So the ideal portfolio should have stocks, bonds, cash, gold, and real estate. In what proportions? Well, why not keep it simple and give 20% to each? 20% stocks 20% bonds 20% cash 20% gold 20% real estate This is what I call the Awesome Portfolio.

The purpose of volatility is to make people make stupid decisions.

They certainly wouldn’t tip someone 50% on purpose, because they see money as a zero-sum game. If you get less, then I get more. Their sole purpose in life is to accumulate as much wealth as possible, one nickel at a time, until the end, and—then what? What was all that effort for? What was the purpose? They work and save, and work and save, and

And the business has suffered. They are no longer dynamic, risk-taking entities. In the 2000s, they would spend money on technology, payroll, and client entertainment—because they always knew they would make more. Now, no more holiday parties. Make sure you work in an industry that still has holiday parties.

What I am in search of is scalable businesses. An internet newsletter is a scalable business. It takes the same effort to write one copy as it does a million copies. The business can grow rapidly, without much increase in overhead. If you look at all the really profitable businesses out there, they are all scalable, weightless businesses.

The idea is worth next to nothing. It is all in the execution. You have to go out there and do stuff. You solve one problem, and you solve another problem, and after you’ve solved all the problems that you can possibly solve, you get to sit on top of a big pile of cash.

An asset that goes up 4% in straight-line fashion is potentially more valuable than an asset that goes up 8% with lots of volatility. Why? Because we’re human beings and we have emotions, and we are all hard-wired to be terrible investors.

It works because it has the best risk/reward characteristics of any portfolio. It allows you to stay invested.

If you invest in an index, you get the returns of the index, which is very good; but you also get the volatility of the index, which is bad. If you invest in the stock market, as represented by a broad market index fund, you will experience all the volatility of the stock market—the ups and downs, the highs and lows. And so will your emotions.