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Some ideas that I use for investing. Part 1.


A simple way to invest is to split my money 50-50 between stocks and bonds – that is what I do with my 401k (retirement plan). For my other savings, I loosely stick to this 50-50 split, but I do pick specific stocks and I do that following certain rules.

Overall, there are two goals to how I am investing. My main goal is to avoid losing money. This is the majority of my strategy. My secondary goal is to invest in things that, in the long term, I think will do well. I use certain rules to identify what I think will be safe and will do well.

In short here is why I think it is very important not to lose money:

When things are going well with the economy, it is nice if my investments are doing well. However, I am more likely to have a job and so are my family. So getting a good return on my investments is nice but not essential.

When things are going badly with the economy, it is pretty annoying to lose money. On top of losing money, I have a bigger chance of losing my job and I need the money more than when the economy is going well.

In short, it is often better for me to avoid losing money when things are going badly then to make a lot of money when things are going well. Furthermore, if the economy is doing badly then many things gets cheaper to buy (e.g. houses, stocks), so if I haven’t lost too much money, I am in a good position to buy things.

The Ben Graham 50-50.

Ben Graham wrote a book called The Intelligent Investor. One of the investing strategies discussed is to invest 50% of money in stocks and 50% in bonds. Here is why I think this is a reasonable thing for me to do:

  1. Why not put more in stocks? Many people recommend putting much more in stocks. For example, Warren Buffett has suggested putting 90% in stocks (the S&P500 and 10% in bonds (although he doesn’t do that with his company’s money). I think that is a bad idea. With 90% of my money in stocks, the stock market could very well fall right before I need the money (say, for a mortgage down-payment or for a wedding or for retirement). Is it really worth rolling that dice to get some upside?
  2. Why not put more in bonds – wouldn’t that be safer? Keeping money all in bonds (or cash) also has risks, such as inflation or an increase in interest rates. If I had all of my money in bonds (especially of mixed or long durations) right now when the interest rates are near zero, the value of those bonds would plummet if interest rates rise to even 3 or 4%, never mind 10 or 15%. I’m not saying that will happen, it’s just a risk I don’t want to take.


When I look through the last 150 years, pure stock and pure bond portfolios have each had large falls. With a 50-50 portfolio, there are significant dips, but not nearly as bad. The other nice thing about holding a constant split of 50-50 is that when stocks down up relative to bonds, I’m buying more stocks. If bonds go down relative to stocks, I’m buying more bonds. By definition, I’m buying low and selling high.

Technical note: For stocks, a simple approach I use is to buy an index fund like SPY. For bonds, a simple approach I use is to buy a broad based bond index fund (that has bonds of different durations/lifetimes). This means I don’t have to think about what specific stock or bond to buy (and risk being wrong).

Avoiding risks I may not be able to avoid with just stocks and bonds.

There are things that can happen that are bad for both stocks and bonds. For example, very strong inflation of the US dollar might be bad for US stocks and US bonds. These are the kinds of things that are quite unlikely to happen, but if they do happen they are possibly very very bad for stocks and bonds. Gold, since it is limited in supply, tends not to devalue when there is inflation, so I have a small amount of gold (via an index fund) – roughly 5% of assets. The reason for just holding a small amount is that the risk of needing the gold is low, but it’s good to have a bit.

Side note: I also have about 5% bitcoin. This is maybe crazy. However, I see some analogy to gold in that the supply of bitcoin is limited and it takes work/money to increase that supply.

Other side note: I have considered investing in a real estate (REIT) index fund. I don’t consider that I understand them much and I don’t have any at the moment.

Loose 50-50

With non-retirement savings, I am a bit loose on the 50-50 rule. When I feel that equities are expensive I move towards holding more cash or bonds. When I feel equities are cheaper, I move more towards equities. This is subjective and I need a few more decades of experience. Interested readers may wish to Google the “Buffett Indicator” and also “Tobin’s Q” to read about some other indicators of whether stocks are expensive. One indicator that I look at is how much profit US corporations are making relative to their value. For example, in 2019, US non-financial corporate business made about $1 trillion dollars of profits after tax. At the end of 2019, those corporations were valued at about $34 trillion dollars. That return is about 3% when I look at profits divided by value. I don’t like 3% per year. I didn’t think that was a lot of compensation considering that the stock market can fall by a lot more than 3% (especially back in mid 2019 when I could get ~2% return on short term bonds).

As a side note, the market has fallen now since the onset of COVID-19. That has reduced the market value somewhat, but corporate profits are going to fall as well. Discussion question: Is the stock market really much better value right now than at the end of 2019?


Simple Ben is 50% stocks, 50% bonds.

A little more complicated is adding in a little gold, (or bitcoin because I’m a little crazy).

A little more complicated again is increasing stocks versus bonds when I feel stocks are cheap and reducing stocks when I feel they are expensive.


6 thoughts on “Some ideas that I use for investing. Part 1.”

  1. Hey Ronan, I’m always interested in hearing people’s thoughts on personal finance, so thanks for sharing.

    Your reasons for a 50-50 split make sense to me for non-retirement accounts or for a retirement account when you’re reaching retirement age, but they don’t make sense to me for a retirement account of someone who will be working for 15+ more years.

