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BiggerPockets Money Podcast

Scott Builds Four Portfolios with Four Different Strategies ($40k Experiment)

42 min episode · 2 min read
·
Four Different Strategies

Episode

42 min

Read time

2 min

Topics

Productivity, Investing, Fundraising & VC

AI-Generated Summary

Key Takeaways

  • Index Fund Mechanics: Purchasing VOO (S&P 500 ETF) requires opening a brokerage account, transferring funds, typing the ticker symbol, entering dollar amount, and executing a market order—the entire process takes under two minutes for liquid funds with no special limit orders needed.
  • Risk Parity Construction: The withdrawal-optimized portfolio allocates 42% stocks (split between VUG growth and AVUV small-cap value), 26% bonds (VGIT intermediate and VGLT long-term), 16% gold (GLDM), 10% managed futures (DBMF), and 6% international stocks to reduce volatility and enable higher safe withdrawal rates.
  • Valuation Concerns: Current market metrics show Shiller PE ratio near 40 (close to all-time highs), price-to-sales ratio above historical 3.4 ceiling, and Buffett indicator over 200% (total market cap to GDP)—all suggesting extreme valuations compared to historical averages adjusted for inflation and earnings cycles.
  • Market Timing Rules: Scott's active portfolio triggers reallocation from bonds/value stocks into VOO when Shiller PE drops below 25 (first 25% move) or below 20 (full portfolio move), providing mechanical rules to avoid emotional decision-making during market volatility and potential crashes.

What It Covers

Scott Trench builds four $10,000 investment portfolios using different strategies on Public.com: 100% VOO index fund, 60/40 stock-bond allocation, risk parity portfolio, and an actively managed value-focused portfolio designed to avoid overvalued markets.

Key Questions Answered

  • Index Fund Mechanics: Purchasing VOO (S&P 500 ETF) requires opening a brokerage account, transferring funds, typing the ticker symbol, entering dollar amount, and executing a market order—the entire process takes under two minutes for liquid funds with no special limit orders needed.
  • Risk Parity Construction: The withdrawal-optimized portfolio allocates 42% stocks (split between VUG growth and AVUV small-cap value), 26% bonds (VGIT intermediate and VGLT long-term), 16% gold (GLDM), 10% managed futures (DBMF), and 6% international stocks to reduce volatility and enable higher safe withdrawal rates.
  • Valuation Concerns: Current market metrics show Shiller PE ratio near 40 (close to all-time highs), price-to-sales ratio above historical 3.4 ceiling, and Buffett indicator over 200% (total market cap to GDP)—all suggesting extreme valuations compared to historical averages adjusted for inflation and earnings cycles.
  • Market Timing Rules: Scott's active portfolio triggers reallocation from bonds/value stocks into VOO when Shiller PE drops below 25 (first 25% move) or below 20 (full portfolio move), providing mechanical rules to avoid emotional decision-making during market volatility and potential crashes.

Notable Moment

Mindy's risk parity portfolio gained nearly $1,000 since July despite withdrawing $42 monthly (5% annual rate), with gold as the top performer at 17.5% gains—demonstrating how diversified uncorrelated assets can support withdrawals while maintaining principal growth.

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Episode Transcript

What if you could see exactly how different investment strategies perform side by side in real time with real money? That's exactly what we're doing in today's episode. Scott is going to build four separate investment accounts with completely different allocations in real time. Same starting amount, same time line, but four distinct portfolios that could produce dramatically different results. We'll track these portfolios over time and see which approach comes out ahead. Will the aggressive strategy win? Will the conservative play prove smarter? Or will something in the middle strike the perfect balance? This is a great episode to follow along on YouTube if you wanna see Scott share his screen to walk us through this step by step. Of course, you can also still follow along on audio too. Hello. Hello. Hello. And welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen. And with me as always is my experimental cohost, Scott Trent. Thanks, Thanks, Mindy. I'm excited to go public with my, investments decisions today here on the show. So I'm excited about this. I have set up four different brokerage accounts using public.com, who is a partner with BiggerPockets Money Now. We're so excited to be sponsored by public.com. And these four accounts are going to answer four questions. How do I invest in an index fund mechanically? How do I invest in a sixty forty stock bond fund? How do I build our risk parity portfolio? And specifically, I wanna compare the results of a risk parity portfolio. We already did this on a previous episode with, Frank Vasquez and Mindy. I wanna see how mine does investing now starting with $10,000 compared to Mindy's who got started in, July and how the timing differences work there. And then last, I'm gonna talk about a thesis for an actively managed ish portfolio that kind of explores the idea of, I don't really like the stock market right now. It's too expensive. That's too the price to earnings ratios, price to sell ratios, they're too high. What is an alternative that I can put my money into? So I'm not just sitting in cash and waiting for the market to collapse, but I am putting it into higher yielding or different asset classes. And when the time comes, my intention is to flip it back to the S and P 500 or a boring old fashioned index fund when certain ratios are hit. So that's what we're gonna explore, those four theses. And, I think it'll be fun to watch the long researched, well researched, well publicized best practices in investing. Just absolutely crush my actively managed portfolio here over the next couple of years. Let's do a quick disclaimer here. I am not a professional investor and not getting paid to promote any of these stocks. BiggerPockets money is sponsored by the brokerage firm public.com, and we do have a special promotional offer for BiggerPockets money listeners. But none of the stocks …

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Books, tools, and gear mentioned in this episode

SignalCast may earn commission on purchases via these links. As an Amazon Associate, SignalCast earns from qualifying purchases.

Tools

  • Sponsors include Monarch (monarch.com)
  • PublicRecommended
    Scott Trench builds four $10,000 investment portfolios using different strategies on Public.com

Products

  • by Vanguard

    26% bonds (VGIT intermediate and VGLT long-term)
  • VOORecommended

    by Vanguard

    Scott Trench builds four $10,000 investment portfolios using different strategies on Public.com: 100% VOO index fund
  • by Vanguard

    26% bonds (VGIT intermediate and VGLT long-term)
  • by Vanguard

    The withdrawal-optimized portfolio allocates 42% stocks (split between VUG growth and AVUV small-cap value)
  • by Vanguard

    The withdrawal-optimized portfolio allocates 42% stocks (split between VUG growth and AVUV small-cap value)
  • by SPDR

    16% gold (GLDM)
  • by Invesco

    10% managed futures (DBMF)

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