The $2 Million Portfolio Plan No Advisor Wants You to See

Tyler Gardner (0:00)

The tragedy isn't running out of money, it's having it and not using it to create a life worth remembering. As Morgan Housel says, wealth is invisible until it translates into well-being.

Hello friends, this is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. Hey everyone and welcome back this week. Before we dive in, as always, my weekly request, if this show has ever helped you cut through the noise and feel a little more confident about your money, I'd love it if you left a review on Apple or Spotify. It genuinely helps more than you think and keeps this free financial literacy experiment alive and growing. Which is a fancy way of saying, I'm a sensitive soul who genuinely does read all reviews and takes them to heart. So if you find it useful, I'd love to know. And to the 1200 or so folks who have already left reviews, you are amazing. Thank you and I appreciate you and am looking forward to the show's continued growth. A while back, I did a show about how to allocate a $1 million portfolio. And when I say allocate, I just mean invest across different asset classes or funds, etc. A lot of people enjoyed that episode. And since then, I've been asked the following question by many in response not only to that show, but to short form video clips on TikTok or Instagram, Facebook, where I do a mock allocation for people with a hypothetical principal starting amount. Tyler, people ask, how would this change if I had $2 million, or $500,000, or a billion dollars? And honestly, the first time someone asked me about the billion dollar scenario, I did chuckle to myself. Because if you have a billion dollars, and you're listening to a free podcast for investment thoughts, we need to have a very different conversation about your life choices and what you should be doing right now with your time. But hey, if you're also finding some value here, awesome. And here's what most people miss when thinking through allocation strategies. Because bluntly, most of us are never taught about allocation strategies. It's always and forever about the percentages, not the principle. A good allocation strategy doesn't magically change because you have more zeros in your bank account. Whether you're working with $100,000, or $10 million, the fundamental math of diversification across asset classes, risk tolerance, and expected returns remains stubbornly consistent. It's like baking. The recipe for chocolate chip cookies doesn't fundamentally change whether you're making one batch or 50 You just scale the ingredients accordingly. And in no humility whatsoever, that might be one of the better analogies I've offered you. So remember that one next time you ask someone what to change about the tollhouse recipe just because you're making more cookies. Which, by the way, is also yet one more reason why paying someone a flat percentage of your assets under management is, pardon my French, garbage. Think about it. If your advisor charges 1% and you have a $2 million portfolio, that's 20,000 bucks a year. For what? Putting your money in index funds you could have googled yourself? That's like paying someone $20,000 annually to remind you to brush your teeth. Sure, they might do it very professionally, with quarterly reports and everything, and tell you that they're forecasting headwinds for potential tooth decay down the road. But you're still capable of opening a tube of toothpaste on your own and brushing with just the right amount of force to be highly effective, yet gentle and kind to your gums. Apologies and rant and digression. So today, we're going to do a textbook asset allocation for a $2 million portfolio. But this allocation would be equally effective if you had $2 or $2 billion. And even though it's a highly effective and incredibly simple way to allocate a portfolio, you most likely have not inherited the belief that this allocation will be okay in retirement because you inherited a fear based belief that assumes when we retire, it's time to fire up the old bond allocation and be satisfied with a 50-50 split that is somehow supposed to fit every investor the same just because they're 65 years old. Today, we're talking about what happens to a portfolio that's 90% invested in stocks, 10% invested in a short-term money market fund. And yep, that's it. Simple, boring, and yeah, terrifying if you're used to being told that bonds are your friend in retirement and that you should be hiding gold bars underneath your Tempur-Pedic adjustable mattress. But if it's good enough for Buffett's estate plan, and quite literally, this is Buffett's estate plan, it's good enough for me and should be worth your serious consideration. It's also a perfect way to start thinking about withdrawals and how you actually spend the money you've worked so hard throughout the years to earn. Because just to repeat what I'll repeat in every episode ever, most of us are actually better than we think at accumulating money. We're just not quite as good at finding the best and most fulfilling ways to enjoy the money. So let's start with the why behind this particular allocation, as opposed to your vanilla 60-40 or 50-50 split.