Discuss your personal asset allocation

nuppal Wrote: > > 75% Automobile (it appreciated in value believe it > or not) > 5% Motorcycle > 10% Equities > 10% Cash Finally, someone who has their priorities straight.

50 % suits 40 % equities 10% comic books

30% Real Estate 15% Stocks 25% Bonds 15%India & China 15% Cash

NakedPuts Wrote: ------------------------------------------------------- > Obviously you should count the full value of your > house and subtract your mortgage, but you can’t > count home equity in your personal asset > allocation without recognize it’s likely a heavily > leveraged asset on which someone else has a first > lien. This obviously doesn’t make any sense since home equity = the portion of your home that you have already paid off and own and that no one has a claim on.

Cash 7% Home equity 23% Concentrated 5% Illiquid Stocks 28% Stocks 22% Munis 15% 100000000000000000000% human capital!!

SMIRK Wrote: ------------------------------------------------------- > NakedPuts Wrote: > -------------------------------------------------- > ----- > > Obviously you should count the full value of > your > > house and subtract your mortgage, but you can’t > > count home equity in your personal asset > > allocation without recognize it’s likely a > heavily > > leveraged asset on which someone else has a > first > > lien. > > This obviously doesn’t make any sense since home > equity = the portion of your home that you have > already paid off and own and that no one has a > claim on. Yes, but it is a leveraged position --> a 1% change in the value of your home results in a change in the value of your home equity of >1%

akanska Wrote: ------------------------------------------------------- > Cash 7% > Home equity 23% > Concentrated 5% > Illiquid Stocks 28% > Stocks 22% > Munis 15% > > 100000000000000000000% human capital!! That’s a lot of leverage for human capital

artvandalay Wrote: ------------------------------------------------------- > SMIRK Wrote: > -------------------------------------------------- > ----- > > NakedPuts Wrote: > > > -------------------------------------------------- > > > ----- > > > Obviously you should count the full value of > > your > > > house and subtract your mortgage, but you > can’t > > > count home equity in your personal asset > > > allocation without recognize it’s likely a > > heavily > > > leveraged asset on which someone else has a > > first > > > lien. > > > > This obviously doesn’t make any sense since > home > > equity = the portion of your home that you have > > already paid off and own and that no one has a > > claim on. > > Yes, but it is a leveraged position --> a 1% > change in the value of your home results in a > change in the value of your home equity of >1% No.

its a high quality asset :wink:

Clearly! I’m sure it has produced huge capital gains since college.

SMIRK Wrote: ------------------------------------------------------- > artvandalay Wrote: > -------------------------------------------------- > ----- > > SMIRK Wrote: > > > -------------------------------------------------- > > > ----- > > > NakedPuts Wrote: > > > > > > -------------------------------------------------- > > > > > > ----- > > > > Obviously you should count the full value > of > > > your > > > > house and subtract your mortgage, but you > > can’t > > > > count home equity in your personal asset > > > > allocation without recognize it’s likely a > > > heavily > > > > leveraged asset on which someone else has a > > > first > > > > lien. > > > > > > This obviously doesn’t make any sense since > > home > > > equity = the portion of your home that you > have > > > already paid off and own and that no one has > a > > > claim on. > > > > Yes, but it is a leveraged position --> a 1% > > change in the value of your home results in a > > change in the value of your home equity of >1% > > No. The only way this is not the case is if you don’t have a mortgage, which was my assumption. Otherwise, you are clearly a retarded trouble maker.

> > Yes, but it is a leveraged position --> a 1% > > change in the value of your home results in a > > change in the value of your home equity of >1% > > No. What? You have a $100,000 mortgage on a $200,000 home, so you have $100,000 of home equity. If the value of your home goes up 10%, to $220,000, you now have $120,000 of home equity. $120,000/$100,000 = 1.2. (1.2-1)/100 = 20%. Voila! A 10% change in the value of your home has increased your home equity by 20%! I can’t believe I just bothered to type all that. PS don’t worry about what happens when the value of your home goes down.

The amount of leverage you have makes absolutely no difference on your home equity amount. It doesn’t matter if your mortgage is $100,000 or $1 billion, your home equity balance is still the same. Pet peeve = people who pass CFA Level 1 and all of a sudden try to throw erroneous financial jargon around and complicate otherwise simple concepts like addition and subtraction.

your home equity is the amount of money you have paid off on your mortgage, no? As in, if Joe has a home worth X and a mortgage of Y and has paid off Z (down payment included) on his mortgage his home equity is Z.

SMIRK Wrote: ------------------------------------------------------- > The amount of leverage you have makes absolutely > no difference on your home equity amount. It > doesn’t matter if your mortgage is $100,000 or $1 > billion, your home equity balance is still the > same. Pet peeve = people who pass CFA Level 1 and > all of a sudden try to throw erroneous financial > jargon around and complicate otherwise simple > concepts like addition and subtraction. No one made that argument. The point was that a large portion of your (not you specifically, anyone with a mortgage) net worth is highly levered. No one said your home equity is something other than what you claimed it was.

SMIRK Wrote: ------------------------------------------------------- > The amount of leverage you have makes absolutely > no difference on your home equity amount. It > doesn’t matter if your mortgage is $100,000 or $1 > billion, your home equity balance is still the > same. Pet peeve = people who pass CFA Level 1 and > all of a sudden try to throw erroneous financial > jargon around and complicate otherwise simple > concepts like addition and subtraction. its not the amount… its the allocation. Would you say that person X who has a personal account where they have 80 in cash and 100 dollars in stocks that they have purchased on margin w/ a 20% maintenance has 80% cash and 20% stock allocation?

akanska Wrote: ------------------------------------------------------- > SMIRK Wrote: > -------------------------------------------------- > ----- > > The amount of leverage you have makes > absolutely > > no difference on your home equity amount. It > > doesn’t matter if your mortgage is $100,000 or > $1 > > billion, your home equity balance is still the > > same. Pet peeve = people who pass CFA Level 1 > and > > all of a sudden try to throw erroneous > financial > > jargon around and complicate otherwise simple > > concepts like addition and subtraction. > > > its not the amount… its the allocation. Would > you say that person X who has a personal account > where they have 80 in cash and 100 dollars in > stocks that they have purchased on margin w/ a 20% > maintenance has 80% cash and 20% stock allocation? Here we go again.

Er, this really depends on how you want to classify the assets and liabilities. If home equity is defined as the net balance of your home value and mortgage, then yes, it is a leveraged asset. However, I could also say that I have a fixed liability (the mortgage) and an unrelated unlevered asset (the house). Aha! Why are we arguing about this?

That’s funny, my pet peeve is people is people who put up threads like “personal asset allocation” and then barely understand the concept. Home equity doesn’t really belong there for a number of reasons, but if you do want to include it, you should really do it in the form of a net worth statement, and recognize all your liabilities as well. Think about it in terms of your other asset allocation decisions. Can you just increase or decrease your allocation to home equity at will? To a certain extent you can, but it will involve paying off (or taking out) more debt. To continue to just ignore this, as if your home equity is entirely equivalent to a stock portfolio, is stupid.

What’s stupid is assuming that an asset is defined as something you can increase or decrease at will. If that’s the case then most private equity investors are worth nothing.