My Investment Strategy & Framework

I think about investment in very broad terms. That is to say that I think holistically about my entire life in terms of “asset management” and investment performance and returns. After all, in the final analysis it’s not just monetary gains and our financial assets, but our full life portfolio that matters most.

This more holistic portfolio management concept considers time and talent (and not just money) as investment capital. By extension, experiences and achievements can be considered as assets (and stores of value), just as are stocks, real estate or precious metals.  Having said that, what follows is mostly about my financial investment strategy.

Income As ReturnsMan Lake Mountains View

There’s a commonly held notion that income can be categorized into three different types. The first of these is earned income, being the income derived from a job (trading time for money). This is the most common yet least scalable, because one cannot trade in more than their own available waking hours. 

The second income type is so-called passive income which derives from revenue-generating assets such as real estate or a business with positive cash flow. The term “passive” here is a bit of a misnomer since these income sources certainly require active effort to build up or manage. 

Finally, the third type is referred to as portfolio income. This typically comes from bond yields, dividends or proceeds from stock or derivatives trading in a traditional investment portfolio. These assets are usually fungible, exchange-traded instruments but could be any kind of standardized financial products that offer a predictable income stream.

I see the distinction between “portfolio” and “passive” income as having less to do with the type of asset, and more to do with whether you built it or bought it.

I see the distinction of portfolio versus passive income as having less to do with the type of asset, and more with whether you built it or bought it. In my view, portfolio income comes from investments that one simply bought into (like a company’s stock or a hedge fund) which someone else, therefore, will manage (like the CEO or fund manager). But all of these income types should be considered as part of the investment mix, including one’s job (since time is the most precious asset we have to invest). I write more about these types of income at Digital Downshift.

Desk Computer NotesTime Valuation

There is a single, immutable and universally acknowledged factor required to have any of these income sources: time. Without time (to trade away in the first case above, build up in the second or research in the third) then no income sources or investment returns are possible. This is why time valuation and management has become a cornerstone of my investment framework. 

This concept is viewed among institutional investors as “opportunity cost”, which is the loss associated with opportunities not taken because other, less profitable investments were made instead. Put simply, you can’t be everywhere at once. However, there are ways to utilize both the expertise and resources of others to maximize our desired outcomes.

Fast-Follow Investing

I am generally a careful and cautious person. So, when it comes to my investments and my full life portfolio, diversification and risk reduction are just as important as maximizing gains. I achieve this, in part, by applying my ‘income as returns’ framework above. However, true diversification is not possible without a sufficient number and variety of investable ideas. 

…it has never been easier to leverage the skills and scale of others in order to magnify our own investment returns.

I know I know very little (even though I sometimes think I’m clever). So ongoing learning and ideation is just as important as physical fitness and a healthy diet. But even this is not enough. We can have all sorts of ideas based on personal experience, acquired knowledge or the guy next door.

But both our range of ideas and our ability to objectively assess them is limited by our biases and perceptions. It’s also, of course, limited by those few waking hours we all have (see time, above). And how many business ideas or investment themes could we actually execute on if we had to do everything ourselves?People Whiteboard Meeting

But we don’t have to do it ourselves if we model successful investors and traders, and tap into the ocean of readily accessible information and research around us. And, thanks to major innovations in the retail investment space, it has never been easier to leverage the skills and scale of others in order to magnify our own investment returns.

Predictions and Confirmations

There are a variety of fundamental and technical indicators that I track or reference in order to filter or reinforce my investment ideas. I have used one to two dozen consistently over the years. These span broad macro barometers, individual asset or company fundamental and technical or chart analysis tools. Here are two from the first bucket…

The AAII Sentiment Survey is a useful investor sentiment tracker, especially helpful for identifying reversals. One contrarian signal that some use is if the % bullish minus the % bearish is 20 or more, it is a is a bullish signal for stocks 6 months out.

When the futures on the VIX (which measures the degree to which investors are buying insurance on their portfolios) front month contract is above the contract 4 month out, it indicates significantly higher short-term fear in the market. This is an infrequent occurrence (it happened less than 10 times since 2009) but is a strong indicator that a market bottom may be at hand.

These data-driven indicators are two of the potentially useful and freely available measures of market and economic sentiment, and can help reinforce more sector-specific investment ideas and research.

 Focus on Investment Themes

There are many assets and opportunities into which we can put our investment capital. Too many, in fact. 

Market Storm Clouds Over Calm SeaAs suggested above, it’s hard (and foolish) to not use our subject-matter expertise in a given industry or area if investment opportunities present themselves. But I also incorporate my principles and world views to inform my investment strategy. 

Factors and metrics like the examples above can help create a sort of if/then decision matrix. But focusing on a subset of sectors, trends or themes can help focus our learnings on specific industries and players, and better assess the assets we would invest in (when the factors give a green light).

I share a detailed overview of the investment themes and trends I follow, which I will update over time.


There are many ways to build, manage and optimize an investment strategy. They all involve some combination of goal setting, self-assessment and research. Of course, having the discipline to consistently follow the strategy is a whole other challenge.