039: Fueling Financial Independence: Inside my Portfolio Investment Strategy

When people ultimately ask me, how did I get to financial independence? It's because I built a business of investments. I built a structure around my portfolio so that it could become a business that would provide income to my family and financial stability, not just for this generation, but for the next. 

And what I found is that when you give it a purpose and a direction and you manage it like a CEO, you can do great things and sometimes in a shorter amount of time than you could ever imagine. Welcome to the podcast for financially focused technology employees. 

Are you working for equity?Do you have questions on how your career and money work together? Then welcome. Every week we discuss strategies and tactics for how to grow your career, build wealth and reach your financial and lifestyle goals.

Welcome to this episode of tech careers and money talk. My name is Christopher Nelson. I am your host and I'm really looking forward to today's episode because we're going to talk about my favorite subject, which is the evergreen portfolio. 

Now, the evergreen portfolio is where you create a business, a vision, a mission, and a strategy around your investments and you manage and grow it so that it becomes this financial vehicle that can support your family today and then also in the future for future generations. 

This is the third pillar in my teaching from equity to exit that has four main pillars. So the four main pillars I discuss in episode 16. If you want to hear me break down the four pillars at a high level and give you the strategy. 

You can then go to episode 35 through 38. I did four episodes on expertise. Expertise is the first pillar where you build your skills to a level of expertise that you can build a brand and a business around them. And those four episodes give you breakdowns of different techniques I used to do that. 

And then also a case study around my friend Bart Finelli who built incredible expertise, traded that for equity during his career. And now he's building a business around this expertise that he's built. 

The second one is equity. We trade our time and talent for equity as technology employees. And so this second pillar of equity is how do you do that strategically? How do you position yourself as this asset and trade it at the best companies thinking like an investor? If you want to check that out, you can go to episode 27 where I break down equity. 

Today, I'm going to be breaking down the third pillar, which is the evergreen portfolio. If you've executed one and two, your expertise in equity, then you have substantial means that you need to put to work in a strategic way so that it can provide you the benefits. 

The fourth pillar is the exit plan. I haven't done an episode around that, so stay tuned. And if you're a financially focused technology employee and you enjoy conversations like this, I would encourage you to follow the podcast right now. And then you can also subscribe to our YouTube channel. 

Then you can make sure that you're up to date whenever we're releasing new episodes. So why is this important to technology employees? So many technology employees that I speak with in and around investing don't understand that their portfolio is really this business that should be doing the most work for them. 

And it's really thinking of it as your future source of income and also your future source of benefits. If you build this portfolio strategically, what it provides to you is the ability to take sabbaticals, work when you want to work, being able to take down time between roles so that you can be more choosy and make better decisions about the companies that you go to work for. 

And also, I mean, let's admit it, right now in these choppy times when you have jobs and divisions being eliminated very rapidly, you want to have that failover and redundancy to be able to support you. 

A well-run, managed portfolio can provide these things. If you have this business outside of your regular nine to five, it also creates this phenomenal framework where your work becomes purposeful, meaning that when you're at work and you're earning that paycheck, and it may not be incredibly stimulating, it may not be hitting on all cylinders, you realize that the effort put there is towards your main purpose, which is building this portfolio that can be this future of where you're going to eventually manage that full time. 

And this is the vision that I want to share with all the technology employees, because this is the stuff that's not taught. What's not taught and why this podcast was created so that we can have transparent, honest conversations because you see people doing this. You see the results of this. Well, how is she able to take a sabbatical in between these roles? She's not worried about getting the next role. She's taking her time, being very purposeful, and she's still paying all her bills. She has a portfolio and a financial strategy that's allowing for that. And the more that I talk to technology leaders, technology employees, there are many financially savvy people that have a clear strategy for their portfolio that lets them achieve these results. 

And this is what I want to cover today. And I'm going to break down two key things. Number one, the mindset of your portfolio is a business. And this is critical. And this is where many people go wrong. And I want to make sure you get it right is how do you think about this evergreen portfolio strategically and have the right mindset towards it so that you will get the result that you want. 

The second thing is I am going to break down for you my portfolio thesis and the way that I structure it so that you can see an example. Too many times I talk to people and they don't know where to get started. 

And again, the goal here of Tech Crews and Money, which is this podcast and also the associated newsletter, is for people to have visibility into how other technology employees are managing their career and money to get to financial independence, to get to where they own their time through examples. right, not just hearing from astronomers, people that want to go to the stars, but from the astronauts, the people that have been there. 

