Personal Investments • Re: Portfolio Review- Warning Alternative Assets!

And just to be clear, crypto can be part of your portfolio if you would like. Just keep in mind that, from a portfolio construction perspective, it needs to be a small percent (generally <5%) and rebalanced with everything else, similarly to how one would use a leveraged ETF, or otherwise should be excluded from the portfolio. If you do the former, be careful of volatility drain (a highly volatile asset is 5% of your portfolio, drops 60%, you sell other things to rebalance, and then it drops 60% again. If you rebalance again, your portfolio has now lost more value than had this asset simply went to $0) mods: please delete this paragraph if it violates forum rules

Regarding question 2, what's the most efficient way to get all these cash equivalents from taxable to tax sheltered?

That is a tough question because it requires knowing why you hold those in the first place.
-Do you like feeling like part of your portfolio is "safe" from market turmoil? if so, a treasury fund (I'd probably recommend intermediate duration or mixed duration) or even a total bond fund in 401k is a good alternative
-Do you like the security of immediate liquidity? If so, keep in mind you can also sell equities, but nothing quite replicates a cash holding in a money market fund. I'd recommend 5-10% of total portfolio tops.
-Are you looking for something non-correlated with equity performance? Cash does meet this criteria, but has such limited volatility and return that is hard to use for rebalancing (other than "dry powder.") Long-term treasuries, while much more volatile than cash, are non-correlated with stocks and provide a return over inflation long-term.

You can also mix and match. Ultimately, the main reason people keep cash or short-term holdings is for peace of mind. That may not be "optimal" but has clear value and is something no other asset holding can truly replicate. The downsides to rolling short-term T-bills in taxable are low returns made even lower by taxes, but the upside is a near-guaranteed return and safety of principal. If the latter is worth more than the former, keep as much cash equivalents as you like. There's no "wrong" answer.

In my pre-Boglehead days I looked into miners and frankly they confused me as just what they could do for me since they are sort of weird when you dig into the details of their business model.

The argument, as I understand it, is that gold miners are the most tax-efficient way to gain exposure to gold in a taxable account. Their returns are highly correlated with the cost of gold. This is because gold mines across the world are typically not operating at 100% capacity and vary their mining based on the price of gold, so they can produce more gold as needed when the cost rises. At least, that is my understanding.

I'd agree with you that holding gold as an ETF is probably a better plan in terms of return, diversification, and simplicity, even despite the tax complexities.

Statistics: Posted by breakfastinbed — Sat Feb 22, 2025 11:42 pm

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