Diversified Investment Strategy for Salary Workers (feat. Cash Flow)
After taking big losses in stocks last year, I shifted my investment approach to focus on cash flow.
Step 1: Emergency Fund
- Set aside 6 months' worth of living expenses in a CMA or savings account.
- Goal: survive 6 months even with sudden job loss.
Step 2: Regular Investment
- Every month, invest 20% of my salary into funds/ETFs via dollar-cost averaging.
- Diversify by mixing US S&P 500, Korean dividend stocks, and REITs.
Step 3: Rebalancing Rule
- Check allocation every 6 months. Adjust if any asset class swings more than 10%.
Step 4: Reinvest Profits
- Always reinvest dividends or interest. They say that's the magic of compounding.
After doing this for 2 years, I could steadily accumulate without being shaken by volatility. Of course, it's not that I'm making a loss, but the returns may be lower than friends who day trade. Still, it gives peace of mind.
5 answers
Yeah, I changed to this too and felt much more at ease lol
I had a similar experience last year—took a hit and shifted to a cash flow focus. It’s definitely better for mental stability. But when rebalancing, you have to account for taxes and fees. I only do it once a year.
Well, I don't think we should rely solely on the S&P500. The US could have a bubble burst too. For diversification, shouldn't we include emerging markets or commodities?
Agreed, you summed that up well.
The cash flow strategy sounds good, but is a 6-month emergency fund enough if you lose your job? Probably depends on the industry. I increased mine to a full year's worth.