The Most Proven Core Portfolio Components
You're going to be surprised not by my click-bait approach but by how muc money this makes you! (Not financial advice and written by a hack.)
Oh God, here we go…
Some tired investment wisdom that I’m TIRED of:
“VOO and chill” - no, YOU chill!
60% stocks, 40% bonds - that one’s not all bad, you’ll see later
Time in market beats timing the market - yeah, if you suck at timing
I have an issue with those, specifically the argument that the S&P 500 is the king for risk adjusted returns, or investing efficiency.
The data just doesn’t bear that out.
So, I must be missing something, or people aren’t looking at the data.
(Wait, that’s been a theme for me in business! People don’t look at or appreciate data. They prefer to go with the herd spouting maxims that are easy to repeat, even if they’re wrong. So I’m gonna assume that, yet again, they’re not looking at the data, or don’t know how to, and don’t want to listen to the weirdos that do. I’m not lonely- you’re lonely.)
And by the way, here are some investment maxims I do agree with:
Put that 30-50% (40% in bonds) in MMFs are something liked Treasuries guaranteeing you 4% just in case- unless you’re an extremely efficient (and of course experienced) investor, or just one of those fun-lovin’ Duke boys!
Don’t fall in love with a stock. It’s not a family member. It’s not a boat that was magically given a personality by Disney. You don’t have to love a knife that’s cutting you.
Be greedy when others are fearful and fearful when others are greedy. Basically, reversion to the mean explains this one. And the people (I’ve done this, learned the hard way) who assume a skyrocketing stock is a good investment make a ton of money for the smart people.
So, anyhow, another mistake, in my opinion is…
Constantly hunting the next hot stock keeps you buying high and selling low,
and you end up investing in things you don’t really understand. Both of which lead to inexplicable misfortune.
It’s inexplicable to you- but not to others.
Why not get really expert in 8-10 instruments and their relationships, so that you can allocate where you need to when you need to?
And further, why not choose instruments that are as uncorrelated to each other as possible?
For example, here are six and their correlations over the last 5 years:
Oh, and the 12.71% is the average correlation of the instruments- the closer you can get to zero, and still make money, the bigger your return:volatility ratio; aka Sharpe ratio. That’s a good thing.
What’s interesting is that people often talk about gold (IAU) as a S&P 500 (SPY) hedge, but they’re 80% correlated!
And you can see it in how similarly they move:
By contrast, take a look at VIXM (medium term volatility - specifically the volatility of SPY)…
Unsurprisingly, it’s just about a mirror image of SPY. What happened when the Tariff Shock of 2025 tanked “the market” (as the the S&P 500 is known by the terminally ignorant)?
What happened is that this VIXM ETF was extremely profitable:
Gold warn’t (“weren’t” for those of you who don’t speak Southernese) too bad neither:
I Sure Hope You Did the CHILL Part of “VOO and Chill”
So, if you VOO’d and Chilled (VOO is just Vanguard’s S&P 500 ETF, they same as SPY or SPV) from Feb 19 - now (June 12, 2025), you experienced all those red losses, and still aren’t square yet. You’re down and you lost a bunch of potential profits you could have gotten in other instruments.
Take a look at all that red you lost.
Oh wait, you didn’t lose it because you chilled and didn’t sell?
Mmkay, but what else could your money have been doing during those 113 AND COUNTING days?
Hmm, I don’t know….
VIXM investors earned all that green, with the small exception of the pink area. But the green’s a lot bigger than the red, right?
That yellow area popping out behind VIXM is gold. So even though gold and SPY are 80% correlated over 5 years, there are key times like this where it hedges the heck out of SPY.
Maximum loss = 18.7%, that’s if you freaked out and sold on April 9th.
But let’s be fair- any serious dip or crash of SPY historically has had a drop of over 4% from its last highest price. So let’s say you waited until it dropped 4% and sold then. So you see that on Feb 28, and you sell the AM of March 3rd.
You still have over 95% of your money, and it’s free to deploy in smarter placed.
Plus…
Your stock portfolio’s value isn’t real until it’s sold. Anytime a crash happens, that money you thought you had becomes a fiction. It’s not the real number anymore.