    The main reasons you give for being loss averse is that you don’t want to lose money during a downturn when you’re more likely to be unemployed, or lose money right before you need it for something important (down-payment or wedding), but neither of those situations should be funded by retirement accounts anyways — weathering a downturn should be accommodated by an emergency fund, and down-payments and weddings should be paid for through savings (or maybe a conservative non-retirement investment account for a down-payment).

    The goal of a retirement account should be to maximize net worth when you actually need it for retirement. If that’s in 20 years, that means it’s not important if the account loses value in the next 5 years as long as your strategy produces the most gains over a 20 year time frame. The conventional wisdom is that young folks like us should have ~90% stocks in our retirement accounts because most modeling shows that a 90-10 balance outperforms 50-50 over these longer time scales.

    1. Howdy Lee, thanks for reading, and for commenting.

      For me, doing 90% in stocks would mean very high faith in continued stock market growth vs bonds. I think this is likely but not assured and so I lean more towards 50%. Here are some data points I find interesting in thinking about this:
      1. The Japanese stock market has been pretty poor for the last 30 years. Is this scenario possible for other stock markets?
      2. There is decent data on the US stock market since 1870. When you think about long investing periods (30 yrs), is that a lot of data to go by?
      3. Since 1870 there have been multiple 30 year periods where bonds have outperformed stocks. Interest rates are very low now compared to historically. Will that continue? Might there be good periods for bonds ahead?
      4. There is survivorship bias in just looking at – for example – US stock market data. Argentina had very impressive growth and made it into the top 10 for per capita income in 1900 – now the country (and it’s markets) are not doing as well comparatively.

      1. These are fair points, and my response to 1, 2, and 4 would essentially be that it is indeed true that past performance is not a guarantee of future returns, but past performance is the best data we have. Even if that data is relatively limited, I’d rather use it then treat the situation like a coin flip. Also, if those are points you’re particularly worried about, I’m curious why you’re ~90% exposed to US debts and equities and don’t hold more international investments for some additional diversification.

        On the first part of point 3 I have to admit that I wasn’t aware that there had been 30-year periods where bonds outperformed stocks. I found this article: (if you have a better source, please let me know) and while the data in it shows that there have been multiple periods where bonds outperformed stocks over 30 year periods, that statement still feels a bit misleading since there were only two such windows (after 1870) and one was over 100 years ago (notable because it predates the Fed) while the other only applied to a single 30 year window (during which bonds only marginally outperformed stocks). So the prospect of bonds over performing stocks over long periods doesn’t seem too likely/isn’t that worrying to me.

        On the second part of point 3, perhaps my understanding of how bonds perform is incorrect, but I was under the impression that bonds do best when interest rates fall. Given the low interest rates we have now, there’s not much room for interest rates to go lower, which I imagine should serve as a ceiling for how well current bonds could perform.

        In any case, the extra research you’ve inspired me to do has persuaded me that a 50-50 split is a good strategy for reducing tail risk without reducing expected returns too much compared to a more aggressive portfolio, but it still seems to me that the aggressive portfolio will produce better returns on average.

        1. Thanks Lee!

          I think your argument is that limited data is better than nothing. My response would be that limited/poor data shifts me towards towards ignoring the data and trying to take a more fundamentals based approach. As model uncertainty increases, my predictions move towards equal weight outcomes. If I was very confident in the last 150 years of US data being representative of the full set of outcomes, this would lean me more towards equities. Looking at other markets and histories, it seems to me this 150 years of data is incomplete, so I favour a more even split.

          I do international diversification on my retirement monies – the 50% stocks I hold are 25% US broad market and 25% developed markets. For my other monies you can see that Berkshire, Southwest, JetBlue and Facebook are US. Ryanair is European, but that wasn’t why I picked it (it has low debt, a CEO with high % net worth in the business, and it generates [or at least generated!] lots of cash). Generally, my sense is that the US stock market will perform better than stock markets in other countries, so I weigh towards that. For stock picking, I also don’t understand much about other countries.

          Good point on bonds doing badly as interest rates rise. My (poorly communicated point) here is that rates are low now and bonds may not look good, but that may change in future and bonds may become attractive. My retirement bonds are split 50-50 between broad market and inflation protected bonds (TIPS) so there can be an inflation protection benefit built in as well. For my other monies I hold short term TBills right now (specifically ones with less than 3 month maturities) – these inherently have low inflation (and interest rate) risk because of their short maturities. I favour them over broad based bonds (of mixed maturities) right now because interest rates are low and – as you point out – I don’t think the return from bonds can get much better in the short term. The purpose of holding short term TBills for me right now is not to get a return but rather to preserve capital so it can be invested in stocks at a good time.

          1. Yes, I think you’ve identified the root of our disagreement. I trust limited historical data over trying to model based on economic indicators, but it’s entirely possible that you’re right and the next 30 years won’t look anything like the last 150.

            And I misread your comment about SPY as saying that half your retirement money was in SPY, which is why I wrongly assumed you were fully in US equities.

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