Deploy Your Money: How To Build A Strong Portfolio

By Richard Reis

Hello dear,

This is probably the most important letter I’ve written. Also, it might change your life.

I want to warn you, this letter is longer than usual. I know some people will give up before finishing it.

… But not you!

Trust me, you don’t want to miss out on this one.

So, set aside 10 minutes, pay attention, and take notes.

Throughout this series, I’ve taught you the main lessons I learned from early retirees.

I’d say we’ve done a pretty good job.

You learned to save as much as you can (so that you can invest), and why you should invest.

However, we haven’t talked about how to invest. Where should your money go? Stocks? Bonds? Gold? Cryptocurrencies?

Today, we’ll answer all of it!

Sidenote: The guys in suits told me to protect my butt before putting this letter out there (unfortunately there’s a lot of evil people in the world). Remember, (a) I’m just sharing what I know, (b) nothing is guaranteed, and (c) you are solely responsible for your own choices. Don’t follow anything I say without reading this disclaimer first.

A Few Notes

Before we dig into the main course, let’s make a few things clear.

1. This is U.S. galore

It took me a long time to figure out the best way to invest where I live, the U.S.

Now, can you imagine how long it would take to study every country in the world?! Can’t do it.

If you don’t live in the U.S., this letter won’t apply to you 100%.

However, some principles will work for everyone.

2. Have no debt

If you owe money, don’t take investment risks. The stress alone will drive you crazy.

Hence why I recommend you pay off your debt before making a single investment.

3. We’re in it for the long-term

These strategies will obviously court controversy. That’s because the stock market is a bumpy ride (remember the 2008 financial crisis, anyone?).

I’ll talk more about this in a future letter. For now, remember this:

Don’t think about investing as a 2–5 years thing. When I say “put your money here,” I’m saying “don’t touch it for AT LEAST 30 years!”

In investing (and in business), short-term thinking is the best recipe for failure.

Remember, get-rich-quick schemes are for losers.

4. Keep it simple, silly

If you don’t care about investing, this letter’s for you.

Here, we keep it simple (and yet, you’re likely to beat more or less 96% of active investors out there).

5. There is no such thing as absolute safety

This goes for everything in life (unless you live in one of these).

The most honest investment phrase is this: Past performance is no indication of future results.

However, I can talk about strategies that are very likely to work well (which, coincidentally, only a small number of people use).

But remember, your best strategy is to reduce how much money you need. That way, market crashes and other unfortunate losses won’t affect you as much.

“There is no such thing as an absolutely safe investment. If you need every penny of that just to make ends meet, your ability to handle risk drops.” — JL Collins

6. Having said that, the worst mistake is not investing

I’ve talked about this before.

Even if you stuff all your money under your mattress, you’ll lose a lot due to inflation.

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” — Teddy Roosevelt

Ok, no more notes. Did you take these notes to heart?


Without further ado *drum rolls*, here’s your portfolio! *tada!*

Your Core (Serious Money): Index Funds

This is where the bulk of your wealth goes (hence why we call it Serious Money).

Why Index Funds? Because costs matter.

What most active investors fail to realize is that (a) they’re paying fees and (b) they’re paying taxes (many don’t even know how much they’re paying!).

Holding an index fund for 30+ years minimizes both those issues.

Sidenote: This goes without saying, all our Serious Money is invested through Vanguard.

Stocks (VTSAX)

This Index Fund mimics the entire U.S. stock market (currently 3,591 companies!).

You name them; Apple, Google, Microsoft, Amazon, Facebook… They’re all in here! And much more.

This way, you don’t have to worry about which company fails or succeeds (you’ll own them all!).

When I tell you to invest in “the market”, this is it.

Study after study has shown that a portfolio of 100% stocks (which is what VTSAX gives you) delivers the highest returns over time.

What does that mean?

Picture this. If I gave you $100,000 in the year 2000, and told you to invest it in VTSAX, today you’d have about $278,937 (despite the financial crisis of 2008!). Imagine where this money will be 10, 20, even 30 years from now?!

“Could it really be this easy? Yep. I started investing in 1975. At the time VTSAX had yet to be created, but over the 40 years from January 1975 until January 2015, the S&P 500 index produced an annualized growth rate of 11.9%. […] Over that same period, a one time lump sum investment of $10,000 would have become $897,905. This despite all the panics and collapses and recessions and disasters we’ve endured during these last 40 years.” — JL Collins

Now, Vanguard only accepts a minimum of $10,000 for the Admiral Shares version (trust me, you want the Admiral Shares version! It only costs 0.04%).

If you don’t have $10k burning a hole in your pocket, don’t worry! You can invest in their Investor Shares version, which accepts a minimum of $3,000 (although their costs are higher at 0.15%).

Here’s what I’d do: Start with $3,000 in the Investor Shares version, and keep adding more to it. Once you reach $10,000 Vanguard will switch you to the lower-cost Admiral Shares version. Success!

