# The Dumbbell Investing Strategy: Balancing Risk and Reward for Wealth Growth
Since I left my regular job in 2012, I have utilized a form of the dumbbell investing strategy to enhance my wealth while minimizing the risk of significant losses. This approach has been crucial in helping me stay invested during uncertain times, particularly when the urge to stockpile cash or stay inactive is intense.
If you find yourself knowing you need to take some risks but are also cautious about losing money, the dumbbell investing strategy is something to think about.
## What Is the Dumbbell Investing Strategy?
The dumbbell investing strategy involves dividing your investable assets into two roughly equal parts: one side focuses on high-risk, high-reward investments, while the other emphasizes low-risk, capital-preserving options.
By maintaining a 50/50 risk distribution, as discussed in considerations of wise risk-taking, you are essentially applying a variant of this strategy. It is especially beneficial during uncertain macroeconomic phases or when your personal financial situation seems unstable.
## Why I First Embraced the Dumbbell Strategy
The most uncertain times in my life have been during:
– Completing college without a job offer from a Wall Street firm.
– Departing from my career at age 34, replete with doubts about my choice.
– Becoming a father in 2017, unsure if our passive income was adequate.
In each situation, I aspired to invest in my future and my family’s, yet fear restricted me. To navigate this, I implemented the dumbbell investing strategy post-retirement and upon becoming a father, allowing myself the mental space to take steps. Prolonged avoidance of investment risk can result in missed opportunities.
## Why I’m Deploying the Dumbbell Strategy Again in 2025
Today, my financial situation is significantly more secure. Nevertheless, as an investor for life, the current market conditions render me cautious. Elements like tariffs, new legislation, inflated valuations, high interest rates, and AI market speculations make me reluctant to invest heavily in the S&P 500, currently valued at 22 times forward earnings.
I am a proponent of dollar-cost averaging and believe the market will trend upwards over time. However, high uncertainty often fuels the urge to hoard cash. The risk of waiting for clarity is that by then, many gains may have already been captured.
For instance, during the tariff-induced selloff of March-April 2025, those who postponed action awaiting market stabilization missed a substantial recovery. This highlights the potential benefits for those who act when others hesitate.
Thus, I am reaffirming my commitment to the dumbbell strategy once again.
## The Conservative End of My Dumbbell
As the main custodian of my family’s finances, I feel the urgency to guarantee a stable, if not opulent, lifestyle. Every dollar set aside or invested in risk-free income propels me closer to financial tranquility.
My goal is to achieve an annual gross passive income of $380,000, up from the current $320,000. I am diligently working to close the $60,000 gap by the end of 2027.
With Treasury yields exceeding 4%, I recognized an excellent opportunity for strong, risk-free returns. Consequently, I allocated funds into a mix of short-term and longer-term government bonds, including:
– $100,993.74 in 3-month Treasury bills yielding about 4.45%.
These will soon mature, allowing me to reinvest in similar or longer-term bonds based on current interest rate movements. This conservative strategy alone will generate around $4,450 in risk-free passive income over the next year, reducing my annual shortfall to approximately $53,550.
## The Aggressive End Of My Dumbbell
Having solidified the conservative part of my dumbbell investing strategy, it’s time to concentrate on the aggressive aspect.
Traditionally, I would invest another $100,000 into the S&P 500, which generally comprises about 70% of my public equity exposure. However, given the current high valuations and my existing investments, I prefer to direct this capital toward something more in line with my interests and concerns: artificial intelligence (AI).
AI is on the brink of significantly altering the job market, stirring fears about the enduring worth of a college education. As a parent of two young kids, this concern is prominent in my thoughts. To mitigate potential employment difficulties for them, investing in the AI field appears essential. Ideally, they will learn to utilize AI for their advantage or join an AI company to increase their wealth.
Therefore, I allocated an additional $100,000 in **[Fundrise Venture](https://www.financialsamurai.com/innovation)**, which has investments in leading AI companies such as OpenAI, Anthropic, Databricks, and Anduril. I hope these investments will grow at a pace that surpasses that of the S&P 500, considering their rapid expansion.