Five years ago, I started regularly using part of my salary to buy stocks. At the time, I had researched extensively online, reading a lot of content — probably over a thousand articles. It still took me some time to build up the confidence to actually invest. I spent a year learning before I finally opened an account and bought stocks. I initially invested in global market cap-weighted ETFs (VT + VGIT) with an 80/20 stock-bond allocation. I’m grateful I had a good start, but five years later, my perspective has shifted.

Warning: Investments carry the risk of loss, including potential loss of principal. Leveraged investments can result in losses that exceed the original principal. Please carefully assess your repayment ability. This article is solely a personal experience sharing. The investment methods and instruments mentioned should not be regarded as financial advice or recommendations, nor do they constitute an offer, solicitation, invitation, inducement, suggestion, or recommendation for any securities or financial instruments.

Index Investing

When I started, I was convinced by the rationale for index investing: it’s a strategy that everyone can implement consistently, leaving little room for subjective judgment. By following the strategy, one can achieve market-average returns that exceed inflation. This is different from evaluating individual stocks, where it’s hard to say whether a P/E ratio of 20 is high or low, or whether a stock is worth buying. Index investing does not take much time, as a software engineer in an industry with high salary ceilings, focusing on increasing my salary seemed more efficient than spending time trying to boost my investment returns.

The Downsides of Index Investing

The downside of index investing is that it’s slow. But this makes sense; there’s no such thing as a fast and stable investment method—if there were, no one would need to work.

Articles promoting index investing often mention that by regularly investing a set amount every month, after thirty years, you’ll accumulate wealth that looks like financial freedom. They’re not wrong. When I started, I also believed that focusing on steady earnings was key. I used a compound interest calculator and realized that I could achieve financial freedom in less than thirty years, especially since my salary would increase over time. At the time, I was only 30, so retiring in my 50s seemed early enough.

But after a few years, I grew impatient and changed my mind.

Lifecycle Investing

I later came across lifecycle investing, a simple concept: when you’re young, you have little money but plenty of time to let your assets grow through compound interest. As you age, the reverse is true—you have more money but less time. So, your younger self can borrow from your future self, giving your future money more time to grow with compound interest. Borrowing comes with costs, such as interest on loans or leverage decay in leveraged ETFs, and futures can be forcibly liquidated. However, if you have good credit, a high salary not directly tied to stock market performance, and you don’t over-leverage, the risks are controllable.

In Taiwan, many people who have bought and held real estate long-term have made money. This is another form of lifecycle investing. While the returns on real estate may not surpass the stock market, with five times leverage, the returns can be much better. Stocks are more volatile, and with leverage over two times, it’s easy to lose everything.

In 2022, when the stock market plummeted due to the pandemic, I took out a credit loan to buy stocks. I don’t know how to pick stocks, so I bought market-cap-weighted ETFs. Even though the market continued to decline after my purchase, my salary was enough to cover the loan repayments, so I held on. To my surprise, the market rebounded quickly.

The Barbell Strategy

The barbell strategy comes from Nassim Taleb’s book Antifragile: like the two ends of a barbell, one side is extreme risk aversion, while the other is extreme risk tolerance. The idea is not to aim for “medium” risk on both sides because risk is often misjudged, and what appears to be moderate risk might not actually be moderate. If 90% of your assets are in low-risk investments—like cash—and 10% in high-risk assets, the maximum loss is only 10%. However, if you pick a stock that grows 100 times (like Tesla in 2012), your total assets could grow tenfold.

Cash is too conservative for me. Low-leverage, broad-market ETFs are my low-risk assets, and 1-5% of my total assets are allocated to high-risk investments, which include not only individual stocks but also cryptocurrencies and other financial instruments. Let’s see how things look in another five years.