Ever since I left my day job in 2012, I’ve used a form of the dumbbell strategy to grow my wealth while tecting against large losses.
It’s a framework that’s helped me stay invested during uncertain times—especially when I felt the urge to hoard cash or sit on the sidelines.
If you’re in a situation where you know you should take some risk, but you're also worried losing money, the dumbbell strategy is worth considering. What Is the Dumbbell Strategy.
The dumbbell strategy involves allocating a roughly equal portion of your investable assets into high-risk, high-reward investments on one end, and low-risk, capital-preserving investments on the other.
If you're operating with a 50/50 risk split— I suggest in my post when to stop taking excess risk—you’re already applying a version of the strategy.
It’s especially useful when you're uncertain the macroeconomic environment or your personal financial situation.
Why I First Embraced the Dumbbell Strategy The most uncertain times in my life were: Graduating from college without a written job offer in finance (came a month later while I was traveling in Japan) Leaving my career at 34 and wondering whether I had made a huge mistake betting on myself Becoming a father in 2017 and questioning whether our passive income was truly enough to keep up with inflation Each time, I wanted to invest in my future and my family’s, but fear of loss made me hesitate.
That’s why I turned to the dumbbell strategy after I retired and became a father. It gave me the psychological permission I needed to take action.
Because the longer you sit on the sidelines avoiding risk, the more ly you are to fall behind.
Note: When I started working at Goldman Sachs in July 1999, I felt I had won the lottery and decided to invest 100% of my savings into stocks.
With strong income potential and modest expenses, going risk-on seemed appriate. But I quickly received a rude awakening when the dot-com bubble began to burst on March 10, 2000.
The NASDAQ would bottom on October 9, 2002, down 78%, and it wouldn’t fully recover until April 24, 2015—a long 15-year wait just to get back to even.
Why I’m Deploying the Dumbbell Strategy Again in 2025 Today, I’m more financially secure than in the past. But I’m also a lifelong investor, and right now the market gives me pause.
Between tariffs, new legislation, stretched valuations, elevated interest rates, and AI hype cycles, I’m not rushing to load up on the S&P 500 at 22X forward earnings.
Still, I believe in dollar-cost averaging and that the market will be higher over time. But when uncertainty is high, the temptation to hoard cash increases.
By the time certainty returns, the easy gains have often already been made. Take the March–April 2025 tariff-induced selloff.
If you waited for resolution, instead of buying the dip during the period of most uncertainty, you would’ve missed out on a 20%+ rebound.
The best returns tend to go to those who act when others are frozen. This is why, rather than stop, I’m leaning on the dumbbell strategy again.
The Conservative End of My Dumbbell As the person responsible for our family’s financial well-being, I feel constant pressure to der a good-enough lifestyle, if not a great lifestyle.
Every dollar d or invested in risk-free income is a step closer to peace of mind. My ultimate goal is to generate $380,000 in gross passive income a year, up from $320,000 currently.
That $60,000 gap is what I’m methodically trying to close by the end of 2027. Once achieved, I will deem us financially independent once more.
With Treasury yields still above 4%, I saw an opportunity to lock in solid returns with no risk. So I deployed capital into a mix of short-term and longer-duration government bonds.
On one end of my dumbbell, I purchased: $100,993. 74 in 3-month Treasury bills yielding ~4.
4% These will mature soon, and I’ll continue to roll them into similar duration or longer-term bonds, depending on interest rate trends Over the next 12 months, this position alone will generate roughly $4,400 in risk-free passive income, reducing my annual deficit to $53,600.
Passive income gress feels wonderful. The Aggressive End Of My Dumbbell Now that I’ve shored up the conservative end of my dumbbell strategy, it’s time to swing to the aggressive side.
I could simply invest another $100,000 into the S&P 500, which I normally allocate around 70% of my public equity exposure to. But the S&P 500 feels expensive today, and I’m already heavily invested.
Instead, I want to put capital toward what I’m both most interested in—and most concerned : artificial intelligence.
AI is already disrupting the job market, and my biggest worry is that it will make spending a fortune on college an increasingly poor financial decision.
