Accumulate More Wealth With An Investing Game Plan

Investing Game Plan

Having an investing game plan is important if you want to accumulate more wealth. With an investing game plan, you will stress less and execute winning financial movs more often.

Violent stock market corrections of 10% or more happen almost every year. Sometimes, we'll see a whopping 30%+ decline like we did in March 2020.

Doing nothing is considered one investing game plan. But doing nothing because you couldn’t be bothered to think about how scenarios might play out is lazy. It’s better to be lucky, than good. However, what if you’re neither?

Since writing the post, Stock Market Meltdown Implications For Everyone, many of you have asked for specific advice on how to deploy your capital into the markets. Given everybody's financial situation is different, I'm just going to suggest a five step framework, and use myself as an example. 

I've lost a ton of money in the markets before, having invested during the Asian financial crisis of 1997, the dotcom bubble of 2000, and the economic collapse of 2008-2009.

What has helped me get through difficult investing periods is simply coming up with an investing game plan to account for different scenarios. The fear of investing gets minimized, and rational action takes over.

How To Create An Investing Game Plan

Here are five steps to creating an investing game plan to help you good times and and times. It is during good times when we need an investing game plan the most. Because once the bad times hit, we will be prepared.

An investing game plan is similar to an investment thesis everybody should create before putting any money to work. Regularly review your investment thesis to ensure it's still intact if you want to keep holding.

Step 1: Figure Out Your Liquidity Need

I currently need at least $30,000 in the bank to feel secure. Any more than $30,000 feels like I'm wasting opportunity to invest somewhere since money market accounts pay almost nothing. Any less in the bank, and I start to feel uncomfortable just in case a financial catastrophe happens. My liquidity need has fluctuated between $10,000 – $100,000 in the past mainly due to job security and upcoming expenses.

Once you figure out your minimum cash need, you can implement an investing game plan with the money above your minimum. A good minimum liquidity benchmark is six to twelve months worth of living expenses.

You can currently get a pretty good online savings rate with CIT Bank to park your money. The other way is buying 3-month treasury bonds.

Step 2: Assess Your Current Position

Based on my neutral view on the stock market at the time, as a new year's goal, I accumulated $70,000 over my $30,000 minimum liquidity need. My current overall stock / bond allocation is roughly 70% / 30%.

Meanwhile, my public market investing portfolio (as opposed to private equity and venture debt) makes up roughly 21% of my overall net worth. My comfortable net worth allocation range in public markets is 20% – 30%.

Figure out how much money you are willing to invest beyond your minimum liquidity need. Analyze your current equities / fixed income split. And calculate what your total public market investment exposure is to your net worth and adjust accordingly. 

Check out the proper asset allocation of stocks and bonds by age to help with your investing game plan. At least from a public asset portfolio perspective, my post should help.

Step 3: Reaffirm Your Investment Horizon

My investment horizon is 22 years, or age 60 for both pre-tax and post-tax investment accounts. The idea is to match the minimum age at which I’m able to withdraw money from my 401k, SEP-IRA, and Solo 401k accounts penalty free with my after tax investments. The hope is to never need the money due to existing cash flow from other income streams. But one never knows and I will reassess when the time comes. 

Any time horizon longer than 10 years should help investors become more disciplined. I’ve found that if your investing time horizon is less than three years, you become either much more risk averse or too risk loving. With your main investment portfolio, it's wiser to shoot for singles and doubles. 

The longer you can stretch your time horizon, the less concerned you will be about market meltdowns. Reaffirm your investment horizon. If you have young children, then you can really stretch your investment horizon by decades. For example, my wife and I are regularly contributing the maximum gift tax exclusion amount per year in our children's 529 plans. We're fine if the market sells off because our investment horizon for the 529 plans is over 15 years.

Step 4: Divide Your Excess Capital Into Multiple Tranches

If you had unlimited ammunition to buy, you’ll eventually be able to pick the bottom. This is one of the basic goals behind Dollar Cost Averaging. Once every two weeks or month, deploy a certain percentage of your disposable income into an investing portfolio in hopes of buying some shares at lower prices.

