Fitz can’t remember the exact source of his formula, but it follows the following steps:
- Define how much your investment capital is.
- Divide your age into two and treat the result as a percentage. Multiply that percentage to your investment capital, and invest that percentage to low-risk investments like government bonds, treasury bills, etc.
- Invest half of your capital to moderate-risk investments such as mutual funds, blue-chip stocks, etc.
- Whatever remains, invest in high-risk investments such as speculative stocks, forex, etc.
This formula is very similar to Nassim Taleb’s barbell investing strategy.
Financial independence thinking debunks the last step because it intentionally goes for risk. My goal in investing is to protect my capital and to grow it so that I can sustain my cheap cost of living.
So perhaps, a better portfolio should consist of low risk investments and moderate risk investments diversified based in location (country and international) and asset class (see my ginger ale portfolio in etoro).
References
Villafuerte, F. (2011, August 18). Where and How Much Should You Invest? A Simple Formula for Creating Your Portfolio. Ready to Be Rich. https://fitzvillafuerte.com/where-and-how-much-should-you-invest-a-simple-formula-for-creating-your-portfolio.html