That’s why big traders and institutions “take profits” after abnormally high gains. They know it’s going to regress to the mean, and the gains will disappear.
So here’s the harsh truth, simplistic investors:
Time-in-the-market doesn’t beat timing-the-market if you’re stupid.
Timing the market means thinking you know where it’s going.
But holding regardless means you think you know where it’s going. When you buy and ALWAYS hold, you ARE timing the market - just in a different, not necessarily a better way.
You are still in “the market” even if you aren’t investing in the S&P 500.
You are correct, the this time is different crowd still hasn’t been right yet.
But what about the swing traders?
Anyway, What the Heck IS “The Market”?
The Truth: “The market” is VERY big. You have a lot of choices.
The S&P 500 is not “the market”.
That means that “VOO and chill” is like going to Baskin Robbins and hearing you should only eat vanilla ice cream. And probably in a cake cup. Those pointy ones are evil and probably communist.
“Vanilla and chill, buddy! It’s more Amurkn!”
The Truth: There are more than 31 flavors of investments.
There are 3,873 ETFs like SPY, EWP, IAU, VIXM, SMH, XAIX, and there are 52 heavily traded ETFs (over 10 million shares a day). Even just ETFs outnumber your Baskin and Robbins choices, which you shouldn’t even be eating unless you had your protein and exercise for the day.
Do you know what those 3,873 ETFs are?
Here are some, sorted by highest trading volume:
What are those 2x and 3x ones… oh!
Does it surprise you that some of the most traded ETFs are people doubling or tripling their bet for or against Tesla, Semiconductors, tech stocks, and even the S&P 500?
That explains why the stock market news is so important to some people, and why they obsess over Tesla’s performance. You can make money off trends either direction.
Tesla has been such a volatile stock. And, typically, the higher the volatility, the higher the potential returns. But volatility is risk, so be careful out there.
Beyond ETFs, there are are 5,000 individual stocks you can trade on American exchanges.
(I apologize for being Amerigo-Vespucci-centric here, my international friends, it’s just my experience. I really do like other countries! I can even point some out on the map! But our pizza is better. Yes, I’m looking at you, Italy!)
This is all beside my point, which is…
What is The DNA of the Perfect Portfolio?
You have choices, but let’s keep it simple and diversified, and avoid staying in instruments that are oscillating down.
If you’re interested, my recommendation is to take some time to research and analyze these- first the simple version, what I call the DNA of my Sharpes Portfolio:
SPY - Industry (American but with a lot of international business)
IAU - Gold
SLV - Silver
VEU - International
USO - Oil
Maybe VIXM, but be careful, because if you hold it too long at the wrong time, it drops A LOT.
The Multi-Polar, Multi-Regime Version
A bit more sophisticated but not that overwhelming, and a bit more multipolar which gives us more tools for more variations of market regimes, let’s call them the 10 most important nutrients for a growing portfolio’s body:
GDX - the first of 5 precious metals, gold miners, bigger returns
IAU - Gold, the weird metal we decided was most important
PLTM - Platinum, kind of a badass, but higher SPY correlation like SLV
SLV - Silver, also has practical uses
SLVP - Silver miners, bigger returns
SPY - Industry, as we said above
TMF - a “long” ETF related to those 20 Year Treasuries that made news as the true foundation and stabilizer of the U.S. economy that some of the more conservative country clubs won’t let you trade, and which interestingly has been down since some of the monetary policy decisions we made for COVID recovery, but recently has been up
USO - Black Gold, according to Jed Clampett
VEU - Your international friends who are usually just kind of a minor SPY, but sometimes do better when the USA is in trouble
VIXM - your volatile friend, yeah the one who stole your girlfriend, but sometimes saves the day when things get weird.
The cool thing, if you want to get all Robert Shiller about it, is that you can measure the momentum of each instruments risk-adjusted returns to inform your allocations...
But I’ve gotta comed back to that another day, because my carpal tunnel is flaring up!
As a gift, because I don’t want you to be lonely, I’ll leave you with this very original cartoon I forced the ChatGPT I have tied up in the basement to do:
Excelsior!
(I have no idea why anybody would ever say that.)