Savings breakdown

Effectively structuring your savings into distinct categories is essential for both security and growth:

Availability Funds

• Purpose: Immediate access to cash for emergencies and unexpected expenses

• Target amount: Cover 12 months of expenses

• Characteristics:

  • Must be accessible at any time without penalties

  • Can be held in monetary funds or standard bank accounts

  • Accept that inflation will gradually erode value (this is the cost of liquidity)

Precautionary Savings (20% of investment portfolio)

• Purpose: Preserve purchasing power by matching inflation

• Strategy: Extensive diversification to weather any economic conditions

• Allocation:

  • Real estate holdings

  • Fixed-income instruments

  • Physical gold

  • Antifragile portfolio component (5% of the 20%)

    • 50% stocks

    • 25% gold

    • 25% cash (adjustable based on economic cycles)

Graph showing growth vs inflation and optimal allocation (For the antifragile portfolio)

Performance Investments (80% of investment portfolio)

• Purpose: Generate substantial returns through market timing and swing trading

• Strategy: Utilize technical analysis to identify medium-term opportunities (months to years)

Traditional vs. Active Approach Comparison

Looking at traditional portfolios demonstrates the difference in approach:

• Portfolio 1: Harry Browne's Permanent Portfolio

• Portfolio 2: Global Stock Market Index

• Portfolio 3: Antifragile Portfolio

While Portfolio 2 (full market exposure) ultimately reaches the highest value, it experiences a maximum drawdown of 52%. Portfolios 1 and 3 deliver lower returns but with approximately half the volatility and better Sharpe ratios.

Conventional wisdom suggests going "all in" on stocks when young (accepting volatility) and becoming more conservative near retirement. However, this approach depends on two questionable assumptions:

1. Stocks will always rise long-term (despite most market participants being wrong)

2. There's no way to achieve better returns with lower volatility

Nasdaq Strategy Performance

Strategy performance showing 25,882.83% return (Nasdaq Buy & Hold +16,571.09% return)

This strategy has outperformed the Nasdaq with only a 21,6% maximum drawdown, while the Nasdaq experienced multiple -60% drawdowns and even a -80% crash. This superior performance with lower risk was achieved with just 38 trades over 40 years.

Market Timing Evidence

Consider recent market evidence:

S&P 500 chart showing April 2025 correction

The S&P 500 drop in early April 2025 returned prices to early 2022 levels. Investors dollar-cost averaging earned 0% over three years, far from the expected 8% annual return.

Meanwhile, sophisticated traders captured up to 70% returns during this same period. With proper risk management (limiting potential losses to 1-5% per trade), you could achieve 40% returns over three years while maintaining cash reserves for future opportunities. The next section on trading will show you how.

S&P 500 chart highlighting 70% potential gain

Following Smart Money

Markets telegraph information before mainstream awareness. Consider Novacyt, a diagnostic testing company:

Novacyt chart showing accumulation phase

Vertical accumulation began October 28, 2019, months before the first COVID-19 case was officially diagnosed in December and well before global awareness in January 2020.

Novacyt chart showing 17000% gain

This stock gained over 17000% in a few months. By monitoring weekly and daily movements, one can identify accumulation and distribution patterns that reveal where smart money is flowing.

Age-Based Investment Approach

For younger investors (20+ years from retirement):

• Consider 10% allocation to cryptocurrencies (if new to crypto)

• Experienced crypto investors may allocate up to 40%

• Allocate remaining capital to active positions in stocks and other assets, following money flow patterns

  • This requires a structured trading plan with specific strategies

  • Implement monitoring systems and screeners to detect promising assets

  • See the Trading section for comprehensive implementation details

• As you generate profits from performance savings, allocate a portion to precautionary savings to secure your gains

Approaching retirement:

• Gradually reduce exposure to higher-risk assets during market highs

• Progressively increase your precautionary savings allocation

Conclusion

With appropriate learning, process implementation (trading plan, risk management, setup identification, logging, journaling, and monitoring), you can achieve 40% returns over three years while spending as little as 10 minutes per week monitoring the markets.

For more information on current positions and monitoring approaches, visit solynor.trade.