The Barbell Strategy Redefined

in #investing7 years ago (edited)

Nassim Taleb is often credited with advocating the "barbell" investment strategy. Basically it means keeping 90% of your money in conservative investments and putting 10% in areas with the potential for exponential gain. This is often pursued as a bond strategy.

I like another approach: 90% in real estate or other cash flowing assets and 10% in low cost stocks and/or cryptos. The marijuana industry and shale oil are two examples of securities that have the potential for exponential growth, and of course crypto currencies have recently proven to have that potential as well.

The middle ground is more exposed than most people think. I lost 35% of my retirement funds (2008) in a matter of months despite being "safely invested in well researched funds". Meanwhile, conservative cash flowing real estate weathered the down turn well. Values did go down, but you only realized a loss if you sold. Rents continued to come in and principal pay down continued to happen and eventually the markets recovered. If you had cash and bought real estate in 2009-2012 you look like a genius now, although much of that is generic market timing.

If you're big into speculation, limit your exposure to money you can afford to loose. Keep in mind that it's better to get out a year early than a day late.

Here's little more on Nassim Taleb.

https://www.quora.com/Is-Nassim-Talebs-Barbell-allocation-strategy-easily-doable-for-small-time-individual-investors-Is-a-Barbell-portfolio-still-as-viable-as-it-has-been-in-the-past-or-are-options-priced-more-accurately-now

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