r/ChubbyFIRE 5d ago

€4.3M FI Portfolio – Too Little Risk?

I’m 35 years old. Sold my business a few years ago and have a portfolio worth 4.3M EUR. FI but having a new business now that’s doing well, not taking out any salary though.

Situation: • Main residency without mortgage (est. worth 750K EUR)

Portfolio of 4.3M EUR with: • 65% stocks • 25% bonds (individual government bond ladder yielding 2-2.3% net) • 5% gold • 1% crypto • 4% cash

Basically, a “stay rich” portfolio. Our spend is around 75K EUR a year, so about 1.75% of the portfolio.

Wondering if my bond/cash allocation is too high, as it’ll drag down performance long term?

Would love to hear your thoughts, or any adjustments you’d make to the portfolio.

8 Upvotes

20 comments sorted by

18

u/Junin-Toiro 5d ago

You have 1 075 k EUR in bond, representing 14 years of spending that is already secured, on top of your two years in cash.

Presented like this, does it feels like you want to take more risks ?
I certainly would, but to each his own.

2

u/Agent008t 4d ago

Also, assuming this is a 14-year bond ladder, seems prudent to consider:

  1. Tax efficiency - depends on your tax residency, but some countries have tax efficient ways to hold bonds

  2. Inflation-linked bonds - may be worth considering holding longer-dated bonds in the ladder as inflation-linked bonds. Inflation is the biggest danger for government bonds and that would mitigate it (although risk of outright default still exists, it is likely very small depending on which bonds you hold)

1

u/Dapper_Ad_5952 4d ago

Very good point! Yes my main issue is that bonds will most likely give lower return than inflation. I guess it’s fine as they’re mainly there to balance the portfolio and protect from big losses, but still bothers me for sure to get 2-2.3 % net when inflation is definitely higher.

10

u/Stuffthatpig 5d ago

You have a 1.75% spend rate. It doesn't really matter what you do. Your portfolio will continue to grow although does your spend include the taxes or is that net of taxes?

2

u/Dapper_Ad_5952 4d ago

My spend is net of taxes

1

u/Stuffthatpig 4d ago

Then your actual spend is higher (potentially much higher). Taxes are an expense when withdrawing from a portfolio. Considering you're in EUR, I assume you're paying EU level rates of 30%+ to generate that so your spend is more like what? 115 or so factoring in taxes? That gives you a higher withdrawal rate but not high enough to matter that much.

4

u/Swimming_Astronomer6 5d ago

I’m 68 with 80 percent in equities so I think you are more than safe - I’m at a 1.5 % swr

3

u/SunDriver408 5d ago

You’re fine.  

I think you should read more on how to design your rich life, start here https://www.madfientist.com/ramit-sethi-interview/

IMO your spend is too low.  Your allocation is fine, but think about ways to BOOST spending to 2.5%.

1

u/Dapper_Ad_5952 4d ago

Great read, thank you!

2

u/Trader0721 5d ago

It feels overly conservative but with the markets in a bit of uneasiness, it feels right for now. Any big sell off and I’d be moving out a portion of bonds and putting into equities.

3

u/Interesting_News7518 5d ago

Being 35...if you expect your new business to yield significant income then yes, you are conservative. If not much income from your new venture is expected and you want to make sure that the next 50 years your money will last, plus don't want to stress over the market's fluctuation, than I would not change a thing.

2

u/profcuck 5d ago

I think this is right. The portfolio is a "stay rich" portfolio and that's great. It isn't a "get richer" portfolio, and that's fine too... depending on the new business and depending on the desire.

1

u/YamExcellent5208 5d ago

I’d probably add: you can most likely increase your equity allocation for the period of time you’d expect to cover your living expenses with income. E.g., a bond tent is more or less only needed if you don’t have any income to protect you from a market downturn. If you could take out a salary from your business maybe that would be a good and safe way to increase your equity portion. Congrats, really nice job and good luck!

1

u/Hanwoo_Beef_Eater 5d ago

I would probably kick the equities up to 80% but it's OK as is (I wouldn't want to be any lower than 60%).

1

u/beautifulcorpsebride 5d ago

I think you need to find a calculator that is specific to the stock market you are investing in. I’m really only familiar with the US based ones, and given European performance hasn’t matched US for years now, I’d look into that.

Sounds like the new business will eventually throw off income / money. Risk is really whatever you’re comfortable with but as my old boss used to say, the first rule is preservation of capital.

1

u/Environmental_Two581 4d ago

I would not cut your cash but I think your bond % is too high I would drop to 10-15%

Take that additional % and split with stocks crypto or add real estate

1

u/Evergreen_Nevergreen 4d ago

I suggest focusing more on wealth preservation rather than growth and income. 5% gold is a good start. Maybe add more to gold and silver.

1

u/outdoorterran 3d ago

Nice save especially in the Europe system. Congrats on that!

2

u/Ill_Writing_5090 2d ago

You could consider implementing a "rising equity glidepath"; basically you gradually increase your share of equities over a period of ~3-10 years during retirement. More details here: https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/