So I'm gonna break down for you the key elements and strategies of my portfolio that has gotten me to where I am today, and the reality of what it takes to get there. Why do people fail? Many people fail at this endeavor, and it's for a number of reasons, and I think it's important that we call those out first. people look at the media and they see this loud voice and they think that that's the only way to do it.

 Meaning that whether it's the fire movement, right? The fire movement is really, I mean, unattractive as far as I'm concerned, where you are putting a lot of investment into index funds, you're managing your expenses very tightly, and then you get to a point where you have this portfolio that you drain 4% every year, and you pray that it grows faster than that. That's how I see, that's how I interpret that strategy. 

And I've done a lot of research. I've tried to understand how that could work, and I've made a decision to move beyond that. And we'll talk about that in a minute. Or you look at and you see the voice of your traditional wealth manager, traditional wealth managers, they can just operate in traditional investments, stocks, bonds, money market accounts, CDs, they can't operate outside of that. And so they tell you, here's the box. People fail because they hear these loud voices and they think that's it. The second reason is that many people can't get comfortable having conversations and leaning into people that have built real wealth that are living the lifestyle that they want and figuring out how to get there. 

That's the part that we're solving here. This is an open conversation. I have an email ask at techcareersandmoneytalk.com. I take all questions. I answer them. I create looms. I do this every day. So, please send me your questions if you're curious about some of this. And so, you know, first reason is there's this big voice. Second reason is they can't really have conversations. 

They don't know where or how to look. And then the third reason is they don't give their portfolio a purpose. They treat it as a collection of investments. And I've seen people that are very savvy, you know, putting different things together, trying different investments, getting smart and learning how to invest in one way, but they're not looking at the whole and managing it as a business that they see themselves. You know, ultimately it's taking care of them. 

It becomes the main source of income for them and their family. And so it's these three main reasons that I see people fail. And the other reason, and I think it's not that people fail because of this, is they just don't know how it all works. The way that money really works isn't out there in the mainstream media. 

Real wealth is quiet. Real wealth is transacting behind the scenes and is still, if you go back to my, it was episode 20 that I did on alternative investments, you can listen how private equity is still very private. And so people don't know where to look or see for the information and that's really important as well. So here's the truth. Here's what I want to tell you that I want to put out there about portfolios. 

I want to put out about this journey that you may not hear from anybody else. Learning these skills, learning the skills to manage a large portfolio is not hard if you've gotten a computer engineering degree. 

It's not. Or if you've got another technical degree, if you understand math very well, it's really not that hard. Now it takes work, it's not just going to fall in your lap, you have to study. But if you understand, and this is so important, because so many technology employees I know, feel powerless around their finances, in reality, they're just not leaning in and realizing, okay, it's difficult, it's awkward, I have to learn a new skill, and just learning it. But it's so, so, so important. The other thing is that a lot of these strategies and tactics are not in the mainstream. You have to dig, you have to get into groups, you have to get into conversations to uncover these things. A lot of private equity is still very private. 

And we'll get to like what that all means in the scope of the portfolio in a moment. But it is really, really important to understand that real wealth, the way it's managed is still done in private when you think about ultra high net worth individuals, meaning $10 million net worth and above. 

And if you want to be there, if you want to grow your wealth to be there and have it take care of you the way it does for those families, Then you need to study them. You need to understand how they think, how they act, and how they invest. so that then you can achieve those same results. 

You need to build a network of like-minded people. You need to bring in a tribe that is doing this to go on the journey. And I'll tell you right now, it's fun. I'm having a lot of fun. I just got back from a trip where I was meeting with investing partners. I met with other people that I'm making investments with, and I'm just having a blast. It gets to the point that when you enjoy investing well, helping people move their business forward, then it's also very exciting for you as well. 

Many people will fail, will struggle with this because of busyness, right? And so it's important that I know for myself, I was at one point a very busy technology executive. You have to make time for this. You have to give this a priority that is greater than your day-to-day job and be willing to work for it Because when you do, it's going to work for you. It's going to provide you amazing income. 

It's going to provide you amazing benefits. My overnight success to financial independence in August of 2022 took me 10 years. That was 10 years to become an overnight success. And I say that in jest because there's always this conception that it happens very quickly, but it doesn't. It was 10 years of hard work. And I was amazed at how much could happen in that short period of time of 10 years. 

