Investment plan: #3 The asset allocation

Once I have my philosophy, my objectives I have to figure out how to allocate money to asset classes.

I will leave aside automatic allocation by an investment manager. My philosophy, my objectives push me to manage my money on my own, at least the asset allocation part of it.

You hear stock markets outperform over the long run. Bonds are so so. Emerging markets are hot hot hot.

I believe there are a couple of things to keep in mind:

Investing in something I don't understand can be risky. It is gambling without understanding the rules of the game. It is going into a market frenzy and joining the crowd. Not my type. I'm not interested in bitcoin, I haven't spent enough time researching the technology and the market, I'm staying away.

In many markets, professionals will always have an edge on us. Not because markets are rigged, I will not make any assumption on that. Stock markets, particularly the most liquid ones are the most transparent they've ever been. But I can't compete with a trader who's looking at the market ALL DAY. I can't compete with a real estate investor who's looking at houses every day after dropping off the kids at school. I have to remember that when it comes to the best deals on the market, I won't see them. I'm late, too small, too far down the chain. 

Doesn’t mean I should stay away. Market operators are often wrong, they blow up, they do stupid things, for a number of reasons. One of them might be because they only see their own market ALL DAY. I should just accept that you won't necessarily achieve the best returns in a given market. That's fine. Even the insiders get swallowed up when the wind blows.

They don’t have my timeline, they're on a short horizon, they have quarterly numbers to make. They follow the herd. I have the advantage of time, flexibility and much more.

Allocate according to one's own understanding of each asset class and according to their risk appetite. Look again at the objectives.

I do US stocks through ETF and smart ETF. I would like to get into real estate and angel investing / venture capital.

Real estate is stressful and requires a large outlay of capital for little diversification. I'm not ready yet. But there are some really interesting and innovative websites to simplify real estate investing.

Angel investing: I'm still trying to understand the asset class and will start investing soon in small amounts. Same thing, very cool websites out there: Seedinvest and angellist in particular. More to come on thse.