But if the stock market is collapsing by 5%, 10%, 20%+ in short periods of time, you might as well become more aggressive in your Dollar Cost Averaging approach if you have a long investing time horizon. This is where you should consider creating at least three super tranches to purchase securities with the capital beyond your minimum liquidity need. 

I’ve been investing $5,000 – $20,000 a month in the market since leaving Corporate America in 2012. The $70,000 in extra capital is divided into five tranches of between $10,000 – $15,000 each to deploy into the market. This capital is in addition to the monthly $5,000 – $20,000 deployments.

Step 5: Create A Capital Deployment Plan

Armed with five tranches of up to $15,000, I plan to deploy each tranche after every 2% or greater downward move. I use 2% or greater downward moves as a signal for excess capital because major indices generally move up or down by only 0.5% the majority of days.

Furthermore, with five opportunities to buy at -2% or greater, I’m making an implicit assumption that I think with a high probability the stock market will correct by at most 10% and then flat-line or begin to recover again.

If the S&P 500 only corrects by 1% or less, then I will not be deploying extra capital. I'll simply continue my normal $5K – $20K a month dollar cost averaging plan and sit on excess capital until better opportunities arise. If the S&P 500 corrects between 1-2%, then it's a judgement call. Maybe I'll invest just $3,000 in extra capital.

Let's say the S&P 500 corrects by 5% to 1,900 from 2,000. I'm still allocating a maximum of $15,000. If the S&P 500 recovers all its losses the next day, and then loses 5% again back to 1,900, I'm not investing another tranche. Instead, I'm waiting for another 2% correction from the 1,900 level to 1,862 or lower before deploying more capital.

How I'd Invest $250,000

So far, I’ve deployed $40,000 of the excess $70,000 capital into this 10% – 15% correction. I didn't expect to invest the money so quickly, but I'm just following my system. As you will note, the market corrected beyond my expected 10% correction at one point. By having five separate tranches to invest, I've saved myself some ammunition if the stock market corrects even further.

Nobody can accurately predict the future. But we know over the long term, the stock market moves up and to the right. Therefore, it's strategically a good move to keep on investing for as long as possible.

Here's a detailed post on how I'd invest $250,000 in today's market. With the 10-year bond yield at 17-year highs, I'm investing much more conservatively now with the majority of my capital.

S&P 500 Historical P/E Valuation

Follow Your Investing Game Plan

Your investing game plan must include how much to invest in what type of investment over a certain period of time. That, or when a stock or particular index sells off by a certain amount.

Where I’ve blown myself up is when I’ve gotten too cavalier with my investments. For example, in my younger years, I might have deployed all $70,000 during the initial 3% correction and have nothing left to buy during the subsequent 9% – 12% correction. The system keeps me disciplined, and your system will as well because it reduces emotion. 

I'm a big believer in investing in growth stocks when you are younger. However, once you are over 40 and/or have a sizable capital base, investing in growth stocks when valuations are at all-time highs becomes more risky. Hence, it may be better to invest in dividend stocks for passive income or real estate.

The most important thing every long term investors should do is come up with an investing game plan today and stick with it over the long run.

If you keep on investing on a regular basis, the amount of money you can accumulate over a 5, 10, 20+ year period will be enormous. It’s the undisciplined who wake up years later wondering where all their money went.

Watch Your Wealth Grow

Financial Samurai Investing Portfolio Created In 2012
Created in 2012 by following a game plan. Fixed Income actually contains a bunch of equity structured notes.

By investing $5,000 – $20,000 a month since June 2012, a brand new portfolio I created at the time is now over $500,000 three years later. I call it my “Unemployment Fund.”  The idea was to see how much I could grow a portfolio from scratch with no job, just my passive income streams, and an online business that generated less than $100,000 a year in revenue at the time.

I encouraged a personal finance client to join me in creating a new Unemployment Fund of her own in 2012 because she wanted to eventually leave her soul-sucking job as well.