And why I'm doing this is I'm hoping that many of you can do it in seven years, maybe even five years, can execute plans like this. Because with knowledge, with understanding and focus, you can ultimately accomplish a lot. So I want to give you an understanding of how I learned and got this education because this is part of that story you can learn from as well too. There were two things that really drove me to build this evergreen portfolio. Number one was I was convinced that somebody was living this lifestyle that Robert Kiyosaki described. he described in his cashflow quadrant, somebody getting to quadrant four where they have these investments and these investments are paying them. 

Reading that book, and the book was a little frustrating because it was a concept book. It gave you the understanding of what was possible, but there was no how-to. And so that took me a long time to figure out. I think I first read that book in the late 90s. And so you think about it, it was probably 24 years before I got to the point where it was all working for me. But I had that concept and I was convinced that I could have this portfolio that would continue to grow and pay me checks. 

I was convinced that that could work. And so, that was one obsession that kept driving me to figure this out. Who's got the answer? Who can I speak with that has something like this that exists that I can now start building for myself? The second thing that I was surely convinced of was that the portfolio strategy of the 4% rule didn't work. It was something that was being sold to me But I was convinced that anybody who had millions of dollars of net worth did not subscribe to that thesis. 

And so that's where my learning started is I see that there's the possibility of something out there. What I'm being spoon-fed by the media, by these fast food wealth managers is not the truth, is not really how it's done. And so both of those convictions kept me asking questions, kept me curious. 

I was constantly trying to find people that would have these conversations and I didn't know how to talk about money. I didn't come from money, but I just, you know, am the type of person that realized that I can stumble into a conversation, be polite and be considerate and understand how to engage. 

And over time, now I realize that if you want to have conversations about money, you don't talk about amounts, you talk about strategies, you talk about percentages, you talk about those types of things, because people won't open up their personal financial statement to you. but they will tell you where they've invested, what's working, what hasn't worked, what strategies they apply, who they learn from, where they came to understand such things. And many times they're willing to open up and say, Hey, talk to this person over here. I did an investment with them at this point, and I think they're good at X. 

And so what I came to understand is that To build this evergreen portfolio, the clarity that I got is I was marching down this path and really trying to understand how to build wealth. And I tried a lot of things. successfully built a stock portfolio based on companies that I was working for in the early 2000s, such as Salesforce.com and Accenture and created some personal holdings there that did very well. 

I was also a student of the Motley Fool and learned how to read financial statements and I was able to get in on early Amazon and Netflix that helped that particular portfolio grow. But then I went all in on a side hustle, which was a franchise of two juice and smoothie bars. And ultimately that swallowed up all of the earnings that I had made when we had to turn that company over to the bank in 2009. because of the great recession that just, we couldn't sell a $4 smoothie against the $5 foot long subway sandwich. 

And so what I realized then is that I wanted this portfolio to be something that was an entity that I wouldn't touch, I would continue to invest in and grow. And that if I pulled money out for investments, I wasn't gonna go all in. At that point I could, I was a single guy, and didn't have a family, but all of a sudden building a family, I realized I needed to have something beyond that. 

So this was learnings and education in the field from labeled a failure turned into a valuable lesson learned. What I eventually came to realize, and this was post-Splunk After I took that company public, there were wealth managers that wanted to come see us. And I was excited to talk to them because I thought at this point, the doors were going to open and I was going to be sitting with something akin to what I'd heard at that point was a family office, and they were going to be giving me private placements.

I was going to be looking at real estate, not through REITs, but direct ownership of real estate, and then a portfolio. you know, some type of a traditional portfolio. What I ended up getting was the same fast food wealth managers that I'd interviewed before and made a decision not to go with because I could do the same thing that they did without paying them the asset under management fee. 

And so it became clear to me that I was not going to find the answer by just sitting back And even though I now had substantial holdings in Splunk stock, that that was not going to come to me, I still had to go find it. And it was in talking with my good friend, Marco Covedo, who I also have an episode with where he is now a chief investment officer of a family that has a nine-figure net worth. He's chief investment officer of their family office. I realized a couple of things. I had to go into private equity investing. I had to learn it. And I also realized that in private equity investing, you can get real income, meaning 8% to 20% cash on cash returns. Those types of returns exist there. You have to do the work. 

You have to do the research. There's no traditional managers that go out there and find private offerings and offer them to you that I've met. The other thing is that ultra high net worth individuals usually have 50 to 60% of their investments in what falls under the private equity umbrella. 

