure out what percentage of this portfolio is contributions vs. gains, but since this is a pre-tax 401k and I’ll be paying taxes on it all upon retirement, I don’t care enough to look. It’s all the same to me.

You’re also probably asking yourself why a third of these funds are sitting in a short-term government bond ETF ($SGOV) instead of being fully invested. And that’s where the “nuance” of investing comes in.

Over the last decade I’ve dealt with significant uncertainty around my parents’ economics and my own career trajectory. One of the ways to alleviate that stress is to hold a sizeable chunk of cash that I can access whenever an emergency or opportunity comes up.

I’ve tapped into these funds several times. One to help my parents pay down debt. Another time to take time off after leaving a job I hated. A third to help finance and renovate the home I live in. And coming up in a year I’ll be tapping it to help pay for a dream wedding in Italy.

So why do I use this structure instead of a traditional brokerage account or savings account? Great question, and here’s exactly why.

In 2020 I was 25, living in NYC, and made about double what my parents had ever made in a given year. As a CPA I looked at ways to lower my tax bill, and making a large contribution to a pre-tax retirement account like a Solo 401(k) was an obvious choice.

When I did the math, I concluded that I could either make a $57,000 contribution to the account and avoid paying taxes on it. Or if I wanted all the cash in hand with no restrictions, I could take home about $35,000.

Then I looked at how these accounts worked. With a Solo 401(k), you can borrow up to half of your balance, with the loan not to exceed $50,000. Since its a self-administered plan, as long as I set up reasonable terms like charging an interest rate of Prime +1%, I can borrow funds for up to 5 years and make quarterly payments back to myself. There are a few other rules and restrictions, but that’s the gist of it.

It doesn’t take a finance nerd to realize that having $57,000 is better than $35,000. So, I made the contribution, and decided that I would invest it conservatively to provide me the “cushion” I needed to take more risks in my day-to-day life without putting anyone's future (including my own) in jeopardy.

With the benefit of hindsight it’s easy to say that had this money been invested in stocks, it would’ve doubled. But given where my life was (and still is) this preserved capital is far more important to me than short-term gains.

And eventually when this no longer serves its purpose (likely after our wedding), I will invest the funds and keep them as part of my overall retirement planning portfolio(s).

Next we’ve got my Stocktwits 401k. No surprises here. Same allocation over the last nearly 4 years, accruing another $64,000.

Next up is a 529 college savings plan that I began contributing $25 per month to when I was a junior in college. I was not dating then. Had never kissed a girl. And was spending all of my time studying technical analysis. So why I thought I needed a 529 plan for my future kids is beyond me.

Nevertheless, I think somewhere in my mid-20s I stopped adding to this and will get back to it in a few years once I actually have kids. The new rules about allowing a conversion into a Roth IRA give me some flexibility here as well.

Lastly, here’s my Roth IRA that I’m using to trade. I opened this account when I was a college sophomore and initially had the same asset allocation as my 401k, but a few years ago I took the principal out and left the earnings in. Now $22,000 is fine, but at average returns it won’t be THAT much at retirement without additional contributions. So instead of doing the backdoor Roth method each year and consolidating accounts, I’m opting to use these funds as my experimental money. If I do poorly, it’s not going to impact my retirement. And if I do really well, the tax-free gains will make it all that much sweeter.

So I’ve got $22,000 to “play with” and see what I can make happen. It was initially like $20,500 at the start of last year and I’ve made about $1,500 from my random trading sprees (although if you look closely, most of that is sitting in my unrealized open P/L 🙃).

So let’s summarize where my $249,500 in investible assets sit:

• Retirement Savings: $176,500

  • Solo 401k ($100,000 invested in $VTI, $VEA, $VWO).

  • Work 401k ($64,000 fully invested in $VTI, $VEA, $VWO).

  • NYSaves 529 Plan ($12,500 fully invested in global equity fund).

• Emergency Savings Funds: $50,000

  • Solo 401k ($50,000 invested in $SGOV).