Sidenote: I know what some people will say, “but Warren Buffett recommends investing in VFINX!” For those of you who don’t know, the same way VTSAX holds every stock in the U.S., VFINX holds the top 500 stocks. Both their performances are really similar (see image below), so it’s no big deal which one you choose to invest in. I simply like VTSAX because I follow JL Collins’ advice; there’s more diversification (3,591 vs. 500).
10-year comparison VTSAX (yellow) vs. VFINX (blue). Both almost identical. No big deal which one you choose.

Bonds (VBTLX)

A bond is basically a loan made to a government, a company, or some other entity.

  • A Treasury Bond means you lend money to the federal government.
  • A Municipal Bond means you lend money to a city, state, or country.
  • A Corporate Bond means you lend money to a company.
  • A High-Yield Bond (or Junk Bond) means you lend money to a (ehem) less trustworthy company.

With VBTLX, you’re investing 30% in Corporate Bonds, and 70% in U.S. Government Bonds (for a total of 8,174 Bonds).

Why invest in bonds? Because they’re much less volatile than stocks (see image below).

10-year comparison VBTLX (yellow) vs. VTSAX (blue). Cool graph made using this site.

See what happened in 2008? Big crash! Stocks (blue) went all the way down.

However, you can see Bonds (yellow) weren’t that affected. They hung in there and grew (slowly but surely).

Bonds are like turtles, slow and steady.

Stocks are crazy bipolar hares on crack cocaine.

Therefore, we keep some of our money in Bonds. That way, when the market crashes (and it always does) you won’t freak out.

“Why even keep your money in stocks then??”

Yes, they’re more volatile… and crazy. But historically, stocks have performed WAY better than bonds (you can tell from the image, stocks are higher in the end).

Sidenote: In fact, some crazy people (like JL Collins) recommend putting all your money in stocks for the long-term and slowly switch to bonds once you’re nearing old age. If you feel brave enough to do it, go for it. I’m much more conservative.
“Superficially, I think it looks like entrepreneurs have a high tolerance for risk. But, having said that, one of the most important phrases in my life is ‘protect the downside.’” — Richard Branson

Outside Your Core (Funny Money)

Ok! We’ve divided most of our money into Stocks and Bonds for the long-term (remember, 30+ years).

Now, we can play. Hence why I call this “funny money”.

“Index your important money, then go have fun.” — Burton Malkiel


In my opinion, it’s ok to have a liiiiiittle bit of cash in hand. But not too much.


Because the more prices drop, the more your cash can buy! If the stock market crashes tomorrow, you’ll wish you had some cash (ready to buy stocks on sale).

Personally, I keep all my cash in a Capital One account.

But again, there’s nothing worse you can do with your cash (other than spending it) than lock it in a bank account where it does nothing for a long time.

Bets (aka Alternative Investments)

I know what some of you are thinking, “I prefer investing in tech/ real estate/ cryptocurrency/ etc… etc…. I know these markets. I have an advantage over most people.”

Yeah… No.

You may have an advantage over the short-term (which everyone has had lately. The stock market has been going up for the past 10 years, so everyone feels like a genius).

But remember, you can’t keep that advantage for 30+ years (unless (a) this is your full-time job AND (b) you happen to be as good as the top 0.001% of investors like Warren Buffett, Ray Dalio, David Swensen, etc… etc…).

“The problem is, every single asset class that you love will have a day where it drops 50 to 70% in a day […] If it’s later in life, you have no time to make up for it.” — Ray Dalio

However, these small bets are a lot of fun! (look at everyone investing in Bitcoin right now).

If you want excitement, go for it! But do it with a tiny chunk of your portfolio.

“If you decide to have a Funny Money Account, be sure to measure your returns after one year, after five years, and after ten years. Then compare those returns with the returns you’ve earned in your Serious Money Account. I’m betting that your Serious Money will win in a landslide. If it does, you can then decide whether all that fun was adequate compensation for the potential wealth you’ve relinquished.” — Jack Bogle
Sidenote: Want to buy Tesla, Snapchat, or Facebook stocks? A nice app I recommend for these bets is Robinhood. It’s nice to invest in specific stocks when you don’t get charged trading commissions 🙂 And it’s a beauuuuutiful app.

Asset Allocation

Now that you know where to invest, how much should you put in each category?

Everyone is different. It depends on how much of a crazy ride you want.

For comparison, here’s MY allocation:

  • 80% Stocks (VTSAX)
  • 10% Bonds (VBTLX)
  • 5% Cash
  • 5% Bets

You can copy me if you want, or you can edit it to better suit you.

For example:

  • Don’t want crazy volatility? Put more in Bonds (in fact, some studies show that having 10–25% in Bonds with 75–90% in Stocks slightly outperforms 100% Stocks).
  • You’re super tough? Put 100% in Stocks. #yolo
  • Want to go out guns blazing? Use all your money for crazy Bets (not recommended).

It’s really up to you!

Just remember; everyone is different and don’t touch your serious money for at least 30+ years.


Finally, you can kick back, crack open a cold one, and rejoice.


I know some of you have questions. Let’s answer them.

