Frameworks and approaches that help you think through portfolio decisions with intention rather than impulse.
There's a reason experienced investors spend more time on process than on picking individual stocks. A coherent strategy provides guardrails when emotions run high and markets behave irrationally.
Without a framework, every market dip becomes a crisis and every rally a missed opportunity. With one, you have criteria for action—and equally important, criteria for inaction.
The strategies outlined here aren't prescriptions. They're mental models you can adapt to your circumstances, risk tolerance, and financial timeline. Think of them as tools in a toolkit rather than instructions in a manual.
Every investment sits somewhere on a spectrum from conservative to aggressive. Understanding where you fit—and why—shapes everything else.
Prioritizes protecting what you have over growing it. Heavy bond allocation, money market instruments, and minimal equity exposure. Suitable for those nearing retirement or with low risk tolerance. Expect modest returns that aim to beat inflation by a small margin.
The classic 60/40 split lives here, though modern variations adjust based on market conditions. Aims for reasonable growth while cushioning against severe downturns. Most long-term investors find themselves somewhere in this zone.
Heavy equity allocation, potentially including emerging markets and small caps. Accepts significant short-term volatility in pursuit of long-term gains. Requires a strong stomach and a long time horizon—typically 15+ years minimum.
Your investment timeline fundamentally changes what strategies make sense. A 25-year-old and a 55-year-old shouldn't invest the same way.
Money you'll need soon shouldn't be in the stock market. Period. Short-term funds belong in money market accounts, fixed deposits, or ultra-short bond funds. The goal is accessibility and capital preservation, not growth. Accept that inflation may nibble at your returns—that's the price of liquidity.
This is the tricky zone. Long enough to consider some equity exposure, short enough that a market crash could seriously derail your plans. A balanced approach with perhaps 40-50% in equities works for many. Consider target-date funds that automatically de-risk as your goal approaches.
Now we're talking. With this runway, you can weather multiple market cycles. Higher equity allocations become defensible. Consider tilting toward growth assets while maintaining some bond exposure for rebalancing opportunities during downturns.
With decades ahead, short-term volatility becomes noise. Aggressive equity allocations make sense for most of this period, gradually shifting conservative as you approach the end. Consider including alternative assets and international diversification to maximize long-term compound growth.
Markets are made of people, and people are irrational. Understanding your own psychology is as important as understanding financial statements.
We feel losses roughly twice as intensely as equivalent gains. This asymmetry leads to holding losers too long and selling winners too quickly. Recognizing this bias is the first step toward counteracting it. Set sell rules in advance, when emotions aren't involved.
When everyone's buying, it feels safe to buy. When everyone's selling, it feels dangerous to hold. But markets often peak at maximum optimism and bottom at maximum pessimism. Contrarian thinking isn't about being different—it's about being rational when others aren't.
We naturally seek information that supports what we already believe. Once you've bought a stock, you'll notice bullish articles and dismiss bearish ones. Combat this by actively seeking disconfirming evidence. Steel-man the bear case for every position you hold.
Recent events loom larger in our minds than distant ones. After a bull run, we expect more gains. After a crash, we expect more pain. Historical data shows markets mean-revert over time. What happened last month tells you less than you think about next month.
Most investors think they're above average. Mathematically, most can't be. A few lucky calls can inflate your sense of skill. Distinguish between good process and good outcomes—sometimes bad decisions work out, and good ones don't. Focus on repeatable methods.
The price you paid for something shouldn't affect your decision to sell. Yet we anchor to purchase prices constantly. "I'll sell when it gets back to what I paid." The market doesn't care what you paid. Evaluate every position on its current merits, not its history.