- Warren Buffett's number
one rule to investing
is to never lose money,
and we all want to make the
highest rate of return possible,
with the lowest amount of risk.
But how do you do that when
you have a crazy market,
a pandemic, and everything
that's going on in the world,
and chances are, you've
been presented with those
once in a lifetime opportunities.
- Once in a lifetime.
- And if you spent any time
watching YouTube videos,
you probably have seen the ads, yeah.
You know the ones I'm talking about.
- I came up with a strategy that I've used
to take a $2,000 account,
and turn it into a $2 million fortune.
And today I'm going to show
you how ridiculously easy
that can be to make an
extra $1,000 or more,
every single month.
- Let me tell you, I have been presented
with plenty of these once
in a lifetime opportunities,
and I even took a bite on a few of them.
I got excited and I just
thought, you know what?
I'm gonna make a ton of money.
Well, that didn't happen,
but after 16 plus years of
being a financial planner,
being the CEO of my own
wealth management firm,
and then starting an online business
that does over seven figures of revenue.
- Oh, that's great.
- Well, I finally figured it out,
and what I realized was
the investment strategy
that I was implementing was unique.
It wasn't original, meaning
that there was other people
that were already doing it.
In fact, it actually had a name,
a name that I wasn't even aware of,
because most people assume,
since I'm a certified financial planner,
and had a financial planning practice,
they just assumed that I would
subscribe to what you hear
every other single financial
advisor talking about.
Typically what you'll
hear is asset allocation,
having a diversified portfolio,
and one of the most common
strategies that you'll hear,
is having a 60/40 stock to bond portfolio.
And what this is following
is a typical bell curve,
where you'll have your
lower risk and investments
on one side, the higher risk
investments on the other side,
and in the middle is where you'll have
your stocks and commodities.
And this was the strategy
that I subscribed to,
when I first started investing.
I started off with mutual funds,
graduated into individual stocks,
but then after starting my own business,
start educating myself on
what other investment options out there.
It turns out, the investment strategy
that I was slowly starting to adopt
was called the Barbell Investing Strategy.
(bouncy energetic music)
All right, so we all want
to be financially fit,
but the Barbell Strategy is not about
how much you can bench, or
how much that you can squat.
So basically what the Barbell
Strategy is all about is,
we are eliminating the middle.
So we do not have the bonds,
we do not have the stocks.
We don't have the types of investments
that would represent the middle
of that investment risk reward bell curve.
In the Barbell Strategy,
we cut out the middle.
On one side of the bar bell,
we have our high risk investments.
And on the other side of the barbell,
we have cash, our super safe,
super risk averse type investments,
are basically gonna be cash, CDs,
anything that you can attach
the word guaranteed next to it.
But why the Barbell Strategy?
Why are we avoiding the middle?
♪ Why don't you just
meet me in the middle ♪
All right, so a thought
leader that supports
this Barbell Investment Strategy.
His name is not seen Nassim Taleb.
He's an author, a mathematician,
and just a really smart dude.
Some of his books are:
"Fooled by Randomness,"
"The Black Swan," and also, "Antifragile."
So what gave him his claim to fame?
Back in the 2008 financial crisis,
he pretty much predicted it.
- [Woman] Hold my hand, hold
my hand, hold hold my hand.
- What do you see?
- I see something now, yes, I do.
♪ Yes I do, yes I do ♪
- He is one of the strongest advocates
of the Barbell Investing Strategy,
and the prime reason is,
he just sees how banks are
so interconnected nowadays,
and because of that, a
lot of financial markets,
a lot of financial instruments,
investments have been over engineered,
and because of this,
smaller shocks to the system
will have tremendous and
exponential more impact,
and that's why you see the market swing
in such huge droves than it used to
back 10, 15, 20 years ago.
Now he may sound like some
sort of conspiracy theorist,
but hold up, hold your horses.
- Hold your horses, hold your horses.
- Because, let me give you
two real life examples,
that shows what he's talking about.
So the first example, are
mortgage backed securities.
Now we can go back to the
2008 financial crisis,
the Great Recession, to see why
these are our perfect examples.
The way that mortgage backed
securities were packaged,
and the way that they were
priced, using these models,
they never accounted that
home prices could go negative.
And when they did, that's why we saw
so many people first
getting approved for loans
that shouldn't have, and when
the market started to drop,
and we started to see housing prices fall,
that's when it all went to, you know what.
