What is the Rocket Portfolio?
In short, the Rocket Portfolio is just my personal portfolio. A portfolio simply means a group of financial assets. These assets can be real estate properties, shares, savings, funds, money, or any other type of investment.
As investors, we should diversify our investments through different asset classes as a protection measure. First, because we have to protect ourselves against ourselves (yes investors do make mistakes) and second, we have to protect ourselves against an economic downturn.
Managing risk is one of most important aspects of investing (if not the most important one)!
“Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.”Denis Waitley
Each asset class is associated with different risks. As investors, we need to be comfortable with the risks we take.
If someone tells us that historically, 95% of the people that enter a casino lose money and only 1% become millionaires, would you ever enter a casino? How much woud you allow yourself to lose? This is your risk tolerance.
Other important factor is time! Each one of us has a certain time horizon based on life expectancy. As the economy works in cycles, someone in their 20s has more time to recover from a financial crisis than someone in their 70s. Therefore, the risk level should be tailored to each individual.
How I Invest?
I do not take into account my own real estate property into the Rocket Portfolio data. It makes sense to me to add it to my Net Worth (last update here) and yes, I do consider it as an investment because of my own personal situation.
Since this investment will not become liquid in the next few years, I prefer to focus on my other investments. If and when my personal residence becomes a rental property, it will be added to the Rocket Portfolio.
For the time being, I allocate capital into 5 different baskets:
- Stock Market
- P2P Lending
- Equity Crowdfunding
The 5 Buckets
Money is money on current accounts or savings accounts. It can easily be available without penalties. This includes a 6-month emergency fund just in case of unexpected expenses or a job loss.
Savings mean equity assigned to special savings accounts such as housing savings accounts and pension plans. This is “locked” money. Every month there is a contribution to this bucket in automatic mode.
The Stock Market is currently my largest asset class. I hold a mix of ETFs, dividend stocks, and growth stocks in different accounts. I combined all the accounts into this calculation to keep it simple. Read more here.
P2P Lending and Equity Crowdfunding are small chunks of my total portfolio. I am quite a new investor in these categories (less than 2 years). This bucket can generate quite good returns without much effort (between 8% and 13%) depending on the platform.
However, I see a major risk in P2P which is the recession behavior. Most of the platforms and loan originators did not handle a recession before so be aware. In my view, that should its weight on the Rocket Portfolio.
Same goes for equity crowdfunding as liquidity is really long term and the failure rate of startups is really high. Therefore, little money goes into it.
The Rocket Portfolio Allocation
The Rocket Portfolio Growth
Below we can see my portfolio growth in terms of valuation since the start of the year. This includes the new monthly additions and capital appreciation.