So this was the eye opener. And I want to give you some data here because I think data is really important for you. So Tiger 21, you can go online and find Tiger 21. It is a group of private individuals that have a net worth. I think it's gone up from 10 million to 20 million. I think that it's gone up. 

I'm not sure on that, but they share their investments together. It's a club that you subscribe to with very high fees. And you present your portfolio and you defend your portfolio in front of other people and you also invest together and you get ideas. So just think about that for a moment. 

That is things that I always talk about. You want to do it in a group. You want to be around other people that are doing the same thing. Ultra high net worth individuals, they do this systematically, doing it every quarter. And they provide an allocation report. I looked at the latest one that's published right now is Q3 of 2023, and they have the following allocations of 100% of their portfolio. 

So they basically take all the portfolios, they blend it together. 20% is in public equity, one fifth. 30% is in private equity. meaning funds or meaning businesses that they own. 25% is in real estate. So that would be direct-owned real estate that they own, whether that's self-storage or industrial or apartment buildings, or even single-family homes. 12% in cash. 

And then the remaining 13% is mixed between very low risk, fixed income, hedge funds, and then what they're calling miscellaneous. So as I was studying this, as I researched and I started finding these groups and I was just relentless because I knew that it existed and I knew that the 4% wasn't working, what we were being sold isn't what the high net worth individuals were doing. I found that I needed to build and grow a portfolio like they did. I needed to mirror my portfolio off of what they were doing. I also found and discovered in my research, and this is something that you need to know too, is that public markets are shrinking. Yes, what we get access to is traditional investments. Many companies are going private. The move away from the publicly held stock towards private equity ownership has been underway for decades. According to a 2019 report from Ernst & Young, the number of U.S. companies that are publicly held has declined by 50% since the late 90s. 

Meanwhile, private equity funds proliferated during that period. soaring from fewer than 1,000 PE funds to nearly 4,000. And the point that I'm trying to make here is that if investments are going that way, if the market is moving in that direction, then we need to understand what that is so that we can be placing and managing our capital there. Those are high value investments. You will find that many of them provide asymmetric returns. And again, this is not investing advice. I need to say that so that my SEC lawyer is calm and not calling me. But this is education, this is what's happening in the marketplace and you need to be informed and you need to understand where do you want to be placing your money. 

The reality is that there's little help in private equity. Private equity is something that is best done in groups where you engage with other people who have experience and you can start learning alongside them. Because once you start journeying into private equity, if you have a traditional wealth advisor, they are not trained for this. They're not. And again, not advice, just facts. 

Traditional wealth advisors are trained to operate in traditional markets, stocks, bonds, REITs, etc. You start going into private equity, they're not. And this is what I discovered as well too. The other thing is, if you have an advisor who has compensated assets under management, meaning that they get income off of managing your investments, they have no incentive to encourage you to go in that direction. Many of them will say too risky, too volatile. 

And this is, again, your ultimate decision. The decision that I made was to get educated, get into groups and to start placing dollars. And so I want to be able to break down to you. I'm going to take a little break right here, but when I come back, I'm going to break down to you the mindset. 

And then I'm also going to break down to you my portfolio allocation and, or in my portfolio thesis of how I'm managing this. Okay, welcome back to the second half here. Thank you so much for listening in on how you can build and structure an evergreen portfolio. This is the strategy, and this is also the investment thesis of my investment portfolio that we're going to cover in this half. The first half, we covered the high level, what it is, how does it fit into the equity to exit framework, and also where people go wrong why it's important, and then also what really drove me to do this. So now in the second half, let's talk about the mindset. It's important that you're not building a money management business. 

This is the mindset. It's not about I'm managing money. It's about building a legacy wealth business. I'm not managing money. I'm building legacy wealth. It's powerful because it changes the way that you think about it. 

You're not just trying to fill a checking account or a savings account that's something that you can live off of. You're trying to create a financial vehicle that can impact generations. This is what changed my thinking ultimately because when you see ultra high net worth individuals, they're truly the quiet money, the money that has been here for generations is constantly thinking about how do they not only manage their wealth, manage these different vehicles that they have to create income, but also to be philanthropic, also to make sure that the next generation is prepared to manage it. What we see in the headlines is all the failures, is all the catastrophes. 

What we don't see is all the successes that are just quietly continuing to go on generation for generation. So this is your mindset shift now is it's not I'm creating a pile of money, wealth, you know, money management, but I'm creating a legacy wealth business. That's why you want to brand it as a legacy. 