We motivated each other, and her portfolio is now over $300,000 while earning less than $150,000 a year. By accumulating this amount, she got the courage to engineer her layoff in 1H2015 and become a rockstar freelancer instead!

Losing money in the stock market feels terrible. But if you come up with a tailored investing game plan and stick to it, you'll be able to drastically minimize the anxiety of stock market investing. Your portfolio will likely grow larger than if you didn't have a plan and you'll have a much greater appreciation for money as a result.

Invest In Private Growth Companies

Consider investing a minority of your capital in private growth companies through a venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

One of the most interesting funds I'm allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Manage Your Finances Carefully

In order to optimize your finances, you've first got to track your finances. I recommend signing up for Empower's free financial tools so you can track your net worth.

The tool will also help you analyze your investment portfolios for excessive fees. Finally, run your financials through their amazing Retirement Planning Calculator.

Those who come up with an investing game plan build much greater wealth over the longer term than those who don't!

Retirement Planner Personal Capital
Is your retirement on track? Here's my personal results.

Related post: How Much Savings Should I Have Accumulated By Age?

For more nuanced personal finance content, join 50,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. I help people get rich and live the lifestyles they want. 

59 thoughts on “Accumulate More Wealth With An Investing Game Plan”

  1. Samurai, do you have an effective way of charting your gains with this method, relative to not using this method? I’ve taken this on lately and, while it seems to be working, it’s difficult to track exactly how well.

  2. Hello,
    Thanks for sharing this information. It truly is priceless! I wanted to get your opinion on putting the monthly investments in Fidelity portfolio advisory service. In this article you mentioned investing after the discovery process. I have initially used fidelity pas but now I have some capital I don’t know how best to proceed in terms of using s&p index funds, motif investing, or adding more to PAS.

  3. lifetimeandmoney

    Great post. I’m going to try out this investment strategy with some of my funds (too bad my investment slugs are not as big as yours!).

  4. BCEastCoast

    Love your site and advice. Opened a 3% CD from Navy Fed Credit Union which I found be cause of one of your readers. I have a Merril Edge Acct but am confused about how to choose the Bonds/Fixed Income / Mutual Funds/ EFTs. I opened this account seperate from my regular investment account because of the low trading cost $6.95 per trade. I purchased some stock on my own but choosing these takes a trained eye. My Roth and IRA are in yet two other places with other brokers. Is is ok to have 4-6 different Investments firms ? The Merril acct I take care of myself.

      1. One year only and they’ll only take $3000 but I thought it was worth it and I found it on your Blog. I’ve really been encouraged bynreadingthis blog for 2 months now — thank you !!

  5. Hi Sam

    I am really enjoying your blog posts thank you. I have been using Personal Capital’s free services for about 6 months now and really like it. I have an advisor and accounts with Ameriprise. I have been discussing Personal Capitals wealth management accounts with them and am considering a change. I know that many people feel their fees are too high. I need to balance fees with the advice and returns that I am getting. Do you have an opinion on Personal Capitals wealth management program?

  6. Great article Sam! I really liked your idea of setting aside an excess capital deployment strategy to take advantage of market corrections. I’m also curious about your thoughts on two things:

    (1) Do you use a metric / thumb-rule such as the CAPE ratio (or something else) to decide whether to invest in the market on a given month or use that money for other things, like building your cash balance or paying down a portion of your mortgage?

    (2) Do you also have a similar framework to do tax-loss harvesting with your taxable account?

    Many thanks!


  7. Sam, thanks for the post. Like your strategy here and want to get some more details:

    1) After you move the tranches into investment, do you cash them out later based on some rules or leave them there? Do you recharge the tranches with the regular monthly investment fund or separate one?
    2) The size/#tranches would be different for everyone, what’s your guideline for putting money in them v.s. in monthly investment fund?

    And a side question not particularly related to this post: can you help with some advice about health insurance options and investment opportunities associated with that?

    1. Hi Ming,

      1) It depends, but 90% of the time I just buy and hold with the unwavering goal to accumulate wealth until my target age of 60 and reconsider. Time in the market is more important than timing the market as they say.

