4 Levels of Portfolios: Crafting Your Ideal Early Retirement Strategy
One of my favorite podcasts, BiggerPockets Money, hosted by Scott Trench and Mindy Jensen, dives deep into personal finance, investing, and achieving financial independence. If you're unfamiliar, BiggerPockets Money is a spin-off from the larger BiggerPockets brand, which primarily focuses on real estate investing. However, Scott and Mindy’s show casts a wider net, covering everything from budgeting and saving strategies to investment diversification and early retirement. They frequently bring on expert guests and real-life investors to explore how different financial strategies play out in the real world.
In a recent episode, Scott and Mindy discussed an intriguing question: "How would you allocate a hypothetical $1.5 million portfolio for someone looking to retire early?" This question stuck with me, and I started thinking about how I’d approach it, especially if I were advising a 35-year-old friend who lives on around $50,000 a year and is ready to retire now.
So, I’ve crafted four portfolio scenarios, each with varying levels of complexity and activity. Whether you're looking for something super passive or you're eager to stay engaged in the investing world, there's an approach here that might resonate with you.
1. The Super Simple Portfolio
* For the investor who wants a completely hands-off, passive approach.
Cash ($50,000): 100% in a High-Interest Savings Account
ETFs ($1,450,000):
50% US Total Stock Market Fund
15% US Small Cap Fund
15% International Fund
10% Emerging Markets Fund
10% Bond Fund
Estimated Income: $58,000/year (based on the 4% rule applied to the ETF portfolio)
This portfolio is as easy as it gets—minimal management, broad diversification, and a steady income stream that should comfortably cover living expenses.
2. The Simple Portfolio
* For the investor who wants to add a little real estate to their passive portfolio without too much complexity.
Cash ($50,000): 100% in a High-Interest Savings Account
ETFs ($1,000,000):
50% US Total Stock Market Fund
15% US Small Cap Fund
15% International Fund
10% Emerging Markets Fund
10% Bond Fund
Real Estate ($450,000):
100% in Single-Family Homes in Hybrid Markets, Leveraged at 75% (balancing cash flow and appreciation)
Estimated Income: $67,000/year
(This combines the 4% rule for the ETF portfolio and a 6% cash-on-cash return for the real estate portfolio. It doesn’t factor in appreciation, debt paydown, or tax benefits from real estate.)
This approach introduces real estate to the mix, offering more diversified income streams and potential tax advantages.
3. Simple Plus Portfolio
For the investor seeking more diversification with a taste for higher-risk, higher-reward opportunities.
Cash ($50,000):
60% High-Interest Savings Account
20% Gold
20% Crypto (mainly Bitcoin and Ethereum with a small allocation to ALT coins)
ETFs ($1,000,000):
50% US Total Stock Market Fund
15% US Small Cap Fund
15% International Fund
10% Emerging Markets Fund
10% Bond Fund
Real Estate ($450,000):
60% in Single-Family Homes in Hybrid Markets, Leveraged at 75%
40% in Commercial Syndications (multi-family, self-storage, industrial, etc.)
Estimated Income: $67,000/year
(The income remains consistent, but the potential for outsized returns increases with crypto and syndications. For example, I recently exited two syndication deals that delivered a 100% return in just two years.)
This portfolio is ideal for those comfortable with moderate risk and looking for both steady income and potential big wins.
4. The "I’m Not Really Ready to Retire" Portfolio
* For the investor who claims they want to retire but still have the entrepreneurial itch.
Cash ($100,000):
60% High-Interest Savings Account
20% Gold
20% Crypto (mainly Bitcoin and Ethereum with a small allocation to ALT coins)
ETFs ($1,000,000):
50% US Total Stock Market Fund
15% US Small Cap Fund
15% International Fund
10% Emerging Markets Fund
10% Bond Fund
Real Estate ($350,000):
60% in Single-Family Homes in Hybrid Markets, Leveraged at 75%
40% in Commercial Syndications (multi-family, self-storage, industrial, etc.)
Business ($100,000):
Invest in or acquire small, cash-flowing businesses using techniques popularized by entrepreneurs like Cody Sanchez. Think laundromats, car washes, or lawn care businesses. Alternatively, start a short-term rental business through property acquisition or rental arbitrage.
Estimated Income: Unlimited
This portfolio is perfect for someone who wants financial independence but still craves the excitement of business ventures and active income generation.
Which Portfolio is Right for You?
Your ideal portfolio depends on your risk tolerance, desired involvement level, and long-term goals. Whether you're looking for simplicity, a balanced approach, or a more active investment strategy, the key is to create a diversified portfolio that supports your lifestyle and financial independence journey.
If you haven’t already, I highly recommend checking out BiggerPockets Money for more insights like this. Scott and Mindy do a fantastic job of breaking down complex financial topics into relatable, actionable advice. Their podcast has inspired many of my own strategies—maybe it’ll spark some ideas for you, too!
So, what’s your ideal portfolio? Let me know in the comments!
