Since I left my day job in 2012, I have used a form of a dumbbell investment strategy to increase my wealth while preventing a lot of losses. This framework helps me stay invested in uncertain times, especially when I feel like I’m hogging cash or sitting off the market.
If you are in your situation Know You should take risks, but you are also worried about losing money, and the dumbbell investment strategy is worth considering.
What is the investment strategy for dumbbells?
Dumbbell’s investment strategy involves high-risk, high-reward investments that allocate roughly the same portion of your investable assets to one end, while low-risk, high-risk investments on the other hand.
If you are operating in a 50/50 risk split – like I suggest in my post when to stop taking risks – you have applied a version of the strategy. This is especially useful when you are unsure of the macroeconomic environment or personal financial situation.
Why I’m taking dumbbell strategy for the first time
The most uncertain times in my life are:
- Graduated from college without written quote from Wall Street companies
- Leaving my career at 34 and wondering if I made a huge mistake
- Become a father in 2017 and question whether our passive income is really enough
Every time, I want to invest in my future and my family, but fear makes me back. So after I retired, when I became a father to give myself the psychological permission to take action, I adopted a dumbbell investment strategy. Because the longer you avoid taking any investment risk, the more likely you are to fall behind.
Why I deploy my dumbbell strategy again in 2025
Today, I am financially safer than I used to be. But I am also a lifelong investor, and now the market has made me stop. Between tariffs, new legislation, expanded valuation, interest rate hikes and AI hype cycles, I’m not in a hurry to load the S&P 500 with 22x forward returns.
Nevertheless, I believe the dollar costs are average and the market will be higher over time. However, when uncertainty is high, the temptation to accumulate cash increases. question? By the time of certain returns, easy gains have often been made.
Selling caused by tariffs from March to April 2025. If you wait for a solution instead of buying a dip, you’ll miss over 20% of your rebounds. The best rewards are often given to those who act when others are frozen.
That’s why I’m leaning towards a dumbbell strategy again rather than stop investing.
My conservative end of dumbbells
As someone responsible for the financial situation of our family, I feel constant pressure, and if not a good lifestyle, I feel a good lifestyle. Saving or investing in every dollar of risk-free income is closer to peace of mind.
My ultimate goal is to generate a total passive income of $380,000 per year, up from about $320,000 currently. I’m methodically trying to end this $60,000 gap by the end of 2027.
Since Treasury yields are still above 4%, I see a good opportunity to lock in stable returns without risk. So I deployed my capital to short-term and longer government bonds.
On one end of the dumbbell, I bought:
- $100,993.74 on a 3-month fiscal bill, earnings were about 4.45%
- These will mature as soon as possible and I will continue to remit them to similar duration or long-term bonds, depending on interest rate trends
This position alone will generate approximately $4,450 of risk-free passive income over the next 12 months, reducing my annual deficit to approximately $53,550. The progress of passive income feels great!
The positive end of my dumbbell
Now that I have solved the conservative end of my dumbbell investment strategy, it’s time to get rid of the aggressive side.
I could simply invest $100,000 in the S&P 500, and usually I would allocate 70% of the public equity to me. However, today’s S&P 500 is expensive and I’ve invested a lot. Instead, I want to invest my money in what we are most interested in, and the one we are most concerned about is artificial intelligence.
AI is already destroying the job market, and my biggest concern is that it will make spending in college worse and worse. Entry-level work is the highest risk to automation or elimination. As a parent of two children (8 and 5), this concern is severely burdened in my mind.
To counter their potentially difficult future of employment, I think it is necessary to invest in technologies that may harm their prospects. Ideally, they will learn how to use AI to increase productivity, or even join an AI company and build their own wealth. But these results are uncertain.
What am I able Now do it directly represents their investment in the AI revolution.
Invest in artificial intelligence
As a result, I invested another $100,000 Fundraising Eventshold positions in leading AI companies such as Openai, Human, Data Assistant, and Anduril. If AI ends up eating the world, I want to make sure they have a seat on the table, at least financially. I also invest extra funds through closed venture capital funds as they call capital. I also invest extra funds through closed venture capital funds as they call capital.
I hope to own a basket of private AI companies faster than the S&P 500 because these companies are growing much faster. But of course there is no guarantee.
