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My Personal Investment Strategy


The finer points of my personal investment strategy including emergency funds, checking and savings accounts, and investing beyond Betterment.

An emergency fund is vital as we discussed in Episode 64. But we define that a bit differently than a lot of people.   You should not have a savings account.  You need a checking account that contains one month’s expenses plus 150%.  So if you spend $2000 a month, your checking account should contain $5000.  In lieu of a savings account which makes less than 1% interest, you should use a tool like Betterment to stash your emergency fund.  The money here will grow at an average of 7% a year and is liquid within a few days.  This is controversial to some but it is not risky.  This account should be funded up to $25,000.

Should you participate in your company’s 401K?  Never turn down free money. If your company matches, you should contribute the same amount into a 401K even if you have credit card debt.

Always say yes to free money.

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Now things are a bit more comfortable.  Between your checking account and investment account, you have about $30,000.  This is your working capital.  We’re comfy now but it’s no time to get complacent.  We’re going to take a little risk by investing in something like  individual stocks or a fund with a company like Vanguard or Fidelity.

The next step is for advanced investors with $100,000 or more invested.  You can afford a little more risk.  Andrew has had very good returns with Lending Club.  Not for the faint of heart but the rewards can be enormous.

Don’t forget, we’ve also put together a list of the top vanguard funds we know about – you should check them out!

Now go out and be the best investor you can be!

Show Notes

The Ultimate Investment Strategy Blueprint:  Andrew’s recent blog article.

Vanguard: A low fee investment management company.

Betterment:  Where your emergency fund should be stored.  Use this link and get six months free investing!

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15 responses to “My Personal Investment Strategy”

  1. Kristin says:

    Solid advice here, Andrew. Thanks for the info!

  2. Billiam says:

    Thanks for this great podcast explaining your strategy.

    So you said that Betterment is “an average of averages” which I think I understand. But I am curious if by that concept you are asserting that even an aggressively stock-weighted safety net is OK for the emergency fund, as opposed to the Betterment recommended default safety net allocation of 60 bond / 40 stock.

    Or would you start more moderate and get more risk weighted as you build it?


    • Great question!

      I would taper your risk based on your age. Personally I like to take more risk than most but I think the average person should follow the following allocation in Betterment:

      1 – 29 years old: 90% stock
      30 – 34 years old: 90% stock
      35 – 39 years old: 80% stock
      40 – 44 years old: 70% stock
      45 – 49 years old: 60% stock
      50 – 54 years old: 50% stock
      55 – 59 years old: 40% stock
      60 – 64 years old: 30% stock
      65+ years old: 20% stock

      Hope that helps!

      • Meechity says:

        I think that I (and probably the zillions of others who ask you this question) do INITIALLY have trouble considering an investment account a safe place for emergency money. We have to begin by learning to look at an investment account as simply a “funny-looking savings account with higher interest”. But assume that we are beyond that…

        So, Level 1 success: now I’ve decided to invest, and I feel safe investing based on Andrew’s age-driven percentages above. Level 2 concern: should I SEPARATE out my emergency money into a SAFER account? That way I’m reaping the benefits of my growing age-appropriate investments that I continue to add to, but I’ve got my “cash cushion” in a more bond-heavy account.

        Does that make sense?

        • I think you need to focus your “safe cash” in your checking account. The giant leap here is in getting to know how long you suspect you might be out of work in a worst case scenario ALSO while the market is at the bottom.

          Perhaps the most important thing to remember is that while huge busts do happen – they are exceptionally rare.

          Betterment by default puts an “emergency savings” account into a 60/40 split leaning towards Stock. Personally, I think that’s excessively pessimistic but in a huge boom it would help preserve more of your cash. Honestly though, almost any option, even 100% bonds is better than a savings account.

          • Meechity says:

            By “safe cash”, you mean a checking account that covers several months of spending before dipping into investments, right?

          • Yes, sorry, I wrote the original article and recorded this episode awhile back – forgot how I described everything.

            Safe Cash = The 3-4 months expenses you keep in your normal not-fancy checking account.

          • jb1907 says:

            Or a basic money market account that isn’t easy to tap. A checking account is too easy to tap the money.

          • Meechity says:

            @jb1907: But one *would* want to be able to easily access 3-4 months worth of expenses; a checking account is the ideal place for this critical cash. Certainly the sizable “emergency fund” can (and should) sit tight (and swell) in the market.

          • jb1907 says:

            A checking account has a debit card and a local branch. A money market at Vanguard can’t be tapped in one day. Very rarely do you need 4 months of expenses right now.

          • Meechity says:

            That is true: I would hope to never need 4 months of expenses at once. But not only will that cover most run-of-the-mill unexpected expenses (appliance or car trouble, etc.), but that cash creates a nice buffer; then if needed to tap into my invested Emergency Fund, I could afford to wait a week for the transfer thanks to that extra checking account cash.

            (It may also be a matter of personal scale: My checking account contains $5,000 because my current monthly expenses are quite low.)

    • jb1907 says:

      Emergency funds should be in cash or very conservative investments. You can’t afford to lose too much if the market turns down. You don’t make much, but you don’t lose anything. Nobody is suggesting leaving $100K in cash as an emergency fund, but there is also no point in risking $20K for basic emergencies.

      • Billiam says:

        Hello jb1907,

        Thanks for your comment.

        So my current safety buffer tactics are different now from when I originally posted here. I differ too from Andrew’s Betterment usage.

        My current safety margin strategy is a tiered or layered approach. It admittedly goes against Andrew’s one bank account theory, but for me, separate is psychology helpful to make those dollars seem less available for use.

        The safety tiers I use now are:

        Level 1- cash buffer reserve of one month’s rent in a same-bank-as-checking savings account

        Level 2- half of emergency fund in an online cash savings account

        Level 3- the other half of emergency fund invested very conservatively in a robo-advisor taxable investment account allocated for better expected returns than the online savings account, but with low downside risk. The thought here is that should a job loss or life challenge occur, I might not have to tap into this third tier buffer immediately, or at all, bit if so, then equity market trenches are less an issue because of the conservative allocation.

        Above and beyond Level 3, there is the Roth IRA, from which I could pull basis with no penalty other than not enjoying the long term benefit of the that amount. Not ideal, but that’s why I have other layers set up to attempt to avoid that option.

        This approach is definitely more involved or complicated than Andrew’s one checking account preference, but it is working for me, and each of us needs to use a method that works.

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