Author Topic: Diversification on the micro level  (Read 1781 times)


  • Stubble
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Diversification on the micro level
« on: March 03, 2016, 09:13:45 AM »
As I increase my savings % and max out my tax advantaged accounts (401k, 3x 529s, FSA) as well as my 2x Roth IRAs, I am left with some money left over to do something with beyond my 6 months of expenses emergency fund.  The only debt still left on my family's plate is the $150k of our mortgage that we've been paying down fairly aggressively at +$2k to principal monthly which I have decided to put on hold.  Reason being is I wanted to have more liquidity with my funds for a potential home move in the next 3 years and so I've shifted from the final debt pay down to more of a taxable investment strategy that still leaves me a bit uneasy because of my macro level diversification strategy. 

I am basically set up for 80% stocks (60/40), 10% bonds, 10% REITs using lowest expense ratio index funds available for each component.  Now that I’m investing “the rest” into taxable funds, I am currently only investing into VTSAX.  Unfortunately, that leaves me vulnerable to market swings should I need the cash for a down payment on a home sometime in the next 3 years.  But at the same time, I really don’t want to leave it in cash because it pains me to watch inflation eat away at it and who knows when we’ll actually end up moving.

So I actually have 2 questions:
1.   Does it make sense to diversify my taxable holdings separately from my retirement savings since they consider different time periods; maybe more of a 50/50 stock/bond split?  This would allow me to somewhat mitigate market swings.
2.   Is there a way to buy a house leveraging my existing home or mortgage so that I can just pay that back vs. taking money out of our investment accounts?  I would assume it takes a month or two to sell our house once we’ve found one we want to move into, so we’d incur 2 months of interest using this method (if it exists).


  • Bristles
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Re: Diversification on the micro level
« Reply #1 on: March 03, 2016, 09:48:03 AM »
1) The principle makes sense, though I'd recommend a higher ratio of bonds to stocks if your timeframe is 3-5 years. That isn't too far out.

2) Yes. There are a few ways: bridge loan, HELOCs, 401k loan. There are advantages and disadvantages to each. I suggest you research them and decide which one works best for you.


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Re: Diversification on the micro level
« Reply #2 on: March 03, 2016, 10:55:38 AM »
to add to what GrowingTheGreen said...

THere's also another option - with your cash-flow (stated at +$2k/mo after contributing to tax-advantaged accounts) you have the ability to save quite a bit for a down payment if & when moving to a new home becomes a more imminent possibility. Some of your ER fund could also be tapped to provide your down payment, and then replenished when your existing house sells a month or two later. 
You have lots of options, in part because you are already saving a substantial portion of your income. :-)


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