The Dumbbell Investing Strategy: Balancing Risk and Safety

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

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’m also a lifelong investor, and right now the market gives me pause

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

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

Once achieved, I will deem us financially independent once more

So I deployed capital into a mix of short-term and longer-duration government bonds

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

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

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

But of course, there are no guarantees

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

At 38 years old with 15 more years of planned work ahead, I’m comfortable taking more risk

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

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

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

Everything is written based off firsthand experience

With an MBA from Berkeley and 13 years of experience at Goldman Sachs and Credit Suisse, he helps readers achieve financial freedom sooner

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

Notify of new -up s new replies to my s Label {} [+] Name* * Website for the private Financial Samurai. Δ Label {} [+] Name* * Website for the private Financial Samurai. Δ 3 s Newest Oldest Most Voted Inline backs View all s Jerry 36 minutes ago This post really resonated with me

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.