Our home is part of our total wealth. Avoids having to find/pay rent to others (imputed rent is similar to stock dividends). Might be sold to downsize to release capital, could even be totally sold in order to fund a move into a twilight period of living in a nursing home. Price appreciation somewhat similar to stocks, income (imputed rent) similar to stocks (dividends) - might be considered as being equities.
We also will have pensions income - that might be considered as income from a inflation adjusted bond ladder, that precisely exhausts/expires upon death.
With a 67/33 equities/bond preference and with the above in mind any liquid wealth might be split in order to align with that target. Consider home value and stocks as being the same, ditto for bonds and pensions. If $1M in each of home, stocks and bonds sees the house value drop 30% to $700K, stocks and bonds unchanged at $1M each, revised total wealth $2.7M, then rebalancing to 67/33 = $1.8M in combined stock and house value, so $900K in bonds, $700K home value, $1.1M in stocks.
Put another way and if you had $3M of capital and nothing else, one might buy a $1M home with one third, buy another house with a third and rent it out for rental income, invest the final third in a bond/TIPS ladder. Or alternatively buy a home, invest a third in stocks and a final third in bonds. Or invest two thirds in stocks, rent a home, invest a third in bonds.
For those that have enough pension income to cover their spending, own their own home, then 100% stocks for any liquid wealth is fine. For another who has no pension and rents, 100% stock for liquid wealth would be unwise.
We also will have pensions income - that might be considered as income from a inflation adjusted bond ladder, that precisely exhausts/expires upon death.
With a 67/33 equities/bond preference and with the above in mind any liquid wealth might be split in order to align with that target. Consider home value and stocks as being the same, ditto for bonds and pensions. If $1M in each of home, stocks and bonds sees the house value drop 30% to $700K, stocks and bonds unchanged at $1M each, revised total wealth $2.7M, then rebalancing to 67/33 = $1.8M in combined stock and house value, so $900K in bonds, $700K home value, $1.1M in stocks.
Put another way and if you had $3M of capital and nothing else, one might buy a $1M home with one third, buy another house with a third and rent it out for rental income, invest the final third in a bond/TIPS ladder. Or alternatively buy a home, invest a third in stocks and a final third in bonds. Or invest two thirds in stocks, rent a home, invest a third in bonds.
For those that have enough pension income to cover their spending, own their own home, then 100% stocks for any liquid wealth is fine. For another who has no pension and rents, 100% stock for liquid wealth would be unwise.
Statistics: Posted by seajay — Tue Nov 19, 2024 5:10 am — Replies 26 — Views 1894