I've been a real estate investor and broker since I was 19 years old I'm 38 now. Ive always had 95% ++ of my investable assets in real estate... mostly residential real estate, apartments, and shopping centers. I never really had any stocks/bonds or much cash but after living through the 2008 crash in Vegas and San Diego I committed to having a lot more liquidity at all times going forward. I've recently starting maxing out my HSA, solo 401k, and investing on top of that a few grand a month in an intelligent advisor robo account at Schwab. I also keep 12 months of net income from my portfolio + brokerage business in cash in my money market and I don't touch it or consider it usable for deals as a safety net. What do other real estate investors think is the perfect mix of what % of your net worth should be in income producing rental houses and apartments (I don't invest in shopping centers anymore...so the risk of negative cash flow for prolonged periods is lower now with just low LTV rental houses and apartments) versus stocks (I invest in low cost SP500 index funds and bond funds only). I'd love to hear what others think is the ideal asset allocation! My current goal is to get to 30% of my net worth in SP500, the robo advisor account and bonds using tax advantaged accounts although I'm currently not even close that 70/30 I think is ideal after doing this for 2.5 years.
It sounds like you are on the right track with regard to picking index funds as they have the lowest expense ratios. The Vanguard Funds are the best of these for the price, something like VOO for stocks or BND for Bonds would offer you good diversification.
In terms of asset allocation, it all depends on risk tolerance. Stocks are a lot more liquid then real estate, but have more volatility. The classic advice is somewhere around 50/50 split between stocks and bonds and you adjust that ratio based upon age/risk tolerance.
For example I manage my parents (early 60's, dad still working) finances and I have them in 30% stocks, 40% bonds, and 25% real estate (they paid off their house) with 5% in some other things.
However for me, and my siblings ~late 20's early 30's I have more like 60-70% in stocks and similar categories.
Diversification across asset classes is really important, but I will warn you there is A LOT going on in finance, with the markets, and central banks. If you are focused on real estate and don't have a lot of time to dedicate to other pursuits you might want to limit your exposure. I'd recommend checking out a book on asset allocation. Another book you might enjoy is "Stocks for the Long Run" by Jeremy Siegel. It really illustrates the key differences between stocks and bonds.
If I could be all smartly invested in San Diego RE I would go all in but I invest in San Diego RE then pull money out of the RE place it in mutual funds heavily slanted in stocks waiting for another smart San Diego purchase. Finding smart San Diego RE purchases in the past few years has not been able to keep up with what is going into my mutual funds.
So at this point I am maybe 40% RE, 40% stock (domestic and international), 3% bonds and cash, and 7% mineral rights. The RE and mineral rights provide a monthly cash flow which is nice.
I do realize it is a very aggressive allocation and not for everyone. Especially because I am in my early 50s virtually everyone would say it is too aggressive. However, it has worked very well for our family. I do not have to work, my wife has not worked this century other than raising a child (which is work of a different category) and managing our RE (which is work but usually very flexible).
We have owned RE thorough both the mid 1990s downturn and the 2008 downturn. I look at the downturns as buying opportunities that I did not fully take advantage of last time. They do not scare me.
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