Thread by @joshuamschultz

Wealth building isn't really a gradual process, it happens in step-wise functions.

Because of this (and the way people are wired), modern portfolio theory is just that... a theory.

The strategy that will actually help you build wealth is a barbell approach.

Helping 10 people manage / invest 10mil+ right now and its the best for all of them.

People have a tendency towards risk, gambling, the large payoff.

Rather than constantly trying to educate and remove that innate tendency... use it as part of the investing strategy

Creating a safe portfolio, that always trends up over the long term, and has a small chance of declining, enables a riskier approach with the remaining funds.

This riskier approach should include asymmetric bets that will enable step-wise growth in wealth.

You can use 15k to purchase a house, invest 10k in refurbs in the right areas, and then sell it for 30-50k over investments.

This is hard, but the point here is that its possible. You can go from 15k to 80k wealth in less than a year.

Its hard work, risky... but its step-wise

You can do similar things with micro-saas, smb, pharma companies, angel investing, etc.

All offer step-wise wealth creation.

Look at most people whose wealth is over 5 million... attribute where that came from?

It usually wasn't 300/mo into index funds.

However, you need to do these investments without blowing yourself up.

Hence the Barbell approach.

Choose ultra-safe strategies for the bulk of your money.

This will give you the mental temperament to handle the ups and downs of risky bets.

The key is behavioural

When you understand how you are wired, where you will mess up your portfolio (ie sell during a panic, buy during a craze), you can create strategies that work around.

Don't create rules, you'll break them... create strategies.

The key to long term success is not ignoring your behavioural tendencies...

its using them to build a successful system.

I come from finance, used to trade for a hedge fund, and did all that CFA CMT stuff back in the day.

Here is the secret.... risk management wins the day, not secret strategies.

Every. Single. Time.

So, you want to build wealth?

1. Put most of your money in a safe strategy that will go up over time.

Not index funds... safer.

2. If you are retired, or out of work, take 1-2 years living expenses and put them in cash, or near cash assets.

Now, if the market crashes you are, for a time, unaffected, and can let the risk assets do their work and recover (remember, build around your behavioural weaknenss)

3. Find something that interests you that is super risky, and put half of your risky allocation there. Have fun with it, don't be stupid, but experiment and invest.

This will fulfill your risk and curiosity, and keep you from grabbing your safe money. You may even make money!

4. Take the rest of the risk allocation and put it in 3-5 other assymetric bets that if they lose, you don't lose much (ie NOT LEVERAGE), but if they win you make 10 or 100x.

5. Keep cycling

Some of the risks, if done right, will pay off.

Most won't

You'll become knowledgeable in areas and they'll become less risky.

You won't blow up.

You'll achieve wealth faster this way

So stop saving 10k, and then going all in on something only to lose most/all.

You need a series of small bets to find what works for you.

You will prob become discouraged before you try enough things.

I hope this rants helps.

Barbell portfolios rock 🚀