(crowd yelling)
(metal weapons clanking)
All right, so another example
are stock buy-back programs.
You have seen this in the news,
or maybe you have missed it,
but there have been tons of companies
that are buying back their stock,
in order to increase
the price of the share,
and the way that they're able to do this,
is because interest rates are so low,
that they can take on more
debt at extremely low rates,
so then go back and buy more stuff.
But the problem that we have
here is that when they do this,
they are taking cash from the company,
they're dipping into their savings account
to buy back the stock.
So what happens if this
pandemic continues much longer
than anyone has expected,
or we have another pandemic,
or some sort of other crisis or recession,
these companies aren't going to make it.
So now that you know
why to avoid the middle.
Let's talk about the
Barbell Investing Strategy.
So let me show you exactly how I use it.
Okay, principle number one,
with the Barbell Investment
Strategy, you need to know
is that cash is always king.
Cash isn't trash.
And where did the cash is trash come from?
So billionaire hedge
fund manager, Ray Dalio,
he had this to say on CNBC.
- Cash is trash.
Now obviously, Ray knows a
thing or two about investing,
since he is a billionaire
hedge fund manager,
but what he has to say
about cash is trash,
is more applicable to
the average investor.
And it makes sense, like interest rates
haven't got better ever
since he said this.
In fact, interest rates have gone down.
One of the most popular
savings account online.
Marcus: by Goldman Sachs,
continues to see their
interest rates drop.
So, why am I here still
arguing that cash is not trash,
and it is still king.
Well, here's why.
The sole reason why cash is king,
especially with the Barbell
Investment Strategy.
Now remember, we've got
two sides of the barbell.
On one side, we have the
high risk investments,
and on the other side, we want to protect
the higher risk investments,
and we want security.
We want safety, but most importantly,
we want liquidity.
We want access to this money,
because having cash on
hand gives you options.
Having this over abundance in cash,
tucked away in a savings account,
that I know is making next to nothing,
but even still it's given me the ability
to pursue these different
high risk investment opportunities,
and business opportunities
without fear, without anxiety,
so that I can pursue
it full, on full send-
(man yelling)
(woman screaming)
(crowd yelling)
All in, because I know
I've got cash or protect me
just in case, and the
second reason is options.
I can't tell you how many times
that an investment opportunity,
or a business opportunity came along,
that because I had cash on hand,
that I could go to the bank,
or even with my self-directed 401k,
I could write a check, and
place money in this investment.
Now some could argue
like, oh, that's not good,
because you're going to invest
into high-risk investment opportunities,
that you aren't thinking it through.
You're not doing out of good conscience.
You got YOLO Syndrome.
- YOLO!
- And yes, I've got burned
on this a few times,
as I mentioned in the beginning,
but that was then, this is now.
I have a certain filter
that I run through,
before I make any investments,
so that I'm not jumping into
anything that I may regret.
And the best part is, is that
once it clears my filter,
I have the cash on hand to make it happen.
All right, the second
principle that is key
with the Barbell Investment Strategy,
and many people dismiss this,
because they think it's a waste of money,
but the key principle number two is
having the right and
proper amount of insurance.
Now I get it, insurance is-
- Boring.
- You can waste thousands
and thousands of dollars on insurance,
and the hope is that you
never have to use it,
but having this Barbell
Investment Strategy,
when you are making high-risk investments
into whatever that is,
whether it be Bitcoin,
or a small business, or
some sort of startup,
you want to have some sort of protection.
Now, straight from the gate,
I didn't have every
single type of insurance.
One of the key parts of insurance,
I had really key types of insurance I had,
was life insurance, and
that's after I got married.
And as I had more and more kids,
I just kept increasing my
life insurance coverage.
Right now, I think just on me alone,
I have $2.5 million of
just term life insurance.
In addition to life insurance,
we've got our health insurance,
we've got our home insurance,
our auto insurance.
We've got an umbrella policy.
With my business, I used to have
what was called E&O insurance.
There's also key man life insurance,
but there are different types
of insurance that are crucial,
if you are going to adopt
this Barbel Investment Strategy.
You don't have to get it all at once.
You start off what you need,
and then you just build it from there.
Principle, number three.
Now this is a surprise to many,
but having a low exposure
to stocks and bonds,
and that may seem kind of weird,
because you see my grow
your dough throw down,
you see my recent Fiverr video,
where I was day trading,
and I do have some stocks.
