Every investor hits the same wall at some point. You’ve done the research, built conviction in your ideas, and then comes the inevitable question: How much do I invest in each one? Or even broader: How do I spread my capital across different asset classes, ideas, and risk levels?
There’s no one-size-fits-all. But there are proven frameworks that smart investors use to guide capital allocation. This article gives you the most comprehensive list of those strategies — with a plain-English breakdown of how each one works, when it makes sense, and what to watch out for.
Whether you’re allocating between stocks and bonds, building a diversified factor strategy, or managing a portfolio of portfolios like we do in the Founder’s Club — this guide gives you the tools.
Note: Not all of these are asset allocation frameworks in the traditional sense. Some are sector tilts, factor models, or strategy overlays that shape how and where capital is deployed — all part of building a resilient, high-performing portfolio.
Traditional Allocation Models
These are the most widely used models among retail investors and financial planners.
60/40 Portfolio
A standard mix of 60% equities and 40% bonds aimed at balancing growth and income. It can underperform in inflationary or rising rate environments.
Target-Date Funds
Allocation shifts gradually over time based on retirement date. Convenient but often opaque and overly conservative.
Risk Tolerance-Based Models
Built around your ability to stomach volatility, often via questionnaires. Easy to implement but can misalign with long-term goals.
Factor-Based Allocation Strategies
These strategies tilt exposure to known sources of long-term outperformance.
Fama-French Multi-Factor Model
Allocates across factors like size, value, and profitability. Research-backed but requires periodic rebalancing to maintain exposure.
Smart Beta ETFs
Passive exposure to factor tilts — value, momentum, quality, low-volatility — packaged as ETFs. Easy to access, harder to dissect.
Dynamic Core Hedge Portfolio
Our Founder’s Club strategy combines counter-cyclical value and momentum factor exposures to reduce drawdowns while capturing upside.
Mathematically Optimized Allocation Strategies
These strategies rely on risk, return, and correlation math to build efficient portfolios.
Kelly Criterion
Allocates capital based on expected return and volatility to maximize geometric growth. Highly sensitive to inputs and better suited for high-conviction investors. We use this in our Premium Small Cap Value portfolio.
Optimal f (Ralph Vince)
A variation of Kelly that considers drawdown risk. Slightly more conservative and sometimes more stable in practice.
Mean-Variance Optimization (Modern Portfolio Theory)
Builds a portfolio that targets maximum return for a given level of volatility. Prone to unrealistic weightings unless constrained.
Black-Litterman Model
Improves on MPT by blending investor views with market equilibrium weights. Helps create more intuitive portfolios.
Risk Parity
Allocates to equalize each asset’s contribution to total risk, not dollar value. Commonly results in bond-heavy portfolios unless leveraged.
Volatility Targeting
Adjusts allocation based on realized or forecasted volatility to maintain consistent risk exposure. Common in hedge fund strategies.
Shannon’s Demon
Rebalances between uncorrelated volatile assets to extract a rebalancing bonus. Simple but powerful if volatility and mean reversion persist.
Heuristic and Rule-Based Strategies
These strategies prioritize simplicity, clarity, and intuitive rebalancing rules.
Equal Weight Portfolio
Allocates equally to each holding. Great for forced discipline but may overweight riskier or smaller names unintentionally.
Core-Satellite Allocation
Uses a stable core (e.g., index ETFs) with flexible satellite allocations to active or thematic strategies.
Bucket Strategy
Divides capital into time-based needs: short-term, medium-term, and long-term. Useful for retirement planning.
Barbell Strategy
Allocates to low-risk and high-risk extremes, avoiding middle-of-the-road assets. Designed for uncertain environments.
Cash Flow and Income-Focused Strategies
Perfect for investors who need to fund a lifestyle, business, or reinvest for compounding.
Income Factory Allocation
Our Founder’s Club strategy uses CEFs, covered call ETFs, and high-yield funds to generate monthly income and grow by compounding share count.