And when I say brand it, I'm talking about when you create an LLC, this should be treated as a business. Your investments, your assets should be put into some type of corporate structure. I did not mean to be instructive when I said LLC, talk with whether that's your asset protection lawyer or your tax lawyers, what's the best structure for you. But when you create this business entity, make it mean something. 

For my family, and we keep the name private because I also think it's important that you don't brand it to who you are today so that it's not searchable. Again, this is an asset protection strategy. But we have given it a family name. 

I studied genealogy. And this was a woman that we had this family many, many years ago that lived in a country and it was getting overrun and attacked. And in the middle of the night, this woman took the three children. The husband got killed. But this woman, direct descendant of mine, rode these children through the middle of night to across a small sea, 35 miles to safety so that the legacy could continue. 

And I felt like that name, you know, who she was embodied what we want our family to be. There's a story around that. There's a history around that. And I tell this to my sons because I want them to see that we're building off of what was given to us and we're continuing to move forward. We want to make sure that like any business, you're putting values and principles to it. 

So make sure that you brand it as a legacy, something that is going to be part of your multi-generational company. you need to give it a vision and a mission. This is your opportunity to put fingerprints on the next generation. This is what gets me excited and juiced is that, you know, the things and the values and the principles that are important to myself and my wife Regine, we can put that into this entity and that will be part of it going forward as long as it exists. 

And I believe that if we do it correctly, if we put the right constructs in place, it can live for multiple generations and grow and ultimately evolve. The third one is the most important. This is the most important for you when you're thinking about your evergreen portfolio is you need to establish yourself as the CEO and the founder, or you're the CEO and your partner could be another executive. 

But I think there needs to be a lead executive who, just like in a company, is driving the mission, the vision, and the strategy, and then also holding all the other team members responsible. This isn't something, as you're growing your net worth over time, this isn't something that you do on your own. right? You're going to be managing it as a business. You're going to have team members. 

You're the CEO. You're setting the direction and you're holding everybody accountable, just like a CEO would in tech. Meaning you need to evaluate. You need to select the right partners to partner with. 

You need to hire them. And sometimes you need to let them go. And I'm not saying that that's a firing, but I know for us, we worked with an incredible tax person for the last 11 years and then going into 2023, we made a decision that we needed something different. 

Did a lot of research and realized that we were working with a very strategic minded CPA, but there's a whole different level of tax professional out there, certified tax planner that served us much better for where we were going and what we were trying to achieve. So we leveled up, had an open and honest conversation and everybody's still friends. But we had to make the best decision for our business because we knew where we're going. We wanted a different level of service. And then just like another CEO, you want to make relationships with other CEOs. You want to get to know other people that are managing and driving their portfolios in this direction so that you can get input to them as well. And you can understand what they're doing, what are their success strategies because There's no competition in this. That's the beautiful thing about this is you're not competing against somebody else, you know, unless you're going to buy the same business or something like that. But infinitely managing and driving your portfolio, everybody is trying to do it to, you know, get their family, get themselves to a different level of success. So you brand it as a legacy. You have a mission and a vision. You are the CEO. 

Then you get clear on the business functions it owns and the services that it provides. And these are laid out. These are relatively straightforward. You know, investment management, tax strategies, asset protection, estate planning, philanthropy, those are the functions of this business, right? That's what should be operating and on that operating agreement that you have associated with that business entity, here's what it provides or here's the functions that it supports.

 And you're going to have, when you think about that, that's where you're going to actually have service providers that help you in many of those things. What is it going to provide to you and your family? It's going to provide income. It's going to provide checks that you can leverage to live. 

It's going to provide medical insurance at some point. When you exit your W-2, when you exit your 9-5, this should be your vision that this is going to provide you your health insurance, especially here in the United States where we do not have any type of nationalized health insurance. 

That's going to have to pay that. should also emergency cash should be stored in this entity. Any other type of benefits that you can get, you know, as you set it up as a business and it's a company, then it can provide you more benefits. What does that do? Strategically, it takes non-deductible expenses and makes them deductible. It's a tax strategy because you're running it as a business. 

These are all the benefits that you get. And then ultimately, The fifth thing that you do is you manage it like a business, meaning that you set annual plans, you have goals for it, you have KPIs for it, and you manage it throughout the year, having meetings with your different vendors, making sure that they're clear on what you're expecting and you're getting feedback on how different things are performing or services are being provided so that you're getting the best value out of it. 

