It has been bloody weeks on the worlds stock markets lately but that honestly doesn’t concern me much. How can you not care about index plummeting when you are doing FIRE? Well, we have reached a level when FIRE is around the corner and we believe protecting our assets is more important than maximising the gains.
How do you do that, you still gonna need that interest to live on? True, we still need that interest!

Portfolio setups

Introducing portfolio theories – how you can diversify your assets and lower your risks. You want maximum gains? Stick to the index funds, that has historically always been the better choice over longer time periods. But if you want to stay safe of major losses you might want to look into these and at least consider the options.

Two of the most famous portfolios is the Permanent Portfolio by Harry Browne and the All weather portfolio by Ray Dalios. The Permanent portfolio is designed to protect your money no matter what happens in the economy. It does this by dividing your assets equally into 4 different asset types – Short term treasury bonds, long term(20+ years) treasury bonds, stocks and finally gold. Its ridiculously simple but has showed great success in protecting your money in all financial climates historically. You can read more about it here. This portfolio setup might let you sleep well at night, but the return is quite low (6,69% per year over the last 10 years). But what we really want is something in between a “all in” index funds portfolio and a safe(coward) permanent portfolio, to find that sweet spot of return vs risk.

Finding a good balance between risk and return
Finding that well adjusted balance between risk and return is crucial for all investors.

The Golden Butterfly

Introducing the Golden Butterfly which is an improvement(?) of Ray Dalios all weather portfolio designed by the same person who runs the awesome site. The portfolio has a lot of interesting benefits, such as these:
– Average annual return (since 1970) 6,2% compared to 7,6% pure US index fund.
– Maximum loss one year (since 1970) -10,8% compared to -49,3% during the 2008 crash.
The 1,4% loss in interest compared to the major avoiding of losses fascinates me, and being the same type of person such as Warren “Never lose money” Buffet, this is my preferred choice. Why is minimising losses that important? Basically because to return from a 50% loss, you will need a 100% increase. Its also interesting from a SWR (Safe Withdrawal Rate) perspective when planning your freedom. Here’s my last 6 months on my custom setup Golden Butterfly, please note the last volatile weeks…

Custom Golden Butterfly vs Stock market index
Last 6 months development with a custom Golden Butterfly portfolio compared to Swedish index (OMXSPI)

This is why i don’t fret those volatile bear markets any more, the portfolio setup can manage it. The reason the portfolio managed the last weeks so well is because the portfolio long term bonds and gold increased dramatically and compensated for the loss in stocks and index funds. That is what those assets are supposed to do, to compensate and/or limit the loss. Please note that the development above is somewhat affected by currency fluctuations and custom setup so it is only used as an example.

FIRE-approved portfolios

No matter what your investing strategy is, from a FIRE perspective the golden butterfly offers you something extraordinary interesting – a whopping 6,5% Safe Withdrawal Rate (30 year based). That kind of changes the game a little don’t you think? 5,6% SWR for a sustained(forever) portfolio! So if you want a stable 3K per month return to cover your expenses for 30 years you would “only” need 600K Golden Butterfly portfolio instead of a 900K index fund portfolio! Thats a lot less saving!

Golden Butterfly Safe Withdrawal Rate

I believe these portfolios are going to be more acknowledged in the FIRE community in the future. Hugging those Vanguard index funds are great for building your stash, but it´s a very volatile play and not for the faint hearted when that wealth you built over a long time is getting bigger.

Whats your strategy? Why not apply a more “weighted” portfolio? Are you sure you won’t sell those stocks/funds when you “lost” a lot of money and want to save the rest?

There is a follow up to this post here were we taking a deeper look “under the hood “of our Golden Butterfly.


  1. My strategy involves not touching my stashe for the first 15 years or so while we live off of my wife’s government retirement. With that in mind and due to the fact I am in the US, I will go the higher risk (Vanguard) route. We will also have some joint stash of about $200k that I may put in a less volatile option and yours seems like an attractive solution.

    1. Sounds like an excellent strategy, I’m doing the same with my public and private pension funds, all in cheap index funds. Can’t touch these for at least 10+ years so i am letting them do the roller coaster tour until then.
      I am using the Golden Butterfly for “securing” the stash we might actually need now.
      Retiring to Spain as well?

  2. Interesting, I need to research that.

    I do listen to ChooseFI and they are always just talking about maximizing return and talking index funds but I think a lot of people cannot stomach that in the next bear market.

    Personally, I do mostly dividend growth investing combined with some index funds.

    I do think index funds are great if you don’t have the interest or time to do research, especially in the accumulation phase.

    I do think DGI is better during the withdrawal phase since it likely less volatile.

    However, as long as you can sleep at night and stick to your strategy, your a winner

    1. Welcome Rikard!

      Couldn’t agree more on anything you said. Thanks for contributing.

      I feel that I have come too far to risk that “depression” when (it is a matter of time, not if) a hard bear market hits. I still remember the feeling from 2008 and 2001, this time it would be much worse following index 100%. I sleep without worries with the current setup and the only reason i would change it to something more aggressive is if the world index happens plummet 30% or so.

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