Mid-Year 2017 Investment Review by Financial Samurai

In the ever-evolving landscape of personal finance and investment management, regular assessments of one's portfolio are crucial. The practice allows investors to stay aligned with their financial goals and adapt to market shifts. In this article, we will delve into an extensive mid-year investment review, exploring various strategies, asset allocations, and performance metrics that can enhance your financial acumen.

Investment Review Overview

Every quarter, it's vital to review your investments comprehensively. This involves evaluating not just returns, but also understanding the risks associated with each asset class. For many investors, setting a specific return target—such as a conservative 4%-6% yearly return—can provide a benchmark for evaluating performance. However, as financial circumstances change and market conditions fluctuate, these targets may need to be adjusted.

For instance, an investor who has achieved their financial goals might initially desire lower returns but may find themselves aiming for higher returns as they become accustomed to their newfound financial freedom. This phenomenon is known as hedonic adaptation, where satisfaction diminishes as one becomes accustomed to their circumstances.

April Investments Breakdown

In April, a diversified approach was taken across various asset classes to maximize potential returns:

• Stocks: A strategic investment of $10,000 was made in Netflix at $141 per share, significantly higher than the previous purchase price of $92. This decision was driven by confidence in Netflix's robust original content strategy, despite its cash flow challenges.
• Mortgage Payments: A proactive approach was adopted by paying down $3,000 on a vacation property mortgage at 4.25%. The goal is to chip away at this debt incrementally, aiming for complete payoff by mid-2022.
• Real Estate Crowdfunding: A substantial investment of $250,000 was made in the RealtyShares fund, designed to provide exposure to various real estate projects. This included a $600,000 investment in a student housing complex near the University of Arizona, highlighting the strong demand for rental properties in college towns.
• Home Improvement: Investing in property enhancements, such as landscaping, not only adds value but also improves personal enjoyment of the property.

May Investments Analysis

May brought additional capital allocation in several key areas:

• Bonds: An investment of $26,600 was made in California municipal bonds, yielding a gross return of approximately 5.5%, taking advantage of tax efficiencies.
• Mortgage Payments: Another $5,000 was allocated toward the vacation property mortgage, demonstrating a continued commitment to debt reduction.
• Real Estate Crowdfunding: A $700,000 investment was made in a Virginia hotel, capitalizing on the booming hospitality sector in the region.
• Home Improvement: A hot tub was purchased for $15,825, reflecting a desire for personal enjoyment while also enhancing property value.

June Investments Overview

As we moved into June, the focus shifted towards maximizing capital efficiency:

• Venture Debt: A capital call of $3,001 was received for an existing venture debt fund investment, indicating a potential for solid returns.
• Mortgage Payments: A significant $22,000 payment was made toward the mortgage, reflecting a disciplined approach to debt management amidst market uncertainties.
• Real Estate Crowdfunding: A $775,000 investment in a full-service hotel near Dallas was approved, reinforcing a bullish outlook on the heartland of America and its economic growth.

Capital Commitment Review

This quarter saw a notable commitment of $272,426 in new capital, averaging over $90,000 per month—well above the goal of $30,000 to $50,000. This was largely due to the staggered investment strategy employed with RealtyShares. Planning ahead is crucial, especially with potential life changes such as growing family obligations.

When considering capital allocation, it is essential to prioritize investments that align with both short- and long-term financial goals. Here are some recommendations for maintaining a balanced investment strategy:

• Set clear investment targets.
• Review your portfolio regularly and adjust as necessary.
• Focus on maintaining liquidity for future opportunities.
• Avoid lifestyle inflation by prioritizing saving and investing.

Pro Forma Performance Analysis

With a targeted return of 10%, the estimated projected return for the invested capital in the first half of the year is around $42,744. Current returns indicate a promising 15% yield, although caution is exercised in optimism, especially regarding home improvement returns due to variances in costs.

Evaluating performance metrics against market benchmarks is essential for effective investment management:

• Monitor equity returns against major indices.
• Assess bond performance in relation to interest rate movements.
• Recognize the importance of diversification to mitigate risks.

Investment Management Recommendations

To enhance your investment strategies and performance, consider using tools like Personal Capital's Investment Checkup feature. This platform can provide insights into your current asset allocation and help align it with your financial objectives.

As of now, public investments have yielded a 9.78% return year-to-date, which is slightly below the S&P 500 but significantly above the US Bond index. Maintaining a disciplined approach to investing and reassessing your strategy regularly is crucial for achieving long-term financial success.

Key takeaways for successful investment management include:

• Utilize technology to track and analyze your investments.
• Stay informed about market trends and economic indicators.
• Regularly reassess your risk tolerance and investment horizons.

By continuously reviewing and adjusting your investment strategies, you can navigate the complexities of the financial markets while working towards your long-term wealth-building goals.

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