When you do those things, when you brand it as a legacy, when you set a clear vision and a mission, you then are the CEO. You get clear on the business functions it owns and make sure you stand those up over time. Some of them need to be done infrequently, some of them more frequently, and then you manage it as a business, you will be shocked. You will be incredibly and pleasantly surprised on how things move forward very quickly to get you to where you want to grow this business because you're treating it as such. I witnessed so many times people create this pile of investments as afterthoughts and throw things at it, and then they get frustrated, why doesn't it give me the benefits that I want? 

You never treated it as a business. You treated it as this thing, and it didn't really have a mission or a purpose. When you give it, and this is why this mindset aspect is so important, when you give it the intention and the purpose, and you then manage that, week over week, month over month, year over year, this thing will then start evolving into what you want it to be. And our stills continues to this day. We're actively managing this. And what we find is that the more attention we give it, the more efficient it becomes, the more money it's able to generate, the faster it's able to grow. And I would encourage everybody to make sure that you hit those steps one to five. So, The other thing that is when you think about this, the way that you manage it is when we were both working in corporate, it was a closed system, meaning that all of the income that came out of it was just continually reinvested. One of the things that we set up is when you work in technology, we have the benefit when we trade our time and talent for equity, for those of us working for equity, we usually get compensated in three income streams. There's your salary, there's your bonus, and then there's your equity. And so, what was straightforward to us was we live within our paycheck, our week-to-week, month-to-month live within the paycheck. do whatever we needed to do, pay down more equity on our homes so that we had a mortgage that fit within the paycheck, different things that, you know, just get rid of things. You know, we didn't always buy new cars or we would pay cash for cars if we needed to get something that was new so that we could, and it wasn't always new cars, it was new to us cars. we would do those different types of things so that we could live within the paycheck. We would then use the bonus for large purchases or vacations. And equity just went straight into investments. It went into this vehicle. And our mindset was, let's stay broke. Let's stay within the system. And I mean, the great news was, is we weren't having to live off of 50% of our income, we were getting this equity that we can invest that fueled rapid growth of this portfolio. It was just with a little bit of discipline, we were able to live comfortably. We still got all of our lattes from Starbucks. We were then able to accelerate the growth because we kept it as a closed system. Then we opened it up as we needed some dollars. I took a sabbatical in 2019 for nine months. So we opened it up. We pulled some income in as we needed it to supplement some of our funds we'd set aside for the sabbatical. And then now it's opened up and providing wages. It's my wages essentially. So that is important when you think about running it like a business. Those are the five features and those are some of the different operational components. If this is something that you're interested in, you want to hear more about, and you want me to do a deep dive episode, please hit me at ask at techcareersandmoneytalk.com. Ask at techcareersandmoneytalk.com. There's also a forum on the Tech Careers and Money Talk website where you can reach out and ask me questions. But let me know. I'm happy to go deeper on this stuff. I love this. I live this every day. This is part of my work and my purpose. So mindset, you're thinking of the portfolio as business. Now let's break down having a thesis for your portfolio. So you heard about the allocations of the ultra high net worth. I took those allocations and I created a portfolio thesis for my Evergreen portfolio. And I'm sharing this with you today. Again, I will say for Byron, my SEC lawyer, this is not advice. What this is, is education. I'm just telling you what I have chosen to do. You get the opportunity to make your own choices. So a portfolio investment thesis is a structure that it's a framework that guides your decisions on how you construct and build your portfolio. And so there's five key elements that go into that. The first one is your investment objectives and goals. And so this is something that you want to make sure that you clearly define what are the ultimate goals of this portfolio so that then as you're picking investments, you want to go back and say, does that meet with our goals? And so what I have created here, I call it the 50-50 portfolio. And this is a variant off of the 60-40 portfolio that was prevalent in the 80s, 90s and up until 2008. The 60-40 portfolio was all traditional investments and it was 60% in gross stocks and 40% in income. And then as you got older, you moved your income from 40 to 50, etc. I've created this called the 50-50 portfolio and I think it's something that we will continue to manage regardless of the age of myself and Regine. And what that is, is when I look at the portfolio, the investment thesis, the objectives and goals is I want half of the portfolio to be in growth investments where their job is to grow. It's to just continue to grow in value. and that's their job. The other half of the portfolio is income. So, I am going to look at half of my net worth that's in that portfolio. Its job is to generate income. In an income producing asset, what it does is it doesn't generate income through a sale of itself. That's what a growth asset does. That's how it generates income, but you're actually getting distributions