Money Rehab with Nicole Lapin - Portfolio Playbooks: How the Greats Invest Their Money

Episode Date: March 4, 2025

You may have seen the news last week that the consumer confidence index fell by 7 points this month, marking the largest drop since August 2021. Translation? People are getting nervous about a recession. But here’s the thing—you don’t have to panic just because the economy is. Even if you’re skeptical about the marco-economy, you can create confidence in your own micro-economy by taking the reins of your investments. So today, Nicole is showing you four asset allocation strategies designed to help you weather any financial environment. In other words: four recipes for a portfolio that provides growth in good economic times, and stability in tough economic times. Pre-order Nicole's upcoming book The Money School HERE! All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC. Treasury accounts offering 6 months T-Bills are offered by Jiko Securities, Inc.,member FINRA & SIPC. Securities in your account are protected up to $500,000. For details: www.sipc.org. Banking services and the Bank Accounts are provided by Jiko Bank, a division of Mid- Central National Bank. For U.S. Investments in T-bills: Not FDIC Insured; No Bank Guarantee; May Lose Value. Treasuries risk disclosures, see https://jiko.io/docs/treasuries_risk_disclosure.pdf. See public.com/#disclosures-main.

So I just went to the grocery store and I actually flinched at the cost of eggs. And I don't even really eat eggs. That's how bad it is. Everything feels more expensive. And so I'm hearing from a lot of money rehabbers right now that their credit cards are getting a lot of exercise right now. But the last thing I want for any of you is to go into credit card debt. Enter Chime Credit Builder Card. This is a secured credit card with no annual fees. You can build credit with money you set aside and avoid interest or expensive debt. Plus you can get access to my pay

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My pay eligibility requirements apply. Credit limits range from 200 to $500. Go to chime.com slash disclosures for details. It's me talking about public again, obviously. Are you surprised? It is my favorite brokerage after all. By now you know public is the only place I personally buy bonds. If you haven't heard my spiel, in the olden days I would buy Treasuries through the government website and it would always take forever.

And also the branding was horrible. It kind of looked like the Toys R Us website back in the day. But with public, it's simple and easy to invest in treasuries right from your phone. There are literally thousands of bonds to choose from on public, not just government bonds, corporate bonds too. You can use public for more than just your bond investments,

of course. On public, you can invest in stocks, ETFs, options, crypto, and they even have a high-yield cash account where you can earn 4.1% APY on your cash. And there's an exciting new offering on Public that I cannot wait to tell you about. Now you can invest toward your future self through retirement accounts. On Public you can open a traditional IRA or a Roth IRA or both. I mean, why not?

If you're looking for a simple yet sophisticated investing experience, head over to public.com slash money rehab. One more time because trust, you will thank me later. Public.com slash money rehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description. I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Well, my fifth book, The Money School, launches today. Yay!

As you know, if you've listened to yesterday's episode, my latest book is all about proven investing strategies to grow wealth. And so, to celebrate this week, I'm sharing some of those investing strategies here on the pod. In picking the first topic from my book, I landed on asset allocation pretty quickly because I think this is the cheat code we need right now. You may have seen the news last week that the Consumer Confidence Index fell by 7 points this month, making it the largest drop since August of 2021. Translation to that, people

are getting nervous about a potential recession. And here's the thing, you don't have to panic just because the economy is. Even if you're skeptical about the macro economy, you can create confidence in your own little micro economy by taking the reins of your own investments. So today, I'm going to show you four asset allocation strategies designed to help you weather any financial environment. In other words, recipes for a portfolio that provides growth in good economic times and

stability in tough economic times. Number one, the permanent portfolio. This is the brainchild of Harry Brown, politician and investment advisor in the 80s. The permanent portfolio is structured to withstand economic ups and downs by diversifying across four distinct asset classes. 25% in stocks for growth, 25% in long-term government bonds for stability, 25% in cash for quick moves, and 25% in precious metals like gold as a hedge against inflation. This allocation is prepared for anything, no matter what the

economic conditions are. One way to set this up would be to snag a broad-based index for growth, government bonds, particularly long-term ones, for stability, a money market account for short-term treasury bills, ensuring that it's on hand when needed and still earning money for quick moves, and a gold ETF serving as a hedge against inflation and currency devaluation. Historically, the permanent portfolio has shown its strength in providing stable returns with lower volatility than more aggressive investment strategies. Its diversified approach has helped it stay relevant through many economic storms, from

recessions to high inflation periods. This makes it a reliable option for investors seeking long-term growth, careful yet laid-back investing strategy that can handle any financial weather. When the stock market is up, it grabs that growth. When the stock market is down, the bonds are there to keep giving you returns. During inflationary times, gold will see its value go up, and if you need to rebalance, it's easy with cash on hand. Plus, the cash comes in handy when interest rates rise. This strategy is best suited for conservative investors looking to swipe right on the perfect portfolio that reduces risk while still making

gains. It's particularly attractive to those who aren't looking to constantly tweak and fuss over their investments. No shade if that's you. Number 2. The Endowment Portfolio. Big name schools like Yale and Harvard manage massive funds or endowments and they don't hire dummies to do it. But there aren't any fixed percentages for this. This one is about mindset more than a set formula. It's about thinking beyond the traditional stock and bond mix with more alternative assets such as private equity, real estate, and hedge funds.

