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Is this investment strategy good:

Is this investment strategy good: allocate 75% in savings account with high APY(~2%), 20% in long term re-investing dividend stocks and 5% in short to mid term high risk stocks (kind of a swing trade)?


How old are you? If you are close to retirement or retired, and inherited a large sum of money, this may be acceptable (although not for me either). If you had saved enough throughout your life, it still would be a bad idea.

If you are young, let’s say 20’s then this is an incredibly bad idea. If you can invest money for the next 40 years then there is no better allocation than stocks. On top of that, if you have really 40 years time frame, you should go extremely aggressive (use leverage and as you age start deleveraging your account). A good book on this topic is Lifecycle investing by Ayres & Nalebuff.

So, if you have time, invest 100% in high quality dividend growth stocks, reinvest dividends, and use options to leverage your investments (as described in the book for example, or use a “Wheel strategy” – sell puts as long as you get assigned, then hold the stock, collect dividends, and sell covered calls as long as you get assigned).

Just look at the 40 years S&P performance and compare it to a 40 years savings account performance and try to convince me again why would you waste 75% of your money in savings accounts for the next 40 years.

1 response to “Is this investment strategy good:”

  1. John says:

    I would add to this that unless you need your money for an expense in the next 90 days a savings account is really a misnomer for storing your money, better called a draining account.

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