By Ethan Bloch — Mar 19, 2025

How I manage my money - Part 2: How I manage my investments

None of this is financial advice. If you need that, you should seek the advice of an investment professional.

How I manage my money is a series of posts:
Part 1: Who am I?
Part 2: How I manage my investments

I’ve learned there is no single right way to invest. There are best practices and schools of thought and you should take much into account, but ultimately you need to invest your money so 1) you can achieve your financial goals and 2) you can sleep easy at night. My investment process has evolved a lot over the past 25 years. Currently it looks like this:

I divide my assets into three categories

Foundation: the bedrock of my family’s financial stability. All foundation investments possess at least one of the following attributes: limited downside risk, protection against tail events and passive indexing. Example investments below.
Alpha: my active investments. Alpha investments are investments where a manager is actively trying to achieve above-market returns through skilled security selection. More on how I manage this below.
Off-balance sheet: personal-use-assets e.g. primary home, cars etc… (if it's collector stuff I would put it in Alpha). Also includes loans I’ve given to family members. I don’t intentionally allocate money here, I just put stuff in here that I deem off-balance sheet so it removes it from my investable asset calculations.

I allocate 50% to Foundation and 50% to Alpha

I currently allocate 50% to Alpha. I feel comfortable doing this because I have 25 years of investing experience, a background in financial analysis, I get reasonable deal flow, have good investment instincts, reasonable emotion control. Not to mention that my foundation assets can provide me financial security even if lose a large chunk of my Alpha.

I’ve learned that if you don’t have time to dedicate to active investing (whatever flavor) or you don’t have access to top 1% money managers (more on this later) you should dramatically limit how much you allocate to Alpha. I would default to ~10% — meaning I wouldn’t put more than 10% of my assets towards active investing (or speculating) unless I had dedicated the time to hone my investing skill or I have access to top 1% money managers.

Foundation’s goal is to grow and preserve wealth

Foundation investment objectives

Fund upcoming cash needs: responsible for covering any cash I need in the next 12-18 months for spending, capital calls, large planned expenditures, etc.
Insure against tail risks: defend against the full arsenal of financial chaos: crashes, recessions, depressions, inflation, debt crises, bank runs, liquidity crunches, wars or geopolitical conflicts, pandemics and the U.S. dollar losing reserve currency status, to name a few.
Global market returns: invest in global equity, debt and commodity markets in order to spread risk and return far and wide.

Foundation investment constraints

Liquid: assets that have at least $1B in average daily trading volume.
Low fees: average weighted fees across the portfolio, should be less than 25bps.
Tax efficient: minimize tax as much as possible.

Foundation investment process

Set strategic asset allocations for the portfolio every 6-12 months: I am not going to dive deep here; there many books written on this topic. Maybe I will write a follow-up post. At a high level I try to keep things as simple as possible. I start with a default framework and adjust that default based on market assessment indicators. I don’t focus too much on where things might go, predictions and forecasts aren’t useful, I focus on where things are today. I back-test allocations from time to time to have an approximation of performance in different historical scenarios. I capture my allocation rationale in a memo.
Cash rebalanced every 3-6 months: I calculate how much cash I need for the next 12 months. If needed I rebalance into cash in the most tax efficient way. I hold cash in the highest after tax risk free instrument.
Portfolio rebalancing gated by tax efficiency: I try to rebalance foundation as often as possible controlling for tax efficiency. This could be daily, weekly, monthly, quarterly, or at inflows and outflows.

I currently have a chunk of my foundation portfolio managed by an investment manager, a small team of ex-Bridgewater folks, that’s low-fee, aligned with the goals of foundation, and held in a fully transparent separately managed account. Even for this portion of foundation, where I have control, I follow these steps.

Foundation asset classes

Cash: I never want to sell an asset during a drawdown. Holding enough cash ensures this never happens.
Equity indexes: ownership in great businesses, at sane prices, is the best longterm asset class. Great businesses compound at high rates and in the long run tend to be inflation resistant as well as resilient through wars. In periods of crisis I expect drawdowns of 50% or more.
Gold: 5,000 year old store of wealth, no counterparty risk, liquid in most environments, globally recognized, proven to maintain purchasing power through financial crises, wars, and currency devaluations.
Government debt: Liquid, safe, and reliable income. Unlike equities or commodities, government bonds—particularly those from reserve-currency nations— often remain the most liquid and creditworthy asset in a deflationary shock or systemic collapse.
Commodity indexes: this real-asset nature helps preserve purchasing power. Commodities also tend to have a low or even negative correlation with equities and bonds, especially during inflationary periods or supply shocks.

