Jonathan Clements provided an update on his thoughts related to his investment portfolio and wound the article down with this provocative comment; I don’t see any alternative to owning stocks. I'm not going to attempt to make an argument that stocks are not just about the best game in town, it's hard to beat the ergodicity of a well-diversified portfolio. I have always acknowledged that equities aren't right for everyone. I also think there is a lot to be said for endowment style diversification, owning truly disparate asset classes to avoid being overly dependent on the performance of just one asset class. I'll add that it is not impossible that cryptocurrencies evolve to compete with the equity market in this context, just saying it is possible, not that it is probable.

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For any random five-year period, yeah, stocks might be a coin flip but when you think in terms of investment lifetimes, you're probably going to be ok adding money at regular intervals and not doing too much to muck it up. Having other assets though can be a huge difference-maker if one of your major life events coincides with the types of market peaks that occurred in 2000, 2007 or the potential peak that could have occurred in 2020.

The easiest way to mitigate the market peak risk, the real term of course is a sequence of return risk, if you're not lucky enough to other asset class exposure is just to raise cash, enough cash to help you endure a market meaningful market downturn. "Enough cash" is a very subjective term. Don't listen to someone else's idea of how much is enough cash, this is really a sleep factor number....six months worth of expenses set aside in cash, 24 months, in terms of comfort level there is no wrong answer.

Some sort of real estate investment can help smooth out income from collecting rents that are less lumpy than stock market returns or in our case vacation rental income. I wouldn't expect vacation rental income to be as steady as income from a full-time renter but maybe for planning purposes you could figure a 50% haircut to your typical cash flow? You normally bring in $3000/mo, would be prudent to plan on $1500/mo? Maybe. Like with anything, getting started with a longer runway is better as opposed to "ok, I just retired so I am going to buy a piece of rental property and immediately bring in $2000/mo. You might be that lucky but I wouldn't assume it.

Following up from the other day buying land that yields some sort of crop, even if not olive oil, would provide income unrelated to the ups and downs of the stock market. This is appealing on some level, and while I mentioned firewood in that post the other day, this is not something I really know anything about so I'd be unlikely to pursue it but for people who do understand the risks of this sort of investment and how to mitigate those risks somewhat, it is viable.

What about buying collectibles? Things like baseball cards and art are being securitized so that ordinary folks can own a small piece of X-Men No 1, a comic book that a few years ago sold for $492,000 or multi-million dollar Mickey Mantle cards. I think there's a huge musical chairs element to this. The music will stop and someone is left without a chair and trying to guess when that would happen amounts to guessing about other peoples' emotions in a way that is different than saying the same thing about stocks. If you want to spend a few hundred dollars buying a share of a 1934 Goudey Babe Ruth baseball card because it would be fun, go for it but you're spending money not investing. If it happens to go up a lot in value all the better but don't make a sizeable bet on the future value of a small piece of cardboard.

I believe crypto is an asset class, I might call the asset class asymmetry though as opposed to crypto. What I mean by that is that although unlikely at this point, crypto could turn out to be hokum but I don't want to limit the possibility that crypto turns out to be an evolutionary step and that there won't be other asymmetric opportunities having nothing to do with crypto that are beyond my ability to conceive.

I always talk about allocating 1% or maybe 2% into something like crypto and letting go up a lot or wiping out. Another way to think about sizing a bet, it's a bet, is to look at your portfolio. How much do you have invested? What is the range of normal, daily dollar volatility? Meaning if you have $500,000, are swings of $5000-$10,000 something you can tolerate without panicking or otherwise losing sleep? The amount you can tolerate in this context might be a good dollar figure to start with an asymmetric bet. I doubt the typical person with $500,000 would be comfortable with regular swings of $50,000 or $100,000 but $5000-$10,000? Maybe. Or maybe even $20,000-$25,000 (that would be too much for me)? If 1%-2% swings are too much, then yeah, this is probably the wrong type of trade for you and that is ok.

The final asset class to mention is yourself and what you could earn on your own terms. Your own terms might mean doing what you enjoy and would otherwise do for free, like a hobby, or setting your own schedule or maybe something you're just very good at that few people are. Your skills and experience are a type of asset that I would encourage everyone to pursue to the fullest. Cultivating your skills, your personal assets is a huge source of optionality.

Don't limit your thinking, don't take shortcuts, and don't get out over your skis but do explore.