Valuation of Assets
As I think about things like early retirement (or not – see my last blog post), it got me thinking seriously about where all our assets are and whether we’re diversifying our portfolio enough. For most of my working life, my investments have been classified as “aggressive” which can be good for rate of return, but also leaves me open to more risk from market dips. And with the goal of retiring early (in what….10 years? 15?) it got me thinking about the consistency of our investments. So…I turned to AI.
Image credit: Pixabay/Mohamed_hassan
Incorporating AI into the Financial System
I asked ChatGPT to tell me a recommended breakdown of what percentages I should target for various savings and investment vehicles. I’ve given it categories: retirement account, home equity, high yield savings account (HYSA), taxable account, and cash/checking account. *I forgot to include my Health Savings Account, which is technically an asset, so that’s not included below*
Here’s what he told me and how I fit in:
- Retirement – AI recommended 50-55%. I’m at 63%.
- Home Equity – AI recommends 25-30%. I’m only at 12%
- HYSA – AI recommends 10-15%. I’m at 19%
- Taxable Brokerage – AI recommends 10-15%. I’m only at 4%
- Fee/Assessment – AI recommended 1-2%. I’m in the 2%.
My Thoughts and Thoughts
I will work on the assumption that the AI gave me the best recommendations. It comes from the Internet, so it takes into account all kinds of opinions and advice of financial experts. But that’s just speculation and I’m curious how others feel about the recommended guidelines.
I think these are good targets to shoot for, two things stand out to me. First, I have much less home equity than recommended. Unfortunately, there isn’t much I can do to change that percentage (other than buying more real estate….which we’ve talked about in the past but haven’t done yet). So let’s say that is “fixed” and it is.
The second you have to jump at me is that I have very little money in taxable merchant accounts. This makes sense. I’ve always prioritized retirement funding (especially since I got the company match!) and had a small surplus to sell. ChatGPT explained to me that “taxable brokerage is ‘bridge money’ for early retirement” since most people won’t go into traditional retirement accounts until age 59.5 because of possible early withdrawal penalties.
Chat also didn’t like that I have 21% of all our assets in low yield accounts (checking account + HYSA). That doesn’t bother me too much though. I am financially conservative. And I feel like the market is scary right now. I like the psychological safety of having a good size cushion that is very liquid and safe from market volatility.
WHAT DO YOU THINK? Do you agree with the percentage split from AI? What do you think of my percentage? What kind of rebalancing would you recommend (knowing our goal is to retire early – so even though we’re in our low 40s, we don’t want to work another 20+ years)?
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