Alpha’s goal is to grow wealth

Alpha investment objective

Minimum 12% hurdle rate: pretty self explanatory, the goal for Alpha investments are to achieve a 12% average annual return, or greater. This is significantly better then the US stock market nominal return of ~8.3 - 10.2% per year (depending on what data set you’re consulting ), over the last century. Which was the best performing market over the last century.

Alpha constraints

Minimum 3-year holding period: this raises the bar on making new investments and it prevents me from following the herd, or re-underwriting an investment too soon. It also rules out short term trading which is a practice I am not well suited to perform well in.
Volatility doesn’t matter: this is kind of a reverse constraint. But I don’t care about price swings one way or another in Alpha investments. Each investment is made with conviction derived from independent thinking that is held unless I become convinced I got something materially wrong or there’s been a big adverse event to the business.
Liquidity mostly doesn’t matter: this is also kind of a reverse constraint. But I don’t care about access to liquidity for Alpha investments. It’s great if it has good liquidity but it doesn’t matter. The quality of the investment itself takes precedence over it’s liquidity.

Alpha investment process

Write investment memos: for every investment I capture my thinking, even if brief, on why or why not I’m making an investment. The larger the investment the more rigorous the analysis. I create checklist templates for each type of investment. Memos serve two purposes: 1) clarifying my thinking today 2) provide a record for me to learn from in the future. Any additional buy/sell or eventual exit will also have a memo.
Re-underwrite investments every 12 months: What have I gotten right? What have I gotten wrong? Is it too early to tell yet? What did I miss? I don’t exit or reduce a position unless 1) it’s beyond 3 year minimum holding period or there’s been an adverse event 2) prospects at current prices have materially changed or there is a better opportunity for that money.

Alpha investment managers

I’ve learned that achieving great returns over a sustained period of time is extremely hard. This is no different when you hire a investment manager e.g. venture capital, private equity, public market investors etc… Achieving great returns via an investment manager over a sustained period of time is extremely hard.

After making 17 of these kinds of investment manager investments and talking with many high net worth families over the years, I believe you need at least one of the following, ideally both, to do well:

You need access to exceptional managers. Returns in finance go to the most skilled. The difference between the top 1% of investors and everyone else is staggering. If you’re not getting access to top 1% managers it’s probably not going to be a great investment. The reality is for most retail investors you will never get access to top 1% in Venture, Private Equity, Private Credit, Real estate so you should probably avoid it.
You need to get a discount on the standard fees. Some great managers just charge less in standard fees as a way to better align incentives or for certain for strategic relationships. If you’re paying standard 2 and 20 it makes it even harder to achieve exceptional performance.

The first one should probably be a requirement. Locking up your money with a B-player is almost always a mistake as the S&P 500 will likely outperform net of fees and have much better liquidity. B players are unlikely to beat the market through skill. Even if the fees were exceptionally lower… maybe… but I’d still probably prefer the S&P 500.

Alpha investment asset classes

Public equities: my investing experience has largely been in public equities. While it’s become more competitive than ever, I still underwrite investments here from time to time.
Private equity (venture and growth): I’m fortunate to have built several successful startups in the Bay Area. This gets me access to some venture funds I would have otherwise never have had access to. In addition, because I’m somewhat connected in the fintech ecosystem, I get startup deal flow. I pass on most, probably 9 out of 10, but from time to time a founder catches my eye.
Hedge funds: I don’t do much here because I don’t have access to top 1% managers. More recently I’ve had the good fortunate to become friendly with a top manger who started a new fund. It’s unproven but the talent and experience is promising. I have been in a small amount of money here to test and learn. This could increase over time.
Bitcoin and Crypto: I’ve been investing in Bitcoin since 2013. It’s a part of my portfolio. I’m a HODLer. Occasionally I will sell to take chips off the table and make other investments and/or ride the halving cycle. As for the rest of Crypto, I’ve occasionally traded ETH, UNI, MKR (mostly dabbling); I largely defer to some of the venture funds I invest in that specialize here.
Commodities: I don’t do a ton here. The hedge fund I invest in is commodity-focused. Through that learning I have built some longterm conviction around some specific commodities, so I’ve started to invest and learn here.
Private real estate: I own a rental investment property. Due to mortgages being super cheap several years ago I calculated this could be quite lucrative use of leverage and return. This is mostly out of my circle of competence and is a learning experience I hope is profitable in the end.

In summary

My investment approach has evolved over 25 years and will continue to change. The Foundation/Alpha framework works for me now, but what matters is investing your money so it aligns with your goals and helps you sleep easy at night.

Document your thinking, review performance honestly, and maintain discipline during market volatility. Even sophisticated investors make mistakes—I've made plenty. Learn from them.

Start where you are, use what you have, build from there.

Again, none of this is financial advice. It's simply what works for me.