based on how that business is performing. So, if it's real estate, you have You have rental income that exceeds expenses. Those come to you in distributions. If it is a small to medium business that you own, it's the same thing. As the business is generating income, you get paid or it could be a debt fund, right? So that you're actually getting interest income off a loan that you actually made. Those are examples of income investments. So the objective is to make sure that I have half in income, half in growth. And the objective of the growth is I want it to grow 7% annually, which means that the size of that part of the portfolio would double every 10 years, or I want it to be twice inflation. If inflation is really high, I'm going to put more demands on it as well. And again, remember, this is, you know, multiple years, you're holding this stuff for time. So you want to make sure that this performance average out, you're going to have up years, you're going to have down years, but you're really looking at how does this trend over time, the income portfolio, I want the average return across that side to be 10% cash on cash return. meaning that if you have $1 million in that side of the portfolio, it's going to give you $100,000 of investment income annually. That's that side of the portfolio, that's its job. So very clear objectives, very clear goals. And you know, we can, there's obviously more to that, but I want to give you again this overarching framework, because that is what's really important when you start thinking about what does this even look like. So you have the objectives and goals and then you have asset allocation strategy. So this then takes this broad framework of 50-50 and it goes down another level. So when you are Allocating assets, what type of assets will then go into some of these different groupings, which will go into the gross side and the income side? What do those assets look and feel like that will then be eligible to go into each of those? And so to break it down in the 50-50 on the gross side, I've also then cut that side in half into 25% and 25%. So 25% is going to be stable growth. meaning that is going to be traditional stock investments that are going to be placed into index funds or S&P 500 funds or total market funds where I want those to grow. I want it to be conservative, meaning that I'm going to have it very diversified. I'm going across the whole market. The other 25% or half of the 50% growth is going to be high growth, where I'm taking more risks, including single stock positions, venture capital investing, seed investing, or even direct business holdings. I have some shares and ownerships in some brick and mortar, some restaurants, some different businesses that go into that portion of the portfolio. That is the gross side. And so those are some of the asset classes that belong in that portfolio, in that side of the portfolio. Then there's the 50% income. I have 25% of that. Again, I cut that in half, which is capital preservation. The other 25% is higher risk income. And I say that higher because overall you'll find that my portfolio tends to be a bit more conservative. I'm not taking the 50% of high growth and 50% of high risk income and putting it in very high risk investments. I try to allocate there a little bit more nuanced to maybe 10% on each side. So 20% whole of my portfolio would be very high risk. But when I think 25% capital preservation, that's going to be direct held low leverage real estate. This is something that goes counterculture or to what you hear in the media is like, oh, you always want to have a lot of leverage on your real estate. That's when you get the most value. Well, what you'll find is high net worth individuals, they have a set of their portfolio too, where they'll own buildings outright that have been in their families for years, the value keeps going up on those buildings and they continue to get great cash flow, they're not interested in getting any debt because they want to make sure that that portion of their portfolio does its job, which is its job is to produce cash flow and not have any risk against or the least amount of risk possible. So, direct low leverage real estate investments, farmland is a great capital preservation strategy, certificates of deposit, high interest savings account. These are the types of investments that go there. The 25% higher risk income, this is where private equity funds. Some, like I put together on the Wealth Forward Capital side, where you have mobile home parks. Also, we've invested in self-storage funds. holdings in automated teller machine funds. This is where I also put my value add multifamily. Value add multifamily is medium risk, medium reward. I put it there because it is definitely higher. This is where you put your debt fund. But this is important that you have a view to that allocation from a top stand and where do you want the risk. Where do you want the risk? And then also, what do you want your portfolio to be doing for you? So this is ultimately the key concept of this 50-50 portfolio, which is 50% growth, 50% income. And on the growth side, I have a high-risk side and a low-risk side. And there's some nuance in between there that I do some more nuanced allocations. But just for yourselves, if you've never been exposed to this, this is what it looks like. And these are conversations that people have about, okay, allocating your portfolio and then being able to defend it. Why do you do it that way? Where is the risk in the portfolio? Examining that and making sure that you understand how your portfolio is going to perform under different types of headwinds. And this is the next thing in thesis is you want to have your risk management and diversification. So when you look across the portfolio and the different asset classes, you'll find that many of them have different attributes. It's not just a stock portfolio. So stocks go up and down. My portfolio is going up and down. No. you'll find that