      2) All money in excess of your liquidity need.

  8. What about the research that indicates lump sum investing is better than dollar cost averaging (assuming you have a lump sum to invest and we aren’t talking about regular investing via monthly income)?

    I did all the research again recently when I had about $85K in cash I decided to put to work. Apparently, statistically lump sum investing gives you more money after 20 years (or was it 30?) around 65% of the time. I can’t remember the exact figures or what the exact DCA comparisons were (they vary by study anyway) but you get the jist.

    Anyway, I dumped the money into the Total Stock Market index about 2 weeks ago – right before the correction! I actually don’t feel bad about it though because even with the dip I could end up with more money in a couple of years than I would have if I’d spread out the investment over a fixed 6 month time period or whatever. Who knows where the market will be even next year? This is long term money and I knew that getting in.

    Plus I buy $5K a month via retirement accounts too, and the $85K was a small portion of our total net worth so in the end the decision wouldn’t move the needle too far either way. But in hindsight (of course) I see the value of your plan. The problem is if the market DOESN’T correct though, then you have that money on the sidelines for months or maybe years.

    My plan is to dump extra cash in the market whenever I have it, though I do keep a year of expenses in cash as well as extra if I plan to buy another property or make a private investment in a given year.

    1. Hi Meg,

      I’d love to read why lump sum investing is better than dollar cost averaging.

      But if you think about it, it depends on your future cash flow. If you have recurring cash flow to generate lump sums, isn’t periodical lump sum investing simply a version of DCA as well?

      Where did you come up with the 85K cash? Was it acquired in a lump sum?

      My cash is accumulated from my earnings, and not a windfall, so I will always be DCAing.


  9. Bill Bernstein in The Four Pillars says: …You must know that brutal bear market will happen. …you should increase your stock allocation …say 5% after a fall of 25% in prices.

  10. Sam, I appreciate you writing a whole article in response to my question. Great write up. I read this post twice, and also read the answers above regarding equity vs real estate balance.

    So here’s my plan based on your strategy

    Step 1 – Emergency fund $50,000
    Step 2 – Distribution
    – $450,000 in SEP-IRA which is $350,000 equity and $100,000 cash
    – $100,000 equity in post tax account
    – $50,000 saved for a potential startup investment
    – $10,000 in P2P
    – Real Estate $2 mil
    Step – 3 – Horizon 15-20 years. Currently 44 y/o.
    Step – 4 – Tranches. I really have at least $100,000 to put into the market so I could be pumping in $20,000 at a time.
    Step – 5 – Bump my dollar cost avg to my SEP to $4,000 a month and $1000 into post tax account plus the 5 tranches.
    Step 6 – Wait for Sam’s next article on RE vs Equity.

    1. Thought more about my deployment strategy, and decide to write out a concrete plan with exact numbers.

      I thought a bell curve deployment maybe be better than a linear one. A 5 tier deployment divided into 15%, 20%, 30%, 20%, 15% allocation predicated on the market bottoming out 20% from the peak.

      Here it goes..

      SP500 4% drop (2044) – 15,000
      SP500 8% drop (1959) – 20,000
      SP500 12% drop (1874) – 30,000
      SP500 16% drop (1789) – 20,000
      SP500 20% drop (1704) – 15,000

  11. This is a great tip – Create A Capital Deployment Plan. I don’t have a game plan for capital deployment and it’s been guess work. This week I took the opportunity to contribute 10k to our Roth and my i401k. If the market corrects further, then I’d probably trade in some bond funds for equities. I really like your 5 tranches idea. That’s a great way to keep disciplined.

  12. rags2riches

    Personally, I think your 2% levels are too close. In a serious downturn e.g. dotcom or financial crisis, you would be out of ammo too early and be seeing some big paper losses on new money.

    Are you regularly adding to excess capital funds as well?

    1. It’s predicated on my belief in a 10% max correction.

      I’d love to learn more about your investing strategy and how you invested during the last downturn etc. thanks!

