Financial Samurai Q3 2017 Investment Summary and Capital Redeployment

Investing wisely can be a daunting task, especially when faced with substantial capital. This was the reality for many investors in the third quarter of 2017, a period marked by significant market movements and personal financial decisions. Understanding the intricacies of capital redeployment during such times is crucial for maximizing returns and minimizing risks. In this article, we'll dive into the investment strategies employed during this quarter, exploring the objectives, results, and thought processes behind the decisions made.

Investment Strategies in a Bull Market

In a thriving bull market, holding substantial cash can provoke anxiety among investors. The fear of missing out on potential gains often clashes with the dread of making hasty investments that could lead to losses. This duality of emotions is common, especially for those who have recently liquidated significant assets, such as property sales. The key is to develop a strategic approach to reinvestment that balances opportunity with caution.

Here are some strategies to consider when redeploying capital:

• Set clear objectives: Define specific return goals for your investments.
• Maintain liquidity: Keep a portion of your cash available for unexpected opportunities or market corrections.
• Diversify your portfolio: Spread investments across various asset classes to mitigate risk.
• Stay informed: Regularly review economic forecasts and market trends to inform your decisions.
• Limit emotional decisions: Avoid making impulsive investments based on market noise.

By following these guidelines, investors can navigate the complexities of a bull market while positioning themselves for success.

Breaking Down the 3Q 2017 Investment Objectives

In 3Q 2017, the investment objectives were centered around effectively utilizing the proceeds from a recent property sale. The overall aim was to redeploy approximately 50% of the sale proceeds, targeting a return of 10% per annum. Key objectives included:

• Redeploying capital: Invest around $935,000 from the sale.
• Maintaining liquidity: Keeping enough cash on hand to seize potential opportunities, such as acquiring a property with ocean views.
• Buying dips: Increasing stock exposure by 5% during market pullbacks.
• Expanding market knowledge: Engaging with bearish perspectives to balance a predominantly bullish outlook.
• Tax management: Reducing wage income for the remainder of the year to optimize tax liabilities following the home sale.

These objectives set the stage for a well-rounded investment strategy that accounted for both short-term and long-term goals.

Investment Breakdown by Month

Throughout the quarter, investments were diversified across stocks, bonds, and real estate crowdfunding. Analyzing the investment activities on a month-by-month basis offers insights into how market conditions influenced decisions.

July Investment Analysis

In July, a total investment of $317,580 was made, focusing heavily on bonds:

• Stocks: $82,000
  • $29,000 in large-cap technology companies.
  • $20,000 allocated to a 529 college savings plan for a child.
  • $33,000 invested in an S&P 500 index fund.
• Bonds: $235,000 in various California municipal bonds with yields between 3.7% and 3.85%.
• Mortgage Pay Down: $580 toward a vacation property in Lake Tahoe.

This allocation reflects a cautious yet opportunistic approach, favoring bonds for their stability while selectively investing in stocks during a market dip.

August Investment Recap

August saw a more robust investment total of $537,403, driven by further stock purchases:

• Stocks: $92,000
  • $42,000 in the S&P 500 index fund.
  • $15,000 in the child's 529 plan.
  • $35,000 in large-cap tech stocks.
• Bonds: $234,111 in individual zero-coupon municipal bonds yielding approximately 3.85%.
• Venture Debt: $72,712 in a second venture debt fund.
• Mortgage Pay Down: $13,580 of which $12,000 went to a vacation property.
• Real Estate Crowdfunding: $125,000 in a preferred equity investment in a Las Vegas apartment complex.

This month highlighted an increased confidence in stock investments, capitalizing on market sell-offs to bolster equity positions.

September Investment Summary

In September, the total investment amounted to $254,889, with a focus on both stocks and bonds:

• Stocks: $46,000
  • $15,000 in an S&P 500 structured note.
  • $31,000 in an S&P 500 index ETF.
• Bonds: $74,116 in a California municipal bond.
• Mortgage Pay Down: $9,773 towards properties in Lake Tahoe and Golden Gate Heights.
• Real Estate Crowdfunding: $125,000 in River Ranch Apartments located in Texas.

September was characterized by more subdued market activity, with careful investment decisions reflecting the prevailing uncertainties. The focus remained on long-term goals, despite the allure of quick gains.

Overall Investment Results for 3Q 2017

At the end of the third quarter, the total investments reached $1,109,872, with a remaining cash balance of $1,090,000. This substantial cash position allowed for flexibility in future investment opportunities.

Utilizing investment assessment tools is crucial for tracking performance. An evaluation using Personal Capital's Investment Checkup feature revealed that public investments were up 9.78% year-to-date. This figure, while underperforming the S&P 500 by 3.9%, still demonstrated a strong performance compared to the US Bond index, which was outperformed by 6.74%.

Despite these solid returns, the holistic view of the investment portfolio must include returns from physical real estate and online business ventures, which have proven to be some of the best-performing assets. The emphasis on diversifying beyond public markets has allowed for a more resilient investment strategy.

Future Outlook and Adjustments

The investor's strategy moving forward hinges on several critical factors. The goal remains to continuously invest in the stock market during dips, targeting $100,000 investments at every 1% correction. Additionally, should bond yields rise to 2.5%, plans are in place to allocate $250,000 to $500,000 into bonds. This approach reflects a proactive stance aimed at capitalizing on market conditions.

Engagement with real estate crowdfunding platforms will also continue, with plans for direct discussions with investment committees to gain insights into existing projects and future strategies. This level of involvement is essential for making informed investment decisions in a landscape that is ever-changing.

Ultimately, the strategy is to remain flexible, investing steadily across different asset classes while maintaining a cash reserve. This balance allows for seizing unexpected opportunities without compromising overall investment health.

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