Layer 1: Cash Buffer
The goal of this layer is not returns, but peace of mind. Keep 6–12 months of living expenses in ultra-low-risk instruments like demand deposits, money market funds, or short-term Treasuries.
Many underestimate the importance of this layer—until the day they actually need it. Cash is not a drag on returns; it is the right not to be forced to sell.
Layer 2: Core Holdings
The core is the main body of your portfolio, recommended at 60–80% of total assets. This portion pursues long-term compounding, not short-term alpha.
Suitable for the core: broad-based index funds, long-term holds of quality companies, and high-dividend defensive portfolios. Anything requiring frequent trading does not belong here.
The core's golden rule: before buying, think about holding for ten years; after buying, do not exit due to price fluctuations unless fundamentals deteriorate.
Layer 3: Satellite Positions
The satellite is a "learning + flexibility" sleeve, capped at 20% of assets. This portion can be more aggressive—thematic bets, cyclical plays, high-conviction long shots.
The greatest value of satellites is not the money they make, but keeping you plugged into the market. Total passivity breeds disconnection; a small amount of active experimentation maintains curiosity and rhythm.
But discipline is essential: the total size of satellites must not breach the cap, losses must not be topped up from the core, and short-term satellite results must never shake the long-term logic of the core.
On investment analysis, market insight, and asset allocation — not chasing short-term noise, but understanding what truly drives long-term returns.