  13. DP @ Someday Extraordinary

    Hit the nail on the head. Last week and earlier this week provided a huge opportunity to dollar cost average in the markets. So much of it is just paying attention. As you mention, if you have the liquidity during these dips in the market, you need to recognize the crash for what it is and put your money to work for you! Look at the last two days! You could have made up 800 points back on the Dow simply by paying attention.

    From a long term perspective, you need to recognize the cycles and, again as you said, keep your investment horizon in focus. The market freaks out sometimes; use it to your advantage.


  14. HI Sam!
    Great post. Will re-read it to try to understand the tranche system and possibly employ it in my situation. For now (as I do not trust myself) I follow the simple advice of much more experienced investors. Such as Bogle:

    Develop A Workable Plan
    Invest Early & Often
    Never Bear Too Much Or Too Little Risk
    Never Try To Time The Market
    Use Index Funds When Possible
    Keep Costs Low
    Minimize Taxes
    Invest With Simplicity
    Stay the course

  15. Hey,

    this is a great article. I guess the most valueable rule is to stay calm in all situations. Don’t panic is one of the best advice you can give.
    The fifth point concerning your “emergency buys” is very interesting for me. At the beginning of this weeks i had problems to find enough cash to buy besides of my regular savings.

  16. noal sellers

    What if you are a retired 61 year old earning 2% on 2/3 of your money and 5% on the rest (the company I retired from funds these two accounts and will continue doing so as long as I live). Should I still be considering the stock market (I can live the way I want on what I have now). I loved the market and made a small fortune when I was in it, but now that I have crossed the finish line I feel like I should take my winnings and go home…..your thoughts please.

    1. I think if you can live within your earnings, then just stick with what works. The markets are close to all time highs, and we are six years into a bull market, and the Fed is trying to raise rates in the next six months.

      You’ve already won the race. No need to go back to the starting line!

  17. I have been legging into a couple positions. The volatility this week has been nuts. Such huge falls and spikes. I like to build positions over a period of weeks or months so that I don’t get too stressed out. I’m lucky I didn’t dump a lot of money into the markets earlier this year but spread it out. It’s crazy we’ve pretty much lost a whole year’s worth of performance but we’ll see how things go from here.

  18. “Stay disciplined” through the storm is #1. Exactly who has been tanking these markets? Emotionally balanced and disciplined people who stay chilled when the sheeat hits the fan? I think not. Example…..

    Imagine flying on United in one of the few planes that still has Channel 9 access to the pilot-ground control conversations. You hit 20 minutes of turbulence as you fly over the Rockies near Denver. The pilot asks the flight attendants to sit down and you turn on Channel 9 because you feel slightly unnerved. To your surprise, you hear your pilot FREAKING OUT with ground control. “I DON’T KNOW WHAT THE HELL TO DO UP HERE! WE’RE GETTING SHAKEN AROUND LIKE RADDICIO IN A SALAD SPINNER!!” In truth you’d never hear that because most pilots probably aren’t even touching the controls. Some (not all) may very calmly ask ground control for a different smoother altitude.

    THE LESSON: We need more calm and collected airline pilots and fewer highly freaked out and caffeinated zombies junking out on CNBC to invest in the stock market.

    1. I never watch CNBC anymore. When the market is up, they bring on all the bullish pundits. When the market is down, the bring on the bearish pundits. It’s a lot of noise.

      Just saw a commercial by these two CNBC commentators who are brothers selling option investing to make more money. Really? The average retail investors will lose their shirts. Think they are the Najarian brothers.

  19. Sam, I love this game plan idea and I am in the middle of writing up a plan like yours today. If you could clear one thing up about deploying capital…..So for example, if there is a 6% drop in a day, you would deploy 3 tranches(45k), correct? Then if there is a subsequent 2% drop the next day you would deploy yet another tranch? So with that said, wouldn’t you have burned through all of your 70k during the most recent 10%+ correction? I am confused as to how you only used up 40k of your excess.

    The plan I am writing up is more of a ‘progressive pay-out’ sort of plan, so as the more the market corrects, the more capital I will deploy.

