My family is undertaking a pretty sizable renovation to our home. Fortunately, we've been putting aside money for it for a few years now, but we don't have enough in cash / money market to avoid having to either sell some of our portfolio OR take out a pledged asset line on our portfolio to cover the shortfall over the next year or so.
Our portfolio has been following the Swensen model of index investing and has a mix of:
1. US equity index (primarily VTI) -- which is the largest percentage of the portfolio and higher than our normal targets because I haven't rebalanced in over a year. It also has sizable capital gains
2. Foreign equity index (smaller, but meaningful capital gains)
3. Real estate equity index (smaller, but meaningful capital gains)
4. Treasury bond index (breakeven or have lost money, but also are under-represented in the portfolio)
We're in our 40s and plan to work for many more years. I have avoided timing the market thus far, but deep down do believe we are in an AI bubble.
That has me leaning towards selling some of our domestic equity index, even though we have cap gains because it's too high a percentage of our portfolio and also I think it'll underperform the other classes.
But I also could just take out a pledged asset line at approximately a 6.5% interest rate and avoid paying cap gains. We probably could pay off that loan in 2-3 years.
Still, all the scenarios make my head spin. If you were in my position, what would you do? Or what are the right calculations to make to best figure out whether to sell positions or take out a line?