why I have to adopt 20/80 investment strategy

a year ago

The 20/80 investment method is a strategy that can help you achieve your financial goals. It involves setting aside 20 percent of your income for savings and investments, while spending the remaining 80 percent on living expenses.

The 20/80 investment method has been touted by many financial experts as a good way to manage one's finances. Some even consider it the best approach for young people who are just starting out in life.

While this may be true, there are also some drawbacks associated with this method. In this article, we will discuss these pros and cons so you can decide if this is the right approach for you.

20/80 investment strategy has some drawbacks. Here are a few:

1. You need to have a lot of money to start with

2. You won't be able to take advantage of short-term market fluctuations

3. You won't be able to participate in the stock market directly if you don't have enough capital (for example, you can't buy shares in a company)

4. You might miss out on some big gains if your investments aren't diversified enough

In the 20/80 investment strategy, you invest 80% of your money in safe investments, such as bonds and mutual funds, and save 20% of your income for speculative investments.

The advantages of this method are:

It's easy to follow.

You don't need to be a financial expert to understand the theory behind it

It will protect your portfolio from major losses

If you're really worried about losing all your money in the stock market, then this method is perfect for you. With this method, 80% of your portfolio is protected from market volatility because it's invested in safe assets Uke bonds and mutual funds. If there's ever a crash in the stock market, then you'll still have 20% of your money intact so that you can jump back into stocks when prices return to normal levels again

The disadvantages associated with 20/80 include:

It takes more time than other investment strategies because you have to monitor two different portfolios instead of just one (or none)

There are two main drawbacks associated with 20/80 as investment strategy.

The first is that it's too simplistic and doesn't account for risk tolerance. The second is that it's just one of many possible allocation strategies that can be used to reach your investment goals.

The 20/80 formula is just one way to invest There are others, such as the Trinity Study, which suggests you should invest in a mix of stocks, bonds and cash equivalents (like CDs)

The Trinity Study suggests that investors should allocate their portfolios 45% in stocks, 30% in bonds and 25% in cash equivalents like CDs or money market funds. This approach has been proven effective over long periods of time and has produced better results than simply putting all your money into stocks or allocating it equally among all three asset classes.

Why I have to adopt 20/80 investment methods

As a beginner investor, I would like to share some of my experience and knowledge with you.

I am not an expert, but I have been learning how to invest and trade stocks for years. In fact, my first stock purchase was in 2007 when I picked up shares of Nvidia (NVDA)

I am sure you know what happened next, the stock went up and down like a yo yo. It's been almost a decade since then, but I still remember it very well because it taught met how volatile the stock market can be. If you want to make money in the stock market, it's going to take time and lots of patience!

18 comments