Here I report on my global strategy, which I will execute in order to retire by 33-36. I will use a complex mix of investments, including Real Estate, stocks, bonds, P2P loans, and other alternative investments. I follow a free cash-flow investment model*, which is based on attaining the highest possible Cash On Cash (COC) yields. This model disregards capital appreciation and so asset appraisal is made based on the yields of the assets. For instance, a house on a nice neighborhood worth $300k may worth much less for me than a small 3-unit on an average neighborhood. This is because I will attain COC yields, even if the appreciation of the house is very high and the building is only expected to keep up with inflation (which is the minimum I am looking for).
I plan to buy multi-unit properties in Portugal (after retirement, I may look into properties in Italy too), for cash-flow. In particular, I am interested in distressed multi-unit properties with as many units as possible. My preference goes to properties close to universities, or hot rental markets. I am OK with rehabbing properties because I have the right connections in terms of contractors and developers. You can check out my current portfolio here.
My strategy in the stock market is to hold a number of solid dividend stocks and a few ETFs, with some rules. 10% is my maximum in a name and 25% maximum per sector. In fact, my strategy for my stock portfolio is a derivative of Kevin O’Leary’s rules. As he said multiple times, “over the last 40 years, more than 70% of the market returns have come from dividends, not capital appreciation.”. For me, that is a killer, so all my stocks must be dividend stocks. You can check out my live stock portfolio here.
Bonds / fixed income
This is my least favorite type of investment, because its very hard for me to find a solid group of bonds paying at least 7% net. However, I want to have exposure to bonds, although I will progressively invest more in bonds as my net worth increases. What I will invest in, however, is P2P loans, which I consider fixed income investments.
*Note that this is different from free cash flow models to assess the performance of companies.