when stocks got hit, 2020, 2021, and stocks got beat up, and then real estate values went up because there was a lot of government money flooding the market. Rents were being raised even through 2021 into 2022. Real estate was doing very well. Now, real estate is going down. We've just had stock market is going up. You find balance in both. And ultimately, you're looking to Make sure that all of your assets you're buying right, you're buying at a price point where they're going to perform well, even if the market itself starts taking a haircut. And you want these different asset classes to be able to balance each other out. Risk management diversification. And one of the things that's important for me is in each of those quadrants, I want to make sure that I'm not investing more than 8% of the value of that quadrant into a single asset because I just don't want that much risk. I don't want that much exposure. I want to make sure that if something goes south, it's a portion of the portfolio that I can get very comfortable with. And then the other two are investment selection criteria. This is something that's so important, especially as you start getting into private equity investing, because it's about the investment, but it's also about the operator. This is about finding the right people. And I have found that over time, as I've spent time in private equity, for the last eight, nine, I think 10 years even that, you know, I am getting pickier and pickier about the operators that I choose because I want to de-risk things and make sure that I have teams that have been there, done that, have a lot of healthy scar tissue moving forward. And then the last one is monitoring and rebalancing. All of these go into your thesis of monitoring is a task that you do to understand when do you want to rebalance. I know that right now we're over 50% on the private equity side. So we are in a multi-year strategy of how do we get back to that 50-50? How do we rebalance out the portfolio as we're looking at exiting some different investments over the next 12 to 18 months. So that is a investment thesis. I shared with you my 50-50 strategy, and that is what has worked to get me to financial independence. And it took me time to build up the skills to do the due diligence and also the experience to start placing more and more capital there. So it didn't happen overnight. But it was something that, you know, the more, you know, after the first two or three years, there was some slow, you know, maybe started to allocate, you know, five or 6% of the portfolio. And then as we got momentum, then we started making more investments. Part of it was also having a strategy in place of how we were going to do that. And I think this is so important. There's a lot of fundamentals in what I've said here, meaning that too many technology employees I see are overexposed in a single stock, two stocks, companies that they've worked for. And sometimes they have the inclination to then take that and then go all in on a single asset, single multifamily asset. Okay, I'm going to take a million over here and go a million over here. You have to find diversification or there's going to continue to be risk in the portfolio. So that's something that I would encourage people to think about. The goal of this thesis is to help drive, maintain, and manage your portfolio as you go. But remember that as your net worth increases, as you also build skills and are able to do different things, for example, I am moving now from only investing private equity in real estate to now small to medium businesses. I spent the last year doing some research and recently made an investment into a QSR, quick service restaurant fund, where it is invested in Burger Kings and Subways in the South. It has a great return profile and it's something that I did the work, made the investment, and now I'm continuing to work with the team to watch the performance and make sure that it's meeting my goals. And I tell you this because as you are in building your portfolio, evolving your portfolio, ultimately you want to grow with it. you want to mature with it. I am the CEO of this portfolio and it is so important that I am continuing to grow and manage it as well. So I know we covered off a lot today. This was an important educational episode so that you understand what does this look, feel, and sound like. I mean, so many, you know, I never heard a conversation like this and I would have. been running to try and understand how I could sit down and hear a conversation like this. And I wanted to make sure that you had it. And I know we covered a lot, but let's just review. The mindset of your portfolio is that it is a legacy business. You want to brand it as a legacy. You want to have a clear vision and mission for it. You want to establish yourself as the CEO. You need to own it, own all the decision-making, own the vision, own the KPIs, and then get clear on the business functions that it owns and the services that it's going to provide for you. Manage it like a business. be in there monitoring and managing it. Don't let it go by the wayside because if you don't, if you take care of it, it will take care of you. I'm here to tell you, I'm proof. Then we broke down for you the 50-50 portfolio thesis, where as you understand, 50-50 portfolio, 50% growth, 50% income, and then on the growth side, there was 25% stable growth, 25% high growth, and Then on the other side, there was 50% income, 25% capital preservation, 25% higher risk income. That's it. So if you have questions, please hit me up at ask at techcareersandmoneytalk.com. I'm hoping you do. I want to have this conversation. I want to understand what's important to you. And then I would also ask that if If you like this kind of conversation, please join Tech Career and Money News where I am putting out strategies and tactics every single week that help you grow your career, build wealth, and live well. Thank you so much for your time. See you on the next one.