Breaking Down Our Strategy to Achieve a $1,000,000 Investment Portfolio

The Neighborhood Finance Guy writes about financial literacy topics, main ideas, investment strategies, and retirement tips to help you make effective decisions and set S.M.A.R.T.+E.R. goals with your money.

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An Acid Savings Plan, Investment Strategies, and Emergency Contingencies

While most people fight on social media about debt repayment or investing, we do both. We let the results justify our means.

Our approach is simple, everything and the kitchen sink goes when it comes to our investment strategy. So far this year, we reached 31% investment performance. We are actively avoiding the “index and chill” strategy. As such, my wife and I chose to stay on top of our TNFG Investment Portfolio by staying informed and accounting for the future.

Since a lot of people often wonder about what our positions are and our wealth velocity, we decided to share it in real-time quarterly via Google Sheets (refer to Graphic #1). While this won’t be a deep dive into how I approach every investment decision, this will be a great spot-check in 2024.

We are still on track with the Net/Max Financial plan for couples.

This financial plan allowed us flexibility to travel and cover emergencies without skimping on our savings rate. To save on taxes, we contribute the max in our employer contribution plans i.e. 401ks, ROTH IRAs, Health Savings Accounts, and after-tax portfolio.

All of this brings our savings rate up to 37.5% annually. With any luck, we can push it to 40% starting in 2025.

Our Goals and Our Long-Term Outlook

We are admittedly doing a lot but it didn’t start that way (see below).

Our current goal is to invest as much as $100,000 annually. Why? The more we invest on the front end, the fewer taxes we incur and the sooner we retire. I’m not sure about everyone else; I can’t see myself working through 60+. I started my first job in December 1998, I can barely muster the energy for 50+. To get there, investing is mandatory.

Contrary to popular belief, Savings aren’t synonymous with Investments.

The words are often used interchangeably in media but there is a massive difference. That difference is likely why our parents didn’t master wealth-building. It’s more than just clocking in and out. You have to put your discretionary income to work. The latter was made easier starting in 2004.

More importantly, we use the Acid Emergency Plan model. Why? When it rains, it pours. How you weather the storm falls closer to how resilient and prepared you are. For example, we keep some liquid savings at our local bank no more than $2,500 per adult in the household. And when the time comes, $5,000 per kid.

While it’s great to have the peace of mind of having 6-12 months of expenses in the bank savings account, at a 0.01% rate of return, it’s rubbish. We stack our money in different areas earning more than +5% in high-interest or even dividends.

Keeping Investments Working to Generate More Money

The rest of our money is actively engaged.

We recommend understanding that any asset growing at less than 2% is not growing at all due to inflation. There is always the inevitable question as to why is it possible. Or better yet, the exclamation, where can you even invest today for 8%?

The answer is comedically simple, even Nvidia pulled nearly +90% performance during Q1 2024.

In truth, I don’t have the answers to solve all of life’s questions. Investing doesn’t work that way. There are more risks than there are guarantees. I merely found that if you stick to a better financial order of operation or the NetMax Budget ratio version 3 assumptions — It just works. It’s so effective that I was able to prove that I can generate over $2.8 million for the median American household. Additionally, it could add as much as $112,000 annually in retirement income.

60% of millennials earning over $100,000 say they’re living paycheck to paycheck. It doesn’t have to be that way but people are choosing to leverage their earnings in debt. Without a plan or parameters, of course, people will live “paycheck to stress.”

My household is merely choosing not to play by those rules. Instead, we created our way out.

Table 1. Investment Tracking Through PersonalCapital.com

Although I’m happy that we have outperformed the S&P for the last 3 years, it hasn’t been rosy. A great example is April 2024. I anticipate that the market will be rocky through Q4 2024. We will simplify our positions (holdings) and shift toward being more aggressive in our ROTH IRAs.

In most cases, we would have been better off, buying into the market through an ETF and riding the wave instead of guessing what’s next. However, there is no point in carrying individual stocks if you don’t have an Entry or Exit strategy.

Table 2. Investments by Type

Investment Name	Investment Category	2024 Annual Contribution Limits	Total Current Contributions		Est. Annual Growth
401ks	Retirement	$23,000 x2	$378,570		+$25,000
401k Matching	Matching	$12,500
Traditional Individual Retirement Accounts	Retirement	**$0.00	$119,159		+$7,500
*ROTH Individual Retirement Accounts	Retirement	$14,000	$136,859		+$10,000
After-Tax Brokerage Accounts	Capital Gains	Min. $15,000	$142,336		+$5,000
Health Savings Account	Health/Retirement	$4,150	$38,787		+$2,500
Total			$811,711		est. $50,000

We expect these assets to close north of $900,000 at Year End (YE). With an average annual contribution of $90,000+, our portfolio should grow to a robust $5 million by 2038 (see Graphic #4). Even if we did nothing beyond the end of 2024, our investment would grow to $1.94M (in 10 years), and $4.2M (in 20 years).

We are locked in at this rate.

Table 3. Investments by Allocation

Our current allocation is very aggressive.

Since our savings rate is so high and our cash flow management is still running at 80% efficiency, we can spare the risk but will shift after 2025. From that point, we will go for a 90/10 split in favor of equities to dividend income.

While this isn’t a move most people would consider then again, we aren’t most people.

Table 4. Target Investment Considerations Through 2030

Shifting away from international stocks. After being burned by $NIO and $BABA, I don’t have the stomach for this adventure. It’s always good to consider rebalancing when need be. My wife and I make that consideration semiannually for our after-tax brokerages or quarterly for our ROTHs.

Getting to this point wasn’t easy. We didn’t come from money nor did our folks know how to invest in the market. Truth be told, the market wasn’t this accessible until 2000. It’s a pivot and it is challenging. And yet, it’s something we had to get comfortable with.

Waiting for the perfect moment to start your life, will only make the journey more taxing. While our parents didn’t get the same opportunities, we are charging forward to make the most of ours.

Bonus: Here’s what our household is working toward.

Closing out the year stronger

1. Working on investing in the after-tax portfolio to hit the total of $300,000 in M1 Finance Brokerage focused on Dividend Income that generates at least $30,000 in passive Income for starters in 2030. Check out the portfolio in real-time. If you like the platform and want to start investing, I have the $10 for $10 referral if you need it – https://m1.finance/SYdqDJ2SyADC.
2. Boosting back the EF savings with an additional $5,000. Keep tabs on your savings, cash flow, net worth, investments, retirement, and more for absolutely FREE with Personal Capital! Sign up with my link & get a $20 Amazon gift card. *Terms apply. https://pcap.rocks/lawrencegonz
3. Getting back to shape – HIIT Mornings. Running, and biking just pushing out effort. I say it all the time but it’s still good. We did start HIIT workouts off of YouTube.

Disclosure: This post is brought to you by the Neighborhood Finance Guy. We highlight financial literacy information, resources, and more on your way to money management goals and personal wealth. Our goal is to help you make S.M.A.R.T.+E.R. decisions with our money. We do not give investment advice or encourage you to adopt a certain investment strategy. Your household finances are up to you.

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