Dividend Growth Portfolio
Focuses on quality companies with rising dividends and strong fundamentals. Capital is allocated based on yield, growth, and valuation. Another one of our Founder’s Club strategies.
REIT and BDC Tilt
Heavy exposure to real estate investment trusts and business development companies. Delivers income, but requires careful sector monitoring.
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Tactical and Adaptive Allocation Strategies
These respond to macro conditions, valuation shifts, or market regime changes.
All-Weather Portfolio (Ray Dalio)
Built for economic cycles. Allocates to equities, bonds, gold, and commodities based on how they perform in inflation, growth, or deflation.
Permanent Portfolio (Harry Browne)
Equal allocation to stocks, bonds, gold, and cash. Emphasizes stability in all environments.
Thematic Basket Strategy
Allocates capital based on conviction in long-term themes — e.g., AI, reshoring, food security. Best when paired with valuation discipline.
Event-Driven Allocation
Capital flows into ideas driven by catalysts — M&A, turnarounds, special situations. Common in our Premium Portfolio.
Tactical Asset Allocation
Shifts exposure among asset classes based on valuation, momentum, or macro indicators. Active by nature.
Commodity-Focused Allocation Strategies
Designed for inflation protection, resource exposure, or geopolitical hedging.
Commodity Index Tilt
Adds exposure to broad-based commodity baskets via ETFs. Useful when inflation expectations rise.
Real Asset Allocation
Focuses on hard assets — gold, energy, farmland — that retain purchasing power in fiat devaluation scenarios.
Energy and Materials Overweight
Sector rotation strategy focused on commodity producers. Works best in early-stage inflationary cycles.
Gold Allocation
A hedge against systemic risk, often 5-10% of portfolio. My preferred ETF: GLDM.
ESG and Impact-Focused Allocation
Allocates capital with an eye on sustainability, governance, and social responsibility.
ESG Integration
Scores assets on environmental, social, and governance metrics. Common in institutional mandates.
Impact Investing
Targets investments that generate measurable societal or environmental outcomes, often at early stages.
Negative Screening
Excludes “sin stocks” or companies in objectionable sectors. Easy to implement but can reduce diversification.
Thematic ESG Baskets
Custom allocations toward sustainability themes — clean energy, gender equity, regenerative ag.
Global Macro Allocation Styles
Capital allocation driven by macroeconomic views, regional cycles, or currency dynamics.
Top-Down Asset Class Rotation
Allocation decisions based on macro outlook — growth, stagflation, recession. Requires a strong economic framework.
Currency-Adjusted Allocation
Overlay FX exposure or position in currencies directly. Common among hedge funds and sovereign wealth strategies.
Geographic Diversification
Spreads capital between U.S., international developed, and emerging markets based on relative opportunity.
Sovereign Bond Tactical Allocation
Targets countries offering attractive real yields or currency-adjusted returns. Often paired with inflation outlooks.
Hybrid and Custom Strategies
For investors who blend frameworks and optimize capital at the portfolio-of-portfolios level.
Strategy Stacking
Use Kelly for individual stock allocations, barbell for capital reserves, and thematic baskets for conviction plays.
Lifecycle-Based Reallocation
Adjust allocation over time based on income needs, risk tolerance, and evolving goals. Relevant for business owners, retirees, and builders.
Multi-Portfolio Optimization (Your System)
Allocate across Income Factory, Small-Cap Value, Dynamic Hedge, and Dividend Fortress — each serving a defined role, tuned for total return and capital efficiency.
Final Thoughts
A portfolio is more than a list of stocks. It’s a blueprint for how you grow, protect, and use your capital over time. The strategy you choose should reflect not just your goals, but how you see the world, what kind of investor you are, and what trade-offs you’re willing to accept.
Get allocation right, and everything else becomes easier. If you’d like to see how we apply these principles in live portfolios, check out our Premium and Founder’s Club memberships — or start building your own strategy using this list as a guide.
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