Ever since I left my day job in 2012, I’ve used a form of the dumbbell investing strategy to grow my wealth while protecting 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 about losing money, the dumbbell investing strategy is worth considering.
What Is the Dumbbell Investing Strategy?
The dumbbell investing 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—like I suggest in my post about when to stop taking excess risk—you’re already applying a version of the strategy. It’s especially useful when you're uncertain about 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 investing 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 likely you are to fall behind.
Note: When I started working at Goldman Sachs in July 1999, I felt like 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 appropriate. 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. The problem? 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 investing, 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 deliver a good-enough lifestyle, if not a great lifestyle. Every dollar saved 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 about $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 about $53,600. Passive income progress feels wonderful!
The Aggressive End Of My Dumbbell
Now that I’ve shored up the conservative end of my dumbbell investing 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 about: 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 technology that might harm their prospects. Ideally, they’ll learn how to harness AI to boost their productivity, 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.
Investing 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 investing 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 investing strategy made it easy for me to reinvest a little over $200,000 in cash from my home sale. Allocating $100,000 into T-bills gives me peace of mind that, no matter how bad the economy or markets 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 about your investments matters. The more confident you are, the more likely you'll stay invested and keep building wealth by investing more regularly. That’s why, if I receive another influx of cash or want to redeploy existing funds, I’ll likely continue growing this dumbbell strategy.
The dumbbell approach 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 appropriate, 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 $1.2 million. At 38 years old with 15 more years of planned work ahead, I’m comfortable taking more risk. I’d be fine investing 90% of my net worth ($1,080,000) in risk assets and starting a side business 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 Investing Framework for Peace of Mind and Growth
The dumbbell investing strategy offers a clear 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 approach that can be tailored to your financial goals, risk tolerance, and stage in life.
Whether you're investing an inheritance, reallocating proceeds from a home sale, or simply sitting on excess cash, the dumbbell strategy provides structure without sacrificing opportunity. Best of all, it helps you stay motivated and confident—two essential ingredients for long-term investing success.
So the next time you find yourself with idle cash and decision paralysis, consider the dumbbell approach. You just might sleep better at night while still building wealth during the day.
Readers, have you ever considered using the dumbbell investing strategy during times of uncertainty? What potential flaws or additional benefits do you see with this approach? 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 improve 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 investing, confidence helps you stay the course.
The statement is provided to you by Financial Samurai (“Promoter”) 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 about real estate. I like 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 properties—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 like 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 about balance—it’s about 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 subscribe to my free Financial Samurai newsletter here. Financial Samurai began in 2009 and is the leading independently-owned personal finance site today. Everything is written based off firsthand experience.
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 markets were swinging wildly, and although I had some cash saved up for investing, 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 (like short-term Treasuries or CDs) and something more aggressive (like a broad-market ETF or even tech-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 like a win-win, especially since my goal was long-term growth for my kids’ education funds.
Thanks for laying this framework out so clearly. It’s something I’m definitely using more consciously going forward.
That’s a smart approach to take. Investing 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 like a set it and forget it approach. But it is important to do full analysis reviews at least a few times a year because things are always changing. Thanks for writing!
One part of your article that stuck out to me was your concern about AI and the future job market for your kids. Interesting idea to hedge that risk by investing in AI. I remember when the hype with automation was that it would take blue collar jobs and driving jobs. Uber’s automated driving project failed. Amazon’s automated delivery 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, like 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 like 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.S., 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.