My portfolio is up around 51% YTD, entirely driven by my overweight holdings in certain technology stocks.

• Stocks: 87%
• Real estate: 6%
• Cash: 5%
• Credit, PE, Other: 2%

As a percentage of total asset allocation, several technology names continue to dominate my portfolio:

• Cloudflare: 36%
• Tesla: 8%
• Amazon: 7%
• Google: 6%

Having almost 60% of my net worth in only four companies, and over ⅓ of my entire net worth in just one company, is best described as “risky” and “unwell.” However, I have not learned my lesson just yet.

I’m sitting on more cash than I’d like but am unsure where to deploy it. For now it is in a money market fund (FZDXX) generating 3.94%.

Trimming Some Stocks

I almost never sell my stocks. But I trimmed 25% of a single name in my portfolio in October that is not listed above.

The company, like many others in my basket, is at an all-time high. And my gains on it are astronomical.

So, for the first time in years, I sold a technology stock.

I’m sure the stock will continue to climb. It always does after I sell 🤣

Editor’s note: It has risen 8% since I sold.

As I enter this next phase of my life and want to have kids soon, I think I might be a bit less aggressive in my approach to investing. And while I love and respect each of my major holdings, having more index funds is probably a safer bet going forward.

As such, I will probably redeploy these gains and dollar cost average into a Vanguard index fund soon.

Prenups and Real Estate

I recently did a prenuptial agreement. Part of that process involved documenting and valuing all of my assets.

The hardest part was figuring out how much my real estate assets are worth. I mostly carry them at my basis on these asset allocation reports.

But prenups aka premarital agreements are a little different. They incentivise one to be more accurate in reporting.

So I reached out to the principals of a few of my holdings to get better fair market value estimates. While they were all reluctant to give firm figures, I was happy to see some conservative markups.

Future Real Estate Investments

The valuation considerations for my prenup made me wonder: would I continue to invest in real estate? 

If an interesting deal came my way from a trusted partner, would I write the check?

Only one of my real estate investments has had a refinancing event that allowed me to get my principal back (the cold storage warehouse in New Jersey). The others have had a few distributions, which is nice. But my money has been locked up for years with little to show on my books as I carry them at my basis.

While I expect they will each eventually perform well, the lack of liquidity and reliance on interest rates for success makes investing in real estate a difficult exercise for an entrepreneur and stock picker like myself. I would have undoubtedly done better to invest all of my real estate money into index funds.

But I made these investments in a different time, mostly in 2020-2023, when interest rates were much lower and I had a lot of cash sitting idle. Real estate seemed a better investment than money market funds, and I felt like I was already over-exposed to stocks. Plus, I liked the idea of owning a hard asset investment – in this case, industrial warehouses and Colorado hotels.

Today, I still don’t understand how to calculate a cap rate. And I probably won’t get my principal back for several more years. So I’ll probably stick to index funds regarding any future cash deployments

Unless, of course, something extremely interesting from someone that I trust comes across my phone during a moment of greed or weakness.

Potential IRR for a Real Estate Fund

There is one real estate fund that I invested in January 2020. It was my first major real estate investment and I really liked the thesis.

I talked about it to a friend in Tiger 21, a high net worth mastermind group that I was in. My friend liked the sound of the fund and invested himself.

He recently reached out to the team at this fund with a simple question:

What net IRR range do you expect when the investment fully harvests?

And the firm did some research and wrote back to him:

Based on your funding date of XXX, 2020 and using the midpoint of the expected distributions included in the letter through 2029, it would be ~12.3% IRR. The variance could still be meaningful from here — this assumes XXX and XXX growth of 3~4% annually, so if the shortage of XXX (core thesis) continues to play out as it has for the past decade, it could be higher (each +1% of XXX is roughly +3% of IRR).  

Conversely, if the debt environment changes meaningfully over the next few years (favorably or unfavorably), it could alter the timing of the return of funds and, consequently, the IRR. Obviously many people think rates are headed down — which of course would be very welcome and could really benefit IRR! — but having lived through the recent historic rise in rates, we know that anything can happen and the best thing we can do is be prepared for a range of outcomes.

Now, I won’t comment on my friend’s reaction to that IRR.

But I’ll say that I would be happy with 12%. It is certainly better than keeping the cash sitting on the side.

But does that type of return keep up with inflation?

And does it account for having had our money locked up for nine years with an unknown liquidity horizon?

And does it let me sleep safe at night with the uncertainty of returns, the possibility of additional capital calls, or having so much reliance on interest rates?

I’m not sure.

But it further strengthens my position that I probably wouldn’t invest in future real estate deals knowing the long hold times that real estate investors can be subjected to. I’m at about 6% of my total portfolio in real estate, and that feels fine to me. At least until my wife wants to buy a house.

Conclusion

We’re at all time highs now. It looks like one of my technology bets is paying off, and I still love the company.

I should spend more time thinking about my investments and my asset allocation.

But my general strategy of “buy and hold technology stocks, and rarely sell” seems to be working out well for now.

I have an interview with the founder of one of my real estate investments coming soon. We toured a piece of land in Montana that I have a small ownership stake in. Follow me on X for future posts, or sign up for my Friends Newsletter.