My IRA Asset Allocation

Here is a short description of my asset allocation for my IRA. Before I get into it, I’d like to say first that it is incomplete and imperfect in many ways. I am not a professional investor and do not have access to more complex financial instruments that I would use if available. My IRA portfolio is therefore a rough approximation of my ideal portfolio. I have a relatively high risk tolerance and this portfolio may not be suitable for other investors.My portfolio is currently invested 80% in equities through the use of ETFs (allowing for investments in over 800 companies with some overlap) and 20% in short- and medium-term debt.

This allocation description does not constitute financial advice and is merely meant to be thought provoking.  I have not and will not go into a description of my broader strategy or a justification of my investment choices. I have simply added a short description of my reasoning for each investment. That being said, go ahead and take a look.

• 30% Aerospace / Defense – (ITA) is an ishares ETF with holdings in companies like Lockheed Martin, General Dynamic, Boeing and so on. Lets face it all you hear about in the news is violence and with markets the way they are this is about as safe a place as any. These are also low Beta stocks that should help cushion your portfolio in times of high volatility. Plus a lot of these companies offer solid dividends. My major issue with this ETF is that the companies are all American not Global.
• 15% Alternative Energies – (GEX) is a VanEck ETF offering global exposure to companies producing energy from renewable sources like solar and wind. This market segment can be more volatile, but I think in the long run the world needs to end up using these sources so its worth taking the risk. First Solar and Tesla are two of the American companies held in this ETF. One of the plus sides of this fund is that you can feel good about holding these companies (where you might feel a little lousy for owning those held in ITA).
• 5% Energy Exploration – (FILL) is a globally diversified ishares ETF that holds companies like Royal Dutch Shell and BP. While the oil market might be soft, rock bottom prices leave the market with only one direction to go. These companies pay good dividends and have relatively low Betas. At only 5% of my allocation, I feel fine taking the risk. The ice caps are melting and who knows what we will find beneath them. I don’t condone drilling and destruction of the environment but if these companies are going to ruin our environment they might as well pay us dividends to deal with the consequences.
• 10% Global Pharmaceuticals – (IXJ) is another ishares globally diversified ETF and includes companies like Pfizer. Global climate change is causing increased rates of natural disasters. Natural disasters exacerbate disease issues. These companies also offer decent dividends and relatively low Betas to help cushion a portfolio. Share prices change depending on drug development schedules not broad market movements; this asynchronous behavior helps smooth out portfolio performance.
• 5% Global Telecom – (IXP) I hate utilities but they offer stability. Companies like AT&T included in this ishares ETF are like the U.S. Treasuries of the stock market. That being said, they are overpriced in the current market. These do offer great dividends and low Betas as well though and will make a good addition to a safer portfolio.
• 5% Du Pont – (DD) is a chemical company that also produces things like HAZMAT suits. Share prices popped during the Ebola epidemic and I am including this company in my portfolio for the same as Global Pharma. This company has a higher Beta but pays a decent dividend.
• 10% S&P 500 – (SPY) is a SPDR ETF that approximates the performance of the S&P 500 (ie. the broad market in general). I have a relatively high risk tolerance and I bought in when the market was down earlier this year. While I think the market is bound to take another dip in the near future, I am happy to be long from where I bought in and welcome a little more risk over the long term.
• 10% Income – (DODIX) is a fund made up of intermediate-term bonds. This is the eminence of a previous allocation that I have not yet reallocated. In the mean time, it has performed fairly well.
• 10% Money Markets – The remaining assets in my IRA are held in money markets. I will be doing more research to decide where best to put these funds. Between this and the other 10% income allocation, I have sufficient liquidity to take on new investment opportunities during the summer. I have a feeling the market might go on sale soon with all the Brexit, U.S. elections, and Fed-rate-hike shenanigans going on.

I will likely be making some changes in the not too distant future. 

Financial Preparations for an International Life

If you want to live abroad or work abroad, I am sure there are countless professionals and human resource people that would be happy to help you prepare your finances for the move. If you don’t feel like paying for the help or don’t work for a company that provides it, you may have significantly fewer options. I have decided to put together a list of things that I have done to prepare for my move abroad with the Peace Corps. I hope that these things will help other people that are more limited in there resources.

1. I opened a bank account that reimburses all ATM fees. I opened an Aspiration Summit Account. It is a mastercard so you can use it like a credit card as well as an debit card. This is a phenomenal, transparent new company that offers 1% interest on deposits over $2500. As a client you can choose to pay them any fee that you want for the services you receive (You can choose to pay $0). All ATM fees are reimbursed at the end of the month and they allow mobile deposits. The charge a 1.1% fee on international withdrawals but since the ATM fee is reimbursed it is still less than almost any other bank’s fees for the same transaction.
2. I opened a credit card that has no foreign transaction fees. I got a Capital One Quicksilver. It is a VISA, so almost anywhere that takes a credit card will take it. Credit cards are also great last resort if you are in a pinch. This card offers a flat 1.5% cash back rewards program, which is nice too. I recommend using the cash back to offset purchases, as there is no point in saving up reward dollars since they do NOT earn interest. This is especially true if you have opened the checking account described in number 1. (This is true for any rewards program.)
3. I also have had an American Express Gold Card for similar reason as the Capital One Quicksilver. There are no foreign transaction fees. Amex has outstanding customer service especially if you travel a lot. I have used Amex for several years and been very happy with them. The reason that I got the Quicksilver was to have a different payment option since many non-touristy businesses do not take Amex since it is so expensive to accept. This card has an annual fee after the first year but the points pay for it if you use it. I really have it for the safety that Amex provides and the credit limit flexibility.
4. Took my student loans out of deferment. As a Peace Corps volunteer, you are entitled to defer your loan payments. If you do not expect to have significant other income aside from your Peace Corps income, it would be a good idea to simply sign up for an income-contingent repayment plan (ICR). Odds are your payment will be zero or near zero and you will still have qualifying payments for the federal forgiveness program.
5. Set up auto payments for my student loans. These will be my only recurring obligation while I am abroad. I would recommend automating any mandatory recurring payments though just in case you forget or do not have internet access while abroad. While I am not actually obligated to make payments, it is a wise idea to at least cover the interest incurred so that your loans aren’t growing. I pay a nominal amount above the amount of interest being charged just so that I am at least picking away at the principal.
6. I rebalanced my IRA. I do not know how much time I will have to adjust my investments while away so I figured I should make sure I feel very secure with my investments while I have the time. I love ETF’s for the diversity they offer, their low management costs and their general liquidity.

Milford Beach

Little more challenging but the more colors the merrier!