    1. Hi Justin,

      In the 6% drop scenario, I deployed $15,000. I only allocate one tranche per session. When the market is nose diving into the close, momentum isn’t your friend the next day. This is why a lot of day traders try to close their books each day.

      But I don’t day trade.

      If the market falls again by another 2%+ as it did recently, I deploy more capital again. My belief was a 10% correction in 5 days. But the market did so in 2 days.

      Now the markets are rebounding and I’m just sitting tight with the remaining $30k.

      1. So, other than your regular investing schedule (akin to those of us W-2 people with payroll deductions into our 401ks) you only deploy the “extra” investing dollars during a correction (>2%)… never during a slow, sustained climb with small bumps (<1%)?. I realize that volatility is the name of the game right now but there have been periods of more linear growth in the recent past (likely will be in future too … no?). Curious.

        Loved the article, great advice, another hit Sam!

        1. Glad you like the article! I wanted to make it as clear and helpful as possible.

          To answer your question, the main investment contribution is the plain vanilla $5 – $20K monthly deployment of capital into a portfolio that is asset allocated based on my current belief about the market and risk tolerance. The range splits go from 50/50 to 90/10 of equity/fixed income. I’m currently at around 70/30, and should probably lighten my bond exposure as bonds did rally, but have now come off.

          My $5 – $20K monthly contribution range pretty much encapsulates 80% of all my investing over the past three years. So, no, I don’t have any more to contribute if I want to maintain my net worth allocation percentages.

          Over the past 18 months, I’ve spent several hundred thousand dollars purchasing a house and remodeling/expanding. Now that the remodeling is 80% done, I may perhaps invest more into equities, but I’d rather accumulate cash again… perhaps back up to $100,000 because I feel there will be more opportunities in the future whether in the public market or the private market.

          In short, I’ll adjust my investment game plan over time, depending on liquidity, income, and upcoming expenditures.

  20. Back in 2009 I was sitting on $30,000 in cash and wondering if I should dump it into the market when the S&P was around 700. I didn’t because that fall I would be starting my MBA at UC San Diego so that money went into tuition payments instead. I didn’t know we were going on a 6 year bull run so I missed out on some nice returns. It just seemed too crazy at the time.

    Here we are in 2015 and I’m sitting on a pile of cash for a down payment on a home. If the market takes a 20% dive it will be tempting to deploy some cash. As of now I won’t change my plan but it’ll be sadly humorous if the market hits a 20 year low while my money sits under my bed mattress again.

    1. Hopefully by the time you graduated though, you were in a much better position to land a job while having less or no MBA debt?

      If the market hits a 20 year low, all of us will be out of a job! Including me, even though I don’t have a job!

  21. Great article, this is what I’ve been looking for! I would like to learn more about where the short term funds should be held while waiting for the corrections.

    This post reminds me that I would also like learn more about asset allocation with an emphasis on real estate investing. My main vehicle of investing is in cash flowing rental properties with a current holding of $650k in rental properties and $0 yes $0 in the markets. I would like to build my market holding but I’m unsure what “mix” (real estate and market holdings) I should go for while still saving for our “next” real estate deal.

    I read ALL of your articles and I love your writing style and ideas. I will plan to use this 2% strategy but it would be great to have an article written from the perspective of someone wanting to invest primarily in real estate but also build market funds. I have read your allocation articles and cash flow articles which hit on real estate but I have had a VERY hard time finding anyone that writes about real estate as the #1 method while using market investing as a secondary investment.

    Would LOVE to hear your opinions on this or see an article that has the real estate investor at the forefront.

    Thanks for everything you have taught all of us that follow you!

    1. Hi Blayne,

      Nice to hear from you. I keep my short-term funds in a simple money market account at my main bank. It’s also the same bank I have this Unemployment Fund. When I make a purchase or call the order in, the money market account is debited, and my Unemployment Fund is credited.

      Let me think about an article relating to a recommended mix of just real estate and stocks, with RE being the primary asset.

      How many properties do you have? I love real estate, but the issue is liquidity. This is why I keep my RE exposure to 50% of my total net worth.


