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I’ve been investing consistently for almost six years now, and the more I learn about the stock market, the more I realize how little I actually know.
One thing I do know for sure, though, is that the stock market is not like the weather. You can’t just wake up, check the 10-day forecast, and know exactly whether there’s going to be rain or shine.
The market is a mystery every single day. And because we genuinely have no idea what’s going to happen next, the only investing approach that makes sense to me is to prepare for anything.
That’s why I’ve really leaned into building what I call an all-weather portfolio. In the chaotic and unpredictable world that we live in, I want to know that my portfolio can persevere through whatever the market throws at it.
Practically speaking, building an all-weather portfolio just comes down to owning different types of stocks across the dividend spectrum. Some holdings will perform well in certain environments, while others will carry the load in different ones.
Not every position needs to win at the same time. In fact, it’s likely that they won’t. They just need to co-exist and create balance.
I broke this down a lot more in a recent video where I go through my entire portfolio. But at a high level, my holdings each fall into one of four buckets: stalwarts, high-growth stocks, high-yield stocks, and what I call “double trouble” stocks.
Each of these four categories has a different financial profile. They all have different strengths and weaknesses. And they all play a different role in my portfolio. That’s the point.
I’m not really a big sports guy, but it’s actually not unlike forming a football team.
In building out your roster of players, you’re not going to draft 53 quarterbacks. Yes, you need offense. But you also need defense and special teams.
The thing that makes investing different from football, though, is that it’s not about winning the game. You can’t actually win the game of investing because there is no finish line. There is no limit to how big your portfolio can grow.
And this especially matters to me because I’m only 32 years old. I still have decades of compounding ahead of me, and to make sure I can actually play this game for the rest of my life, there’s one thing I absolutely can’t afford to do: I can’t get taken out of the game.
The first rule of compounding is to never interrupt it unnecessarily. And if you’re forced out of the game — financially or emotionally — the compounding stops.
But if I continue building out my collection of high-quality companies across different categories — and continue pursuing this all-weather approach — I’m pretty confident that I’ll be able to play the game for a long time.
Having said all of that, now I want to hear from you: If the market dropped 20% tomorrow, would you feel confident in your portfolio exactly as it is today? Let me know in the comments below!