• Trading Funds: $23,000

  • Roth IRA ($22,000)

  • Robinhood Taxable Brokerage ($1,000 - cash)

So is having $249,500 saved in my retirement accounts good at age 31? I fear most people on Fintwit and the general internet will say no, though the average stats say the opposite. Nevertheless, let’s talk about why I “only” have this amount and my takeaways from the last decade of investing.

As of September this year, I will have been working full time for a full decade during one of the market’s best bull runs in history. Had I joined the “FIRE” movement, stuck with one career path or employer, and saved every penny I made, I’d likely have a million (or multi-million) dollar net worth by now. But I actually think my life would be worse off. 

Let me explain.

First off, when I graduated college and started my job at EY, I pretty much lived like I was part of the FIRE movement. Except instead of saving and investing for myself, I made a choice to help dig my parents out of debt and try to help set them on the right path. I made $75,000 my first year out of school, lived at home, and plowed every after-tax cent I had into the household that raised me. And let me tell you, I was a miserable SOB.

I did nothing but commute, work, eat, sleep, and repeat. It took my already small-minded outlook on life and made it even smaller. I denied myself even small joys like an $8 Jamba Juice smoothie at Penn Station during my 1.5-hour commute home.

Those 18 months at EY were among my worst and it had very little to do with the job and everything to do with how I was operating my life. Luckily, I met my now Fiancé somewhere in there and us dating expanded my horizons. As we learned more about each other, her questions led me to think more closely about my life and what I wanted out of it. Luckily I looked around with an open enough mind to realize that my good intentions had led me down a stray path.

So I made some adjustments, still “invested” well over $100,000 in establishing my parents’ future, and learned how to use money to support the things I actually cared about in life.

Since then, I’ve had three different careers that I’ve performed well in (and had the flexibility to pursue due to my investing accounts). I took a full year off in between jobs. I’ve traveled to 10+ countries and countless states with people I love. I’ve experienced living in NYC and buying & renovating a home near my hometown on Long Island. And I’m having a dream destination wedding in Italy (and dragging my dad who has never been on a plane before) along for the ride.

Ten years ago my life plan was to continue climbing the ladder at EY, save every penny I could, and have the boatload of money that my parents never had. I had zero vision for what my actual life would look like outside of work. I’m sure I could’ve figured it out along the way, money does give you options. But I’m certainly glad I didn’t stick on that path and decided to get more creative in my life.

So no, I certainly did not optimize my investing habits for massive short-term financial gain, but I did take care of them enough to put me in a really good spot in my 30s. And my investments in life-changing experiences, my family, my relationship, and my skillsets have molded me into the person I am today.

At 31 I’m now planning for my parents and my life with my future wife/family. There are a lot of moving pieces and trade-offs to consider, but as complex as life can get the financial side remains quite simple. We need to continue earning more via careers we enjoy, invest regularly, and take enough risk to achieve our goals, but not so much risk that we could jeopardize what we’ve already worked so hard for.

I’ve learned that the most valuable thing we can give our family is options. As we set up to become parents in the next couple of years, we want to give our children the freedom to pursue what interests them without worrying about us as parents. That’s why getting our financial house in order has been a priority, and now we’re turning to our physical health.

I have not invested in my health at all over the last decade. Luckily good genetics and a generally healthy diet has kept me slim, but my lack of muscle mass and unhealthy sleeping habits have certainly taken a toll. I’ve ruined my share of vacations and life momentums with a random back spasm. But, we’re starting to reverse those trends.

It’s been about three months of prioritizing sleep, hydration, working with a personal trainer, eating healthy meals, taking science-backed supplements, and keeping my stress levels down. So far the basics are working well, with my WHOOP biological age falling from nearly 33 to 30.7. And I ain’t stopping anytime soon.

So anyway, that’s how and where I’m investing. Yes we own also a home, a rental property, two cars, and some other miscellaneous assets/liabilities. My fiancé also has her own career and investment accounts (similar asset allocation). But you’ve got a comprehensive enough picture of my financial assets that the the updates I’ll share for my trading account have enough context for you to understand them.

Next weekend I’ll write a long post detailing my trading plan for the Roth IRA and initial learnings from my goofing around with that account for the last few months.

But for now, I’ll leave it there. Have a great week all. 🫡