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Back in January 2024, I published a book about how to minimize financial stress. You might have heard of it. It was called No Worries.

In that book, I talked about some personal finance stuff, but I also talked about investing, and I specifically talked about how dumb it is that we load up on stocks and index funds to the tune of 80% of our portfolios, and then everyone craps their pants about once every two years.

Did you listen? Noooooo. You loaded up on Mag 7 and index funds, and now the stock market is down 17% from the highs, and you are panicking into a diaper. I did about 75 podcasts and went on all these shows and talked about the book and nobody freaking listened. Nobody ever listens.

By the way, I was talking with my literary agent about a week ago, and he was telling me a sad fact: Nobody’s mind is changed by a book. People buy books to reinforce their own crappy beliefs. The Millionaire Next Door was so popular because, even before people read the book, they believed that austerity was the key to financial independence. It reinforced their priors. So, the book sold a trillion copies, and everyone thinks they have to eat sawdust pancakes in order to save money.

Never publish a book that is going to induce cognitive dissonance. Publish dumb books. I should publish a book about how everyone should buy index funds and then freak out every few years, wishing they weren’t loaded up on index funds, and then load up on index funds all over again.

The Awesome Portfolio

What you should have been doing this entire time is building a portfolio with:

• 20% stocks

• 20% bonds

• 20% cash

• 20% gold

• 20% real estate

The stock market is (at the time of this writing) down 17% from the highs. The Awesome Portfolio is down 8% from the highs. My guess is that you’d be feeling a lot more chipper if you were down 8% instead of 17%. The Awesome Portfolio was up 13% in 2024—not too shabby.

Here is the thing: The conventional wisdom is that you should have 60–80% stocks in your portfolio. I think that is absolutely insane. You’re going to take a 20-vol asset and make it 80% of your portfolio? Something that moves around, on average, 20% a year? And this is your plan to save for retirement?

When I tell people about the Awesome Portfolio, and I tell them that it has 20% gold in it, they think I’m nuts. “Gold is risky! You should only have 1–2% gold in your portfolio,” they say.

Well, gold is about the same volatility as stocks, but the thing about gold is that it typically zigs when stocks zag, so it brings down the volatility of your portfolio. Throw in some bonds that zig when other stuff zags; and real estate, which zigs when other stuff zags; and throw in some cash, which doesn’t move at all and just spits out interest, and you have a portfolio that grows slowly without a lot of volatility. Gold, by the way, has done so well that the returns have been about equal to stocks over many time frames.

Yes, this portfolio returns less than just stocks—about 1.5% less over time, which is significant. But my assertion is that if you had a portfolio of only stocks, you’d actually underperform the Awesome Portfolio by at least 1.5% because every few years, you’d panic into a diaper and sell everything and then buy it back at higher prices. You’d actually return less, in the long run, than if you had the slow and steady Awesome Portfolio that you could just leave alone and not even think about—all because of suboptimal investor behavior.

No Financial Stress

My partner Ed D’Agostino recently came to visit at my home in South Carolina. You know that I am a professional trader, that I manage a small amount of money, and he told me on Friday night that he was amazed at my equanimity in the face of a crashing market. No change in my mood, no stress, happy as ever—I was losing money on Friday, but when 4 pm rolled around, I got up and said, “Let’s go for a ride!” And I did not think about my day. Get ’em again next week.

I do not experience financial stress in anything I do. I look at it as a problem you have to solve—there is no reason to get emotional about it. But I will tell you when people get emotional about it: when they’re losing so much money that they won’t be able to retire. Or they won’t be able to buy food. That is when the panic sets in.

And if you invest in nothing but stocks, you will be in that position at least once in your investing career. I was in 2008, and I vowed to never do it again. I structure my financial affairs in such a way that I am insulated, relatively speaking, from corrections and bear markets in stocks.

Everyone should do this. When my new book The Awesome Portfolio comes out next year, you can read about a concept known as “the Life Hedge.”

The thing about financial stress (as I write in No Worries) is that it is completely avoidable. You don’t have to have financial stress if you don’t want to! You could have all your money in FDIC-insured bank accounts and never have to worry about a thing.

Now, you wouldn’t be earning much money, so you might want to take some risk to earn more money. That is where the stress comes in. But if something (like stocks) has a lot of return, it probably has a lot of risk. This is such a simple concept, and it is mind-boggling that people fail to understand it. Stocks return a lot. They also have a lot of risk! They don’t always go up—the market is not a magic money machine. You can tell yourself that the market always comes back, but that’s a small consolation in times like these. I don’t like investing on the basis of faith.

Why do stocks always have to come back? Is there a rule that says that somewhere? I mean, chances are that stocks will come back, but maybe not on a time frame that is useful to you. There have been three periods in the history of the market when you would have spent 10 years or more below your high-water mark. If you planned on retiring in 2026, you are hosed. And yet I hear all these stories of 80-year-olds with portfolios made up of 80% stocks.

I looked at my life-to-date returns of my brokerage account a few weeks ago. I have made just under 7% over the last 10 years or so. If you add in my futures trading, it takes it up to about 10%. My financial advisor always pokes fun at me because I build this Rube Goldberg contraption of a portfolio with longs and shorts and options and futures and oddball stocks to return about the same as an index fund.

Yes, but with a lot less volatility. I don’t spend too much time below my high-water mark—ever. Which is pretty much what you want out of a hedge fund manager—something that grows slowly, in a straight line, over time. There was a period when Bloomberg and other news outlets were making fun of hedge funds because they returned less than stocks, plus all the fees.

So, why do rich people invest in hedge funds? Are they dumb? No—it’s the promise of returns with less volatility, the holy grail of investing. Tony Robbins thought that private equity is the holy grail of investing, but it’s really just a highly leveraged small-cap portfolio where you can’t get your money out.

The Magic of Correlation

Maybe after all this, you’re like, “Jared, I believe you, what do I do now?” Well, now you’re in kind of a pickle. But it is not too late to switch to the Awesome Portfolio. Yes, you will be locking in losses on your stocks. The alternative is that you sit around and hope for them to come back. You’ll be checking your phone every three minutes to see what the market is doing. Just make the changes and stop looking at your phone.

That is the magic of correlation—you take five asset classes, of which four of them are risky, you put them together, and you end up with something that’s not risky. Correlation, by the way, is the most important concept in financial markets.

I don’t like thinking about money. I like thinking about other stuff, like my cats. If you’re not thinking about money all the time, it frees you up to think about more important things. Like having burgers on the grill for lunch, which I’m going to do in about an hour. Mmmm.

I hate to be the one to say I told you so.

Jared Dillian, MFA