Entry-level jobs are at the highest risk of being automated or eliminated. As a parent of two young children (8 and 5), this concern weighs heavily on my mind.
To hedge against a potentially difficult employment future for them, I feel it’s imperative to invest in the very nology that might harm their spects.
Ideally, they’ll learn how to harness AI to boost their ductivity, or even join an AI company and build wealth of their own. But those outcomes are uncertain.
What I can do now is invest directly in the AI revolution on their behalf.
In Artificial Intelligence As a result, I’ve invested another $100,000 in Fundrise Venture, which holds positions in leading AI companies such as OpenAI, Anthropic, Databricks, and Anduril.
If AI ends up eating the world, I want to make sure they have a seat at the table—at least financially. I'm also additional capital through closed-end venture capital funds as they call capital.
My hope is that owning a basket of private AI companies will compound at a much faster rate than the S&P 500, given these companies are growing much faster. But of course, there are no guarantees.
The Dumbbell Investment Strategy Is Best for Deploying New Cash The dumbbell strategy made it easy for me to reinvest a little over $200,000 in cash from my sale.
Allocating $100,000 into T-bills gives me peace of mind that, no matter how bad the economy or get, at least half of my investment is completely safe and earning risk-free interest.
Meanwhile, if AI mania continues, I have $100,000 positioned to ride the wave higher. Both allocations make me feel good—and how you feel your investments matters.
The more confident you are, the more ly you'll stay invested and keep building wealth by more regularly.
That’s why, if I receive another influx of cash or want to redeploy existing funds, I’ll ly continue growing this dumbbell strategy.
The dumbbell apach works best when you have new money to invest or idle cash sitting around during uncertain times.
However, rebalancing an existing portfolio into a 50/50 split between risk-free and risk assets is a different matter. Your broader asset allocation should reflect your age and stage in life.
A 50/50 allocation might be appriate, but large rebalancing moves can trigger tax consequences you must consider carefully.
Example Of Using The Dumbbell Strategy To Get To An Ideal Overall Net Worth Allocation For example, suppose I already have a $1 million investment portfolio and inherit $200,000 in cash, bringing my net worth to $1.
At 38 years old with 15 more years of planned work ahead, I’m comfortable taking more risk.
I’d be fine 90% of my net worth ($1,080,000) in risk assets and starting a side to pursue growth opportunities.
If my original portfolio consisted of $980,000 in risk assets and $20,000 in cash and bonds, I could easily apply the dumbbell strategy by allocating $100,000 of the new cash to municipal bonds and $100,000 to stocks.
This would bring my total to $1,080,000 (90%) in risk assets and $120,000 (10%) in risk-free investments—perfectly aligning with my ideal 90/10 allocation.
A Simple Framework for Peace of Mind and Growth The dumbbell strategy offers a and practical way to deploy new cash, especially during times of uncertainty.
By allocating capital to both low-risk and high-risk assets, you gain the emotional reassurance of safety while maintaining exposure to upside potential.
It’s a flexible apach that can be tailored to your financial goals, risk tolerance, and stage in life.
Whether you're an inheritance, reallocating ceeds from a sale, or simply sitting on excess cash, the dumbbell strategy vides structure without sacrificing opportunity.
Best of all, it helps you stay motivated and confident—two essential ingredients for long-term success.
So the next time you find yourself with idle cash and decision paralysis, consider the dumbbell apach. You just might sleep better at night while still building wealth during the day.
Readers, have you ever considered using the dumbbell strategy during times of uncertainty. What potential flaws or additional benefits do you see with this apach. I’d love to hear your thoughts.
Balance Risk and Reward With a Free Financial Check-Up If you’re sitting on new cash or reevaluating your portfolio during uncertain times, a second opinion can make all the difference.
One smart move is to get a free financial check-up from a seasoned Empower financial advisor.
Whether you have $100,000 or more in taxable accounts, savings, IRAs, or a 401(k), an Empower advisor can help you spot hidden fees, unbalanced allocations, or overlooked opportunities to imve your risk-adjusted returns.
