I’ve been thinking a lot lately about asset allocation. I know… I’m a wild and crazy guy. This financial independence community agrees on many things including cutting expenses, increasing income, reduction of taxes, and usually on some type of method for accessing capital (i.e. safe withdrawal rate). One thing I’ve noticed is the disparity in the community among the proper asset allocation.
There are many blogs focusing on different methods to achieve financial independence. One size definitely does not fit all. There are paths to financial independence through real estate investing, dividend investing, low cost index funds, etc.
One of the crowd favorites Mr. Money Mustache utilizes real estate and diversified low cost index funds. Dividend Mantra goes the individual dividend growth stock route and recently published a book. Go Curry Cracker and jlcollinsnh keep it simple with low cost index funds.
There are many ways to get to the goal, but no one has the answer of the best way to get there. This is because there is no best way. I have debated with myself over and over again the best way to achieve my goal of achieving financial independence. Do I buy a bunch of diversified dividend growth stocks? Do I buy rental real estate? Do I buy low cost index funds? I won’t lie, those questions played on repeat for a while.
In the past year, I have definitely settled on the low cost index fund method of getting there. The more I keep it simple, the less I have to stress about which is important to me emotionally. I still have some individual stocks that I have picked up over the years. I check my brokerage account daily, sometimes multiple times to see how my little portfolio is doing. If I stress about it that much now, who knows how bad I’d be in 10 years when I’d have a significant chunk of change in individual stocks in my brokerage account. Like I described in my last post, people like Mr. Money Mustache, jlcollinsnh, Rick Ferri, Jack Bogle, etc. have shown me that low cost index funds are definitely the way to go for me personally.
I also would love to add real estate to my assets (physical real estate, not REITs) but my current situation does not lend itself to being the right time to get involved in this investment arena. I’m quite handy and wouldn’t mind having one or two investment properties churning some passive income my way in the future, but not right now.
Are you planning on achieving financial independence through real estate, index funds, or dividend stock investing? How did you decide on your method? Does emotions play a part, in addition to the numbers?