1. Why no International?

This is an understandable question (since I go all in with U.S. Stocks).

My reasons for not investing in International Stocks came from JL Collins. Here they are; Added Risk, Added Expense, We’ve Got It All Covered (for more details, go to JL Collins’ post).

However, let’s say you REALLY want to invest in International Stocks.

Here’s where you want to look (simply add what you like to your Serious Money):

  • VFWAX: Stock markets outside of the U.S. (except Canada). Only holds large and mid-cap companies (total of 2,592 stocks). Minimum investment is $10,000. Cost is 0.11%.
  • VTIAX: Stock markets outside of the U.S. (including Canada). Holds large, mid-cap, and some small companies (total of 6,166 stocks). Minimum investment is $10,000. Cost is 0.11%.


Here you go.

  • VTWSX: You own the world. A total of 7,796 stocks. Minimum investment is $3,000. Cost is 0.21%.

Just remember, costs matter (VTSAX only costs 0.04%).

2. How can I minimize taxes?

Luckily, I’ve talked about Taxes and Retirement Plans (which I’d open with Vanguard) before.

However, before putting any investment in a Tax-Advantaged plan, I’d check how Tax-Efficient it is. If it’s very Tax-Efficient, there’s no huge need to add it to a Tax-Advantaged plan. For example:

  • VTSAX: Qualified dividends (taxed at a lower rate) are 92.75%. This is a very Tax-Efficient investment. No need to put it into a Tax-Advantaged Plan. However, we keep a lot of money in this fund, so it’s good to hold some of it in a Tax-Advantaged plan (it won’t hurt).
  • VBTLX: Remember, Bonds are loans. Therefore, they’re alllllll about interest payments. This is very Tax-Inefficient. You have to put it in a Tax-Advantaged Plan.
  • Cash: Has to be there when you need it. Therefore, you don’t have to put it into a Tax-Advantaged Plan.

You get the idea? It’s really not that complicated.

Just make sure to put as much money as possible into your Tax-Advantaged Plans (fill ‘em up!). This will allow you to keep a big chunk of your money.

“The best way to diversify is to own the index, because you don’t have to pay all these fees. And you get tax efficiency.” — David Swensen

3. I heard of Portfolio Rebalancing, what’s that? Should I do it?

Rebalancing basically means bringing your portfolio back to the allocation you started with.

For example:

  • Let’s say you started with 80% Stocks and 20% Bonds.
  • Suddenly, the Stock Market goes up! Your money has grown but now 90% of your Portfolio is Stocks and only 10% is Bonds. What do you do?
  • Rebalance it. Which simply means you bring the values back to 80% Stocks and 20% Bonds.


Is it such a big deal? Not really. But it doesn’t hurt.

“Rebalancing is a personal choice, not a choice that statistics can validate. There’s certainly nothing the matter with doing it (although I don’t do it myself), but also no reason to slavishly worry about small changes in the equity ratio.” — Jack Bogle

If you want to do it. Just pick any random day (could be your birthday) and do it once a year.

If you want Vanguard to rebalance your portfolio for you, here are two options (but remember, it’ll cost ya’):

  • VASGX: This invests in 80% Stocks and 20% Bonds. What’s more, it’ll stay like this forever (so you never have to worry about rebalancing). Minimum investment is $3,000. Cost is 0.15%.
  • TRF (Target Retirement Fund): The link will take you to Vanguard’s TRF page. Scroll down and select your age, you’ll see which Fund Vanguard recommends for you. What are TRFs? They begin at around 80% Stocks and 20% Bonds. However, as you get older they automatically start shifting to more Bonds (makes sense, you don’t want all the volatility of the Stock Market while you’re nearing old age). For example, mine would be VFFVX. Minimum investment is $1,000. Cost is 0.16%.

And that’s it for today!

Today, you learned alllllll you need to know about where to invest and for how long. You can consider this a VERY productive day!

See you next week (follow the series here to be notified).

Be well.


P.S.: Happy Birthday, Nelson Mandela! You will never be forgotten. In honor of Madiba, this young lad (who lived in South Africa) wants to share with you Mandela’s favorite poem (Invictus by William Ernest Henley).

Sidenote: For major goosebumps, picture Mandela reading this in prison whenever he felt like giving up (27 YEARS incarcerated will do that to you). This poem gave him strength to keep going when things got rough.
Out of the night that covers me,
Black as the pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.
In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeoning of chance
My head is bloody, but unbowed.
Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds, and shall find me, unafraid.
It matters not how strait the gate,
How charged with punishments the scroll,
I am the master of my fate:
I am the captain of my soul.

P.P.S.: For even more goosebumps, here’s Morgan Freeman reading this poem.

Thanks for reading! 😊 If you enjoyed it, test how many times can you hit 👏 in 5 seconds. It’s great cardio for your fingers AND will help other people see the story.

Thanks, Miriam! Glad you enjoyed my post :)

Since I write about finance, legal jargon is obligatory (because the guys in suits made me). Before following any of my advice, read this disclaimer.