      1. Blayne Midthun

        Thanks for the response.

        We have three properties, all three are ranch style fourplex buildings with 1 bedroom 1 bathroom units.

        Again, I love all of your articles and try to add as much of your philosophy as I can to what we are doing and that’s why I would love to hear additional input on a good blend of real estate and market investments with real estate being the primary focus. I understand you tend to be weighted more on the market side but with cash on cash returns over 20% on our real estate investments, I have a difficult timetime finding what our “mix” should be.

        In the past, I have invested in blue chip fund I.e. McDonald’s, proctor Gamble, j&j as well coca cola (Warren buffet influence). But, every year or so for the past three years I have found opportunity to invest at a higher return in real estate.

        Again, thanks for your posts and I look forward to reading more!!

    2. Blayne, I am very real estate heavy too in a low cash flow market. Where are you located to get a 20% cash on cash return?

      I cannot believe you don’t have any $ in equity. What about 401k?

      I thought about this question and came to this conclusion.

      RE is my business and its separate from my stocks and IRA. Just like Mark Zuckerburg would not say he is 99% in equity because of his FB stocks or Donald Trump worry about 99% in RE. Now that I have separated RE I’ll focus on my SEP IRA which is a little behind compared to Sam’s recommendatiom of how much I need in IRA at my age. I should have about $750,000 but I am at $450,000. In my case I want to catch up in my equity position.

      Put it another way. Your business should always be your best investment because no one believe in it as much as you. If not, why are you in your business. You should be buying index fund.

      1. Blayne Midthun

        We are in Western Wisconsin, Eau Claire to be exact. We are a college town with a vibrant music and art scene. Lots of bike paths, scenic river views and lots of wooded areas. Bought our rentals with roughly $30k down and clear about $7k per year after expenses and tax but before depreciation.

        Thanks for your advice and like you said, index funds are one of the avenues I would look to get into as well as blue chip dividend stocks.

        I’m a stay at home dad and have been for the past four years. My wife works for the school district and makes just over $30k but we have been able to grow our net worth by nearly $200k while also accumulating 12 rental units with total value of appx. $600k since I left my job to watch the kids.

        Nice to talk with others that are RE investors. Would love to hear more of your strategies Asianxy!!

        1. Eau Claire, Wisconsin, sounds like a beautiful place. 20% cash on cash return. Did you have to hunt hard for these properties? Did you buy them in 08, 09 when the market was at it’s softest? Can you still find the same deal now?

          I am not a professional real estate investor. I have a 50 hours a week job. I am hoping my real estate income will pay enough so I can work 4 days a week and stay home one day.

          Sounds like you are doing the right thing. I would jump all over that 20% return. However, diversification is still important. Do you have a SEP-IRA? IF not, you really need to set one up and dollar cost average into the equity market.

          1. Blayne Midthun

            Our market has been pretty hot this year and out inventory is pretty low at the moment. Multi family properties don’t come available that often around here other than “student rentals” near the university. Those properties are typically single family homes in need of work and I’m not interested in the hassle of dealing with college students.

            I think our cash on cash return is high due to placing only 20% down on new properties.

            We purchased our first rental in Eau Claire in 2011 I believe, our second a year later and we are closing this next Friday on the third. First two properties were purchased for $167k and cashflow about $600 per month at this point although they were closer to $400 at the time of purchase.

            $600 x 12 = $7200 annually / $33000 (20% down) = appx 21.81% cash on cash.

            Would love to get into equties as I’ve only held short term single stocks in the past like coke, jnj, pg, Tesla and a few others and don’t currently have any exposure to the markets.

            Thanks for chatting with me, I’m looking forward to seeing what Sam can come up with too!!

  22. Bryan @ Just One More Year

    I am so hyper-focused on paying off my last rental property that we are not putting anything extra into the market, even with this recent pull back. However, we continue to contribute new funds into our employer retirement accounts through payroll deductions.

    If the market has some buying opportunities after March 2016, then we will put in new money.