The goal is to achieve long-term growth while lowering risk from the volatile stock market. The financial whiz David Swenson of Yale's epic endowment gave some insight into the mix they use to consistently outperform other investment strategies. When Swenson first took over, the fund was mostly U.S. equity, bonds, and cash. Under his leadership, the Yale endowment has grown to the second largest in the country, with a value of over $40 billion. In roughly largest to smallest percentage of the portfolio, it consists of absolute returns, so short-term investments like options that focus on generating profits,

venture capital, leveraged buyouts, foreign equity, real estate, cash, and fixed income investments like bonds, natural resources, and U.S. stocks. The endowment model has historically been successful for several reasons, but namely being so diverse that it's shielded against big losses. Even if you get an F in one class, as long as you get an A in the rest, after four years your GPA is going to be fine. That's how this portfolio works, too. By investing in asset classes with low correlation to one another, the portfolio can weather different economic conditions better than a traditional stock bond portfolio might.

For instance, during periods when the stock market is down, real estate or hedge funds might do well, cushioning the portfolio against large swings. Number three, the Ray Dalio portfolio. Ah, the famous all-weather portfolio. This model was first introduced by Ray Dalio. I've mentioned him a bunch on the show before, but here are the highlights. He's the hedge fund manager behind Bridgewater Associates, the largest hedge fund in the world with billions under management. hedge fund manager behind Bridgewater Associates, the largest hedge fund in the world. With

billions under management, he's widely considered one of the most successful investors of our time. When Ray talks, investors listen. He keeps the exact recipe for his secret sauce hidden and it isn't easily duplicated on a personal level. But here is a rough formula that Dalio says the individual investor could easily use to duplicate the results of the all-weather portfolio. 7.5% commodities, 40% long-term bonds, 7.5% gold, 15% intermediate-term bonds, and 30% stocks. This mix is all about covering your bases to benefit from whatever market conditions come your way, whether that's a bull market, a bear market, inflation, or deflation. The portfolio has actually weathered those

four economic environments over time. When historically backtested, this portfolio made money 85% of the time. It also would have lost just 20% during the Great Depression, while the S&P 500 lost 65%. In some of the other big market drops, like 1973 and 2002, Dalio's construction actually made money while the market overall suffered. Historically, this particular portfolio has made it through bull markets, bear markets, recessions and everything in between. One way to implement this strategy is to start with the equity portion, so selecting a broad market index fund or ETF to capture the growth potential of the stock market. For the bond component, ETFs, mutual funds that specialize in long-term and intermediate-term

US Treasuries, are ideal for their safety and stability. The gold and commodities allocations can be managed through ETFs that track the respective markets, providing a hedge against inflation and diversifying the portfolio further. This approach is best suited for investors looking for a balanced, low-maintenance portfolio that aims to reduce volatility and deliver steady returns over time. It's particularly appealing to those who want to diversify their investments extensively beyond the conventional stock and bond mix to include assets like commodities and gold that can provide protection against various economic risks. 4. The Warren Buffett Portfolio

Uh, Warren. We can't shake him. And we don't want to. He is the smartest and also the simplest. This portfolio only has two assets. Buffett reportedly outlined his target portfolio breakdown in instructions for his wife and their trust when he dies. Put 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund, he suggests vanguards. I believe the trust's long-term results from this policy, he says, will be superior to those attained by investors, whether pension funds, institutions, or individuals who employ high-fee managers. Okay, Warren. Implementing Buffett's strategy is investing on easy mode. It's one of my personal favorites. You start by selecting a low-cost S&P 500 index fund. The Vanguard one he's talking about

is VOO, but any of them will do. Then a little bit into short-term government bonds, either through Treasury bills themselves or a bond fund focusing on short-duration government bonds. It sounds a little corny, but it's true. Buffett really believes in America. He is confident that over the long haul, the U.S. economy will grow and thrive. By investing in an S&P 500 index fund, he is basically making a bet that his family will benefit from the growth, dividends, and stock buybacks of the top 500 companies in the United States. By investing in Treasuries, he is betting on the US government. This method has historically proven successful, as the

S&P 500 has delivered an average annual return of around 10% over the long term despite some nasty weather along the way. This investment strategy is for those looking for something super super low maintenance. It's particularly appealing to those who believe stocks mostly go up but want to avoid the headache and the risks of picking individual stocks or timing the market. Buffett's allocation is designed for long-term investors who can ride out market volatility and are also looking for that buy and hold strategy. The historical success of the S&P 500 plus Buffett's blessing offers a compelling case

for picking the strategy. While no investment strategy is without risk and past performance is not indicative of future results, this approach has the backing of one of the most successful investors in the world. It is a testimony to the power of simplicity in investing and the importance of patience, discipline and confidence in the fundamentals of the U.S. economy. Now that you have all the information on these famous portfolios, the allocations are yours to play with. You can color inside or outside the lines depending on your particular assets. And ultimately, the lines are drawn to your

individual needs, timeframes, and goals. It all comes down to your own preference and tolerance for risk. Ultimately, I want you to get a good night's sleep so if you are scared now, honor that feeling. Forget about me, forget about Ray, forget about Warren. How you choose to create your portfolio today is totally up to you. And you have the complete right to change and recreate your investment mix whenever your heart desires. You can always take on more risk, you can always take on less risk as your circumstances change.

And they will. For today's tip, you can take straight to the bank. In my new book, The Money School, I have some other templates for asset allocations based on other financial goals and factors like risk tolerance and age. If you want to see all of the options, please order my new book, The Money School. It is now available at the link in the episode description. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions,

moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me, and follow us on Instagram, at MoneyNews and TikTok, at MoneyNews Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.