Dumbbell investment strategy is best for deploying new cash
The dumbbell investment strategy makes it easy for me to invest over $200,000 in cash from home sales. Distributing $100,000 to T-Bills reassured me that no matter how bad the economy or the market caused, at least half of my investments were completely safe and earned risk-free interest.
Meanwhile, if AI Mania continues, I will have a $100,000 position to get higher and higher. Both distributions make me feel good and your feelings about investing are important. The more confident you are, the more likely you are to keep your wealth by investing more. That’s why, if I receive another batch of cash or want to redeploy existing funds, I may continue to develop this dumbbell strategy.
The dumbbell method works best when you have new money to invest or idle cash sits in uncertain times. However, rebalancing existing portfolios to a 50/50 allocation between risk-free and risk-risk assets is different. Your extensive asset allocation should reflect your age and life stage. A 50/50 allocation may be appropriate, but a large rebalancing action may trigger tax consequences that you must consider carefully.
Example of using dumbbell strategy to get an ideal overall net value allocation
For example, suppose I already own a $1 million investment portfolio and inherited $200,000 in cash, bringing my net worth to $1.2 million. At 45, and there are 10 years of planning work, I’m happy to take more risks. I would be well investing in 90% ($1,080,000) of my net worth and starting a side business for growth opportunities.
If my original portfolio includes $980,000 in risky assets and $20,000 in cash and bonds, I can easily adopt the Dumbbell strategy by allocating $100,000 in new cash and $100,000 in stock to municipal bonds. This will bring my total to $1,080,000 (90%) of risk assets and $120,000 (10%) of risk-free investments, which blends perfectly with my ideal 90/10 allocation.
Conclusion: A simple inner and growth framework
Dumbbell investment strategies provide a clear, practical way to deploy new cash, especially in times of uncertainty. By allocating capital to low-risk and high-risk assets, you will gain security while maintaining potential. This is a flexible approach that can be tailored to your financial goals, risk tolerance and stages in your life.
Whether you invest in inheritance, redistribute gains from home sales, or just sit on too much cash, dumbbell strategies can provide structure without sacrificing opportunities. Most importantly, it helps you stay motivated and confident, which are essential elements for long-term investment success.
So, next time you find yourself having idle cash and decision paralysis, consider the dumbbell approach. You may sleep better at night and still build wealth during the day.
Reader, have you ever considered using a dumbbell investment strategy during times of uncertainty? What potential flaws or other benefits do you see in this approach? I would love to hear what you think.
Balancing risks and returns with free financial checks
If you sit in new cash or reevaluate your portfolio in uncertain times, the second opinion can make everything different. A wise move is to get Free financial inspections From the experienced Empower Financial Advisor.
Whether you have a taxable account of $100,000 or more, savings, IRA or 401(k), Empower Advisor can help you discover hidden expenses, unbalanced allocations, or overlooked opportunities to improve risk-adjusted returns. This is an irrelevant way to emphasize current strategies – whether you are building a dumbbell portfolio or considering rebalancing all.
Clarity brings confidence. When it comes to investing, confidence can help you keep your courses.
This statement is provided to you by Financial Samurai (“Initiator”), who has entered into a written recommendation agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.
Beyond Stocks and Bonds: Passive Real Estate Investments for Fundraising
Classic dumbbell strategies include bonds and stocks, but don’t forget about real estate. I like to think of real estate as a hybrid: it provides the income stability of bonds and has the potential appreciation of stocks.
I invested $400,000 FundraisingThe platform allows you to passively invest in a diversified portfolio of residential and industrial properties (in high growth sunny areas). Fundraising is a core part of my investment strategy, with over $3 billion in assets and a minimum of $10, especially when I have cash to redeploy.
Want to get to know the next wave of innovation? Fundraising is also provided adventuregiving you access to private AI companies like OpenAI, Anthropic, and Databricks. As mentioned earlier, I am very focused on the transformative potential of AI, not only looking for exposure to rewards, but also the future of my children.
With a dumbbell strategy, it’s not just balance, it’s about determining safety and growth.
To increase your chances of achieving financial independence, join more than 60,000 readers and subscribe to my free Financial Warrior Newsletter here. Financial Samurai started in 2009 and is today the leading independent personal finance website. Everything is written based on first-hand experience.
