Use the 90/10 Rule When You’re Tempted to Make a Speculative Investment (2024)

Use the 90/10 Rule When You’re Tempted to Make a Speculative Investment (3)

My investing life is pretty boring.

All of my money goes to low-cost, total stock market index funds. Most of this is automated and happens without me paying attention.

Investing in index funds is a really smart move over the long term, but it’s not sexy. It doesn’t have that “suddenly become a millionaire” potential…

Use the 90/10 Rule When You’re Tempted to Make a Speculative Investment (2024)

FAQs

Use the 90/10 Rule When You’re Tempted to Make a Speculative Investment? ›

How do you keep yourself from going overboard? The easiest way to do it is with the 90/10 rule. It goes like this: 90% of your contributions go to safe, boring investments like low-cost total stock market index funds. The remaining 10% is yours to play with.

What is the 90/10 rule in investing? ›

The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds. The strategy comes from Buffett stating that upon his death, his wife's trust would be allocated in this method.

What is the 90 10 stock strategy? ›

Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.

What is the 90 10 rule for wealth? ›

Understanding the 90/10 Rule

Kiyosaki's 90/10 rule says this: 90% of people earn only 10% of the world's money. The secret to being part of the wealthy minority, he says, lies in positioning yourself to have low income and high expenses.

Are 90% stocks and 10% bonds good? ›

A 90/10 investment allocation is an aggressive strategy most suitable for investors with a high risk tolerance and a long time horizon. While Warren Buffett has an enviable track record as an investor, it probably isn't for everyone. Berkshire Hathaway Inc.

What is the rule of 90 10? ›

The 90-10 principle, or the Pareto Principle, asserts that approximately 90% of outcomes result from 10% of efforts. This concept originated from the observations of Italian economist Vilfredo Pareto, who noted that 80% of the land in Italy was owned by 20% of the population.

What does the 90 10 rule refer to? ›

The 90/10 Rule is one of the most helpful concepts for life and time management. According to this principle: 10 percent of your activities will account for 90 percent of your results.

What is the 90 10 rule in savings? ›

Applying the 90/10 strategy entails an investor using short-term treasury bills to construct a fixed-income portfolio with 10% of their earnings while investing the remaining 90% in higher-risk yet affordable index funds. This is the essence of the Buffett ideal portfolio.

What is 90% rule in trading? ›

The 90 rule in Forex is a commonly cited statistic that states that 90% of Forex traders lose 90% of their money in the first 90 days. This is a sobering statistic, but it is important to understand why it is true and how to avoid falling into the same trap.

What is the 10 rule in investing? ›

The 7/10 rule in investing is a straightforward method to calculate the fair value of a company's stock. The rule states that a company's stock price should either be seven times its earnings before interest, taxes, depreciation, and amortization (EBITDA) or 10 times its operating earnings per share.

What is the 90 10 formula? ›

The 90/10 Principle states that 10% of our life is made up of what happens to us and 90% of our lives are determined by our reaction to what happened to us. Simply put, a small number of our activities account for many of our outcomes. We really have no control over 10% of what happens to us.

What is the 90 10 rule for-profit? ›

The 90–10 rule refers to a U.S. regulation that governs for-profit higher education. It caps the percentage of revenue that a proprietary school can receive from federal financial aid sources at 90%; the other 10% of revenue must come from alternative sources.

What is according to the 90 10 rule? ›

So, what is the 90/10 rule? In simple terms, it's the concept that 90% of the work needed to finish your project will take a mere 10% of the time. But that final 10% push to reach the end? It will eat up 90% of your timeline!

What does Warren Buffett recommend for retirement? ›

According to Buffett, you should invest 90% of your retirement funds in stock-based index funds. According to Buffett, the remaining 10% should be invested in short-term government bonds. The government uses these to finance its projects.

What bonds does Warren Buffett buy? ›

The bond market features Treasuries with yields around 4%, investment-grade corporate bonds yielding 5% or more, and junk bonds in the 7% to 8% area. But Buffett likes the 5%-plus yields that Berkshire is getting on its Treasury bills.

What index does Warren Buffett invest in? ›

Berkshire Hathaway CEO Warren Buffett has regularly recommended an S&P 500 index fund. The S&P 500 has been a profitable investment over every rolling 20-year period in history. The S&P 500 returned 1,800% over the last three decades, compounding at a pace that would have turned $450 per month into $983,800.

How does the 90 10 rule work? ›

The 90–10 rule refers to a U.S. regulation that governs for-profit higher education. It caps the percentage of revenue that a proprietary school can receive from federal financial aid sources at 90%; the other 10% of revenue must come from alternative sources.

What is the 70 20 10 rule for investing? ›

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

What is the 70/20/10 rule for trading? ›

Part one of the rule said that in the next 12 months, the return you got on a stock was 70% determined by what the U.S. stock market did, 20% was determined by how the industry group did and 10% was based on how undervalued and successful the individual company was.

What is the 60 30 10 rule in investing? ›

This reinventive basic rule to portfolio structure means allocating 60% to equities, 30% to bonds, and 10% to alternatives. The exact percentages may vary by portfolio, but the key idea is that Alternatives should be an integral part of every portfolio, in some percentage.

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