I do have some ETFs,
and that is mostly done
on this channel, because
I want to show people
that have never invested
before how to start.
And that's what I started with.
I started with mutual
funds, ended up graduating,
and buying some individual stocks.
So there are still some
positions that I hold,
but a majority of my portfolio
is not tied up in stocks.
It's not tied up into ETFs.
It's not tied up into mutual funds.
I don't think I own any bonds whatsoever.
So I have some exposure,
but the majority of it
is tied up into my high-risk investments.
And I guess technically you could consider
the day trading account,
a high-risk investment,
but even the size of that account
is a fraction of my total portfolio.
And that is really more just for fun.
And that's what you do with the
Barbell Investment Strategy.
You are going to set aside
5% to 10% of investing,
where it is just for fun,
or you're investing into
things more traditional,
like individual stocks.
Maybe you want to trade commodities.
Maybe you want to trade options,
and that's what I've
been playing around with,
trying to day trade, even though I'm not
logging into my account every single day,
but just testing out new things.
And I just do that, because
I want to stay relevant.
I want to stay current.
I like to try new things.
So it satisfies that creative,
it's that creative urge
that I have to try out new things,
but the remaining percentages,
this is what the Barbell
Investment Strategy
is all about.
This is where you want to
place anywhere from 10%, 15%,
maybe even 20% exposure into high-risk,
high-return investment.
Since this concept might
be new for many of you,
when we're talking high-risk investments.
Oftentime, if you're a newer investor,
you may be thinking about the S&P 500,
that's average 8% to 9% return
over its historical average.
Now, that is decent return,
but we're not talking about
making 8% on our money,
or 6% on our money.
What we're talking about is,
we're placing our money into
some high-risk investments.
That could be some sort of tech startup,
that could be some sort of
real estate investment trust.
Maybe you're buying into some company,
that just getting off the ground.
I mean, either way, we're not
talking about making 6%, 8%.
We're talking about making anywhere
from four to a hundred
times your investment.
So if you have $10,000 to invest,
by the time that you get out,
your $10,000 has grown two $40,000,
or it's grown to $100,000,
maybe even a million dollars,
if you pick the right thing.
Now, one could argue that
investing into an IPO,
say like if you would have
bought Tesla, Facebook, Google,
or any of these tech
giants back in the day,
you would have made a lot more
than your 6% to 8% per year.
So, that is an example.
Now for me personally,
where I've seen the
greatest rate of return
on any of my investments,
is reinvesting back into my business.
That was my financial planning
firm, until I sold it.
That's also been my online business.
And the way I've been
invested or reinvested
back into the business, is
through hiring key employees,
or even most recently,
I just did a redesign of my main blog.
Goodfinancialcents.com, and that redesign,
I think the final price tag on that
was anywhere between $25,000 to $30,000
for a website redesign.
That is a lot of money.
That was a lot of money to
reinvest back into the business.
But any time that we've done
any major updates like that,
we have seen tremendous,
exponential results,
that are comparable to the
four to a hundred times,
like I mentioned earlier.
And I'm sure there are options traders
that would say the same thing,
or real estate investors
that have experienced
this same type of return.
I'm sure many of them subscribe
to a Barbell Investment Strategy,
or some sort of mixture of the sorts.
But the reality is that
when you have cash on hand,
when you have that extra surplus,
it allows you to invest into
things that most people,
they don't have the cash,
they can't get the cash.
They don't have the creative
financing to get it done,
but most importantly,
they don't have the
ability to make it happen.
Well I'm sure that options traders
would argue that they make
a similar type of return,
and I'm sure there are
real estate investors
that also have made anywhere
from four to a hundred
times on their money.
And I'm sure if you actually
peel back the layers
and look behind the curtain,
if you look at their entire portfolio,
it would look something comparable
to the Barbell Investing Strategy,
or some sort of variation
that's very, very similar.
But the key is with a lot of
these real estate investors,
options traders, even day
traders, you gotta have cash,
you gotta have the money on
hand, and that's where the
barbell and investment
strategy just works.
So what do you think,
do you think that this is a strategy
that you could rally behind?
Do you agree with the idea
of avoiding the middle,
and having cash on one side,
and high-risk on the other?
Let me know in the comments below.
Really appreciate you
checking out this video.
If you got any value, be
sure to Like, Subscribe,
all that fun stuff.
This is Jeff Rose reminding
you, that it's your money.
It's your life.
Know that you can make it.
Awesome, 'til next time, peace.
