Courtesy of Sherry Jiang
Her first investment was simple: “I just put it in ETFs initially. I put it in stuff like VUG.”
While she now considers ETFs a low-risk investment, it was daunting at the time.
“When you’re young, putting $10,000, $20,000 into stuff initially just feels scary, even though intellectually you know you should invest,” she said. “As I got more comfortable, I started taking more bets in the market.”
She started buying tech stocks.
“Apart from the typical Apple, Amazon, and I got RSUs from Google, I was very lucky to invest in Tesla pretty early on,” she said. “I invested in Tesla back in 2015 — this was before a few stock splits — and my investments have grown basically 10x since.”
Over the last decade, she’s developed a more complex strategy that she says has allowed her to capitalize on asymmetric returns in what she considers a fairly low-risk manner.
It’s called the barbell strategy.
“The idea of a barbell strategy is basically you invest only on the extreme ends,” she said, meaning low-risk and high-risk investments — and skip any choices in between.
“Low-risk” and “high-risk” may mean different things to different investors, she noted: “Some people think very low-risk is T-bills; I think ETFs are low-risk from a long-term perspective. I’m not touching this capital for a long time and I don’t think the US equities market is going to go to zero by the time I retire, so that’s why I call it low-risk.”
As for the other extreme, Jiang would consider her 2015 investment in Tesla or her current investments in crypto high-risk.
It’s up to the investor to choose how much of their portfolio they want in safer, stable investments versus more speculative investments.
“Some ways that people construct a barbell strategy is following the 80-20 rule: 80% stable, 20% risky,” she said. “I’m more of a 65-35. I do have more risk in my portfolio. Others do 90-10, so it’s up to you to decide how you want to construct it.”
When figuring out how much risk you’re willing to tolerate, think about how your portfolio would be affected if your big bets didn’t work out.
For Jiang, she feels that if her high-risk investments went to zero, “I will be totally fine,” she said. “And if it goes 10x, it’s actually a significant amount that could contribute to the portfolio.”