It’s a no-obligation way to stress-test your current strategy—whether you're building a dumbbell portfolio or considering a full rebalance. Clarity brings confidence.
And when it comes to, confidence helps you stay the course.
The statement is vided to you by Financial Samurai (“moter”) who has entered into a written referral agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.
Diversify Beyond Stocks and Bonds A classic dumbbell strategy includes bonds and equities—but don't forget real estate.
I to treat real estate as a hybrid: it offers the income stability of bonds with the potential appreciation of stocks.
I’ve invested over $400,000 with Fundrise, a platform that allows you to passively invest in diversified portfolios of residential and industrial perties—many in the high-growth Sunbelt region.
With over $3 billion in assets under management and a low $10 minimum, Fundrise has been a core part of my investment strategy, especially when I’ve had cash to redeploy.
Fundrise also offers Venture, giving you access to private AI companies OpenAI, Anthropic, and Databricks.
As mentioned earlier, I’m heavily focused on AI's transformative potential and want exposure not just for returns—but for my kids’ future too.
With a dumbbell strategy, it’s not just balance—it’s positioning yourself for both security and growth. Fundrise is a long-time sponsor of Financial Samurai as our investment philosophies are aligned.
To increase your chances of achieving financial independence, join 60,000+ readers and to my free Financial Samurai here.
Financial Samurai began in 2009 and is the leading independently-owned personal finance site today. Everything is written based off firsthand experience.
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With an MBA from Berkeley and 13 years of experience at Goldman Sachs and Credit Suisse, he helps readers achieve financial freedom sooner.
Join 60,000+ others and for his free weekly so you never miss a thing. Sam is currently in residential commercial real estate and AI companies through Fundrise.
Finally, to build greater wealth, pick up a copy of his upcoming bestseller, Millionaire Milestones: Simple Steps To Seven Figures. It'll be the best personal finance book you'll ever read.
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Δ 3 s Newest Oldest Most Voted Inline backs View all s Jerry 36 minutes ago This post really resonated with me.
After my second child was born in 2020, right in the middle of the pandemic, I remember feeling a mix of deep responsibility and financial anxiety.
The were swinging wildly, and although I had some cash d up for, I hesitated—unsure whether to play it safe or take advantage of the volatility.
Looking back, the dumbbell strategy would have been perfect.
If I had split my capital between something ultra-conservative ( short-term Treasuries or CDs) and something more aggressive ( a broad-market ETF or even -focused fund), I could’ve given myself the peace of mind to act rather than freeze.
That blend of safety and upside would have felt a win-win, especially since my goal was long-term growth for my kids’ education funds. Thanks for laying this framework out so ly.
It’s something I’m definitely using more consciously going forward. 0 Reply Jamie 1 hour ago That’s a smart apach to take. Is often not easy and straightforward.
The possibilities are endless and I think that paralyzes a lot of folks myself included. I have a decent mix of risk and low risk investments that I’m trying to keep going.
I a set it and forget it apach. But it is important to do full analysis reviews at least a few times a year because things are always changing. Thanks for writing.
0 Reply Andy 6 hours ago One part of your article that stuck out to me was your concern AI and the future job market for your kids. Interesting idea to hedge that risk by in AI.
I remember when the hype with automation was that it would take blue collar jobs and driving jobs. Uber’s automated driving ject failed. Amazon’s automated dery failed.
Then AI came and replaced many white collar jobs instead. I didn’t see that coming. While AI has caused disruption, I think it has some limits too.
I find the I’m not a robot or human verification websites incredibly easy to pass.
Some manual labor jobs that are mechanically simple for humans, repointing brick for example, have not been successfully automated.
My current strategy is to not neglect AI, but not over-rely on AI either.
Perhaps being able to manually work with and explain data as a human with understanding will become a less common and much needed skill in the future.
As far as my kids, I’m saving up and being flexible. Who knows what the world will be in 15 years. I think it’s a good idea to be flexible with our family structure.
If the job market is bad, maybe we will stick closer together as family than is traditional in the U.
, and maybe family can be more of a source of stability, not just economically, but also a source for steady, long-term, life-giving relationships.