    1. Keep up the good focus. It feels great to finally pay of a rental property. The one thing I noticed though, was a decline in motivation to work as hard or make more money after.

      I’m sure there will be buying opportunities after March 16. Always have some dry powder handy!

    1. Sam’s finance background is showing. I think a lot of personal finance writers would just say “buckets.” But, it’s not the first time tranche has shown up here.

      Feel free to work it into a dinner party conversation!

      1. Redact is my favourite word to slip in but I will try and use tranche. I will just have to work on the pronunciation. Tranchez? Or just traunch?

    2. It’s the French word for “slice”, so you split your capital into 5 “slices” that you invest. Makes more sense this way?

  23. Gen Y Finance Guy

    Hey Sam – I love your frameworks you pull together.

    I put together my own framwork in April of this year as I was preparing for a market correction. Except insted of 5 tranches my plan only called for 4 tranches (I called them tiers).

    I made some updates to the percentage breakdowns since my original post in April, because I found it to be a little too conservative.

    It looks like this:

    Tier 1 = 10% correction from all-time highs (1,906) = deploy 25% of cash

    Tier 2 = 20% correction from all-time highs (1,694) = deploy 25% of cash

    Tier 3 = 30% correction from all-time highs (1,482) = deploy 25% of cash

    Tier 4 = 40% correction from all-time highs (1,270) = ALL IN, deploy remaining 25% of capital

    This does not mean however that I will not deploy capital in other sectors that may be presenting opportunities to buy into weakness. A perfect example of this was oil and the related ETF’s (OIH and XLE). It is a classic example of how years of growth can be decimated in months, presenting incredible risk/reward opportunities.

    So far I have deployed 40% of my excess cash.

    Additionally, I have aggressively been selling calls against any long positions I was still holding before this correction.



      1. Gen Y Finance Guy

        This plan only includes the cash sitting in my brokerage accounts. If we are down 40%, we still have more than a years worth of living expenses and growing in the bank.

  24. The Alchemist

    This is brilliant, Sam! Simple and smart. Bravo!

    p.s. Given all this market kerfuffle, are you still looking to make that “spray and pray” house purchase?

    1. Danka.

      I’m always looking to spray and pray on properties that are poorly marketed, underpriced, or overpriced. You should really think about adopting the methodology. You’ll begin to better understand your local market, and learn about the various hurdles to overcome and win.

      I should be finding out the final sales price of that one home within the next week!

  25. That’s a solid strategy for capitalizing on a (rapid) market downturn – a mini-dollar cost averaging on the way down instead of throwing everything you have available in one lump sum. Either way, it’s wise to take advantage of such corrections whenever possible.

  26. My liquidity needs have changed over the past year. Right now, I’m feeling pretty good about keeping $10,000 in cash. I own a home and car, and these things need repairs from time to time. But I’m not so sure about my investment horizon. Even with a new retiree, it can be tricky. My father’s retiring this year at 62, but based on family history, he could live to be 90! I try to remind him of this during market corrections.

  27. Ali @ Anything You Want

    I wouldn’t exactly call what I have in place a long-term investing plan, but I do intend to continue to invest weekly in retirement plans through my 401K and continue to invest in non-retirement accounts any cash savings over my liquidity threshold. I’m not planning to pay much attention to what the market does because my time horizon is quite long (nearly 40 years until retirement), so I think as long as I stick with the plans I have in place and don’t sell anything, I’ll be OK.

  28. John C @ Action Economics

    I have always believed in the “stay the course” mantra regardless of what the stock market is doing. This week I put $250 into my retirement funds, the same as last week, and every week before that all year. During this dip, with my investment horizon at 31 years I thought to myself that I SHOULD buy more stock when the market is down like this, but I didn’t want to make any knee-jerk reactions. I think a formula similar to your 2% daily correction could work well for me. Good thinking.

  29. A very sensible approach Sam. I’ve been doing much the he same thing. Unfortunately the last couple of weeks have shown that too few investors have sat down and thought about a strategy for their own needs. Get a plan for the good and bad times and stick to it, people!

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