As long-time investors, we all understand the importance of diversification when it comes to growing wealth. Bear markets and corrections are inevitable, which is why putting everything into a single asset class is not wise. But what about applying that same principle to our identities? What if “Identity Diversification” could help grow not just our lifestyle, but also our opportunities and wealth?

It’s not something I had ever really thought about, nor have I seen much written about it. But becoming a father, and seeing my children’s birth certificates, forced me to consider their identities and what they might mean for their futures.

Merit will always be the most important factor in getting ahead. While working on Wall Street, we mostly ate what we killed. And with Financial Samurai, there was always a strong correlation with effort and growth until AI came along.

In recent years, it’s become clear that identity matters too. If you’re fortunate enough to come from a multicultural background—as most people do today—leaning into identity diversification can be a powerful advantage for both survival and success.

Neglecting My Hawaiian Ancestry For Too Long

It wasn’t until I became a father—and especially after living through the pandemic—that I realized just how much I had neglected my Hawaiian roots. My mother is from Taiwan, and because I lived there for four years, minored in Mandarin, studied abroad in China, and later worked in Asian equities, my personal identity has long been rooted in my Taiwanese heritage.

My love for language and culture even led us to enroll our children in a Mandarin immersion school. There’s something magical about dreaming in another language. Once you become fluent enough, it’s like living in two different worlds, which feels like a small life-extension hack as you grow older.

Ironically, the only two skills from college I still actively use are Mandarin and negotiation. Everything else, such as all the elements in the periodical table, has largely faded into the background.

Why I’m Refocusing on Hawaiian Ancestry

The birth of our son in 2017 made me think more deeply about our family’s mix of cultures. Although we simply see him as our son, he carries a diverse heritage—my wife is German, Irish, and Japanese.

On my father’s side, my great-grandmother was 100% Native Hawaiian. That makes my grandmother half, my father 25%, me 12.5%, and my children 6.25%. I’ve been traveling to Hawaii since I was born in 1977 and have absorbed some of the culture, but never immersed myself in it the way I did with Chinese culture.

Part of the reason is that no one encouraged me to attend Hawaiian school. Another is that my parents were in the foreign service, so we moved every two to four years and never spent more than a few months at a time in Hawaii each year. We were immersed in Zambian, Japanese, Taiwanese, and Filipino culture for 13 years.

By the time I came to America for high school in 1991, I didn’t feel that 12.5% gave me the right to identify as Hawaiian. I held a subjective belief that you needed at least 50% to claim a particular race.

Then, in 2018, something opened my eyes.

Elizabeth Warren and the Question of Ancestry

In October 2018, after years of criticism for identifying as Native American in her law career, Senator Elizabeth Warren released a DNA test conducted by Stanford geneticist Carlos Bustamante. The analysis showed evidence of a Native American ancestor six to ten generations back—roughly 1/64 to 1/1024 Native American, or about 0.1% to 1.6%.

Warren said the results confirmed her family stories but acknowledged that DNA alone doesn’t confer tribal citizenship, later apologizing to Cherokee Nation leaders. Her supporters saw the test as validation of her being listed as a “minority law teacher” in law school directories from the late 1980s through the mid-1990s, and of her identifying as “American Indian” on a 1986 Texas State Bar registration card.

As a minority myself who struggled to get promoted to MD at work, I was frustrated. Never in a million years would I claim to be Native American if a DNA test showed just 0.1% to 1.6% ancestry. That’s the kind of fun fact you might casually drop at a party, not something you’d put on official forms. On every form I’ve ever filled out, I’ve simply checked “Asian.”

Most Of The Country Is OK With It

Yet, at least half the country seemed fine with Senator Warren’s claim. After all, she’s still a Senator today. It wasn’t considered a problem that a white woman could identify as one of the rarest minorities in America and potentially benefit from it. Suddenly, my long-held personal belief that you needed at least 50% ancestry to legitimately claim a race was challenged. Apparently, even 0.1% could be enough.

To me, the only opinions that truly matter are those of Native Americans themselves. Still, as a rational observer, and as a father who wants to ensure my children are treated fairly, I couldn’t ignore what this meant. The widespread acceptance of Warren’s actions made me start rethinking my own children’s identities, and it planted the seed of what I now call Identity Diversification.

DEI on Full Throttle, But Not for Asians

After George Floyd’s death in 2020, diversity, equity, and inclusion (DEI) initiatives gained tremendous momentum in schools and workplaces. I support DEI to a point, because diverse perspectives can spark better conversations and solutions. Just look at the comments section on Financial Samurai, hooray! The more we can understand different perspectives, the better.

I’m especially passionate about advocating for people with disabilities, who make up about 15% of the world’s population and deserve greater accommodations. Let’s all do more to help the most important minority that spans all races.

But from 2020 to 2023, the DEI movement often felt exclusionary toward Asian Americans, despite Asians making up less than 7% of the U.S. population. Not only were we frequently left out, but sometimes vilified and even attacked during the pandemic.

This climate motivated me to become more public when my book Buy This, Not That came out in July 2022. I wanted to show support for the Asian American community during a difficult time and spread some positivity. After all, since starting my site in 2009, over 100 million people have visited, and countless readers have improved their finances partially as a result.

Then, on June 29, 2023, the Supreme Court struck down race-based affirmative action in college admissions, including at Harvard and UNC. Court filings revealed that Asian American applicants, on average, needed significantly higher test scores than students of other races to gain admission.

To offset this disparity, Harvard relied heavily on a subjective “personality rating,” which was often used to justify rejecting many qualified Asian applicants. Such BS. This was the moment where it seemed like the DEI tide began receding.

Teaching My Kids About Their Hawaiian Roots

Between Warren’s example—showing that even a fraction of ancestry can “count,” with half the U.S. population agreeing—and the mixed results of the DEI movement, I realized it was time to teach my children about their Hawaiian heritage.

It’s a too late for me. At 48, long finished with school and having left the traditional workforce in 2012, my path is already set. But it’s not too late for them. They’re part Hawaiian by blood, and I believe it’s essential they learn the language, understand the history, and embrace the culture. At just 5 and 8 years old, they still have plenty of time.

So we enrolled them in a five-week summer program in Honolulu with Hawaiian class as part of the curriculum. The experience was enriching, and our plan is to return every summer and winter until they graduate high school. My hope is that they not only immerse themselves in Hawaiian culture, but also find meaningful ways to give back to the community.

For example, Jack Johnson, the singer who was born and raised on Oahu, has done an incredible job promoting environmental education and conservation on the islands. Although he isn’t Hawaiian by blood, he’s Hawaiian through and through in how he gives back to the community. Elizabeth Warren, on the other hand, doesn’t seem to have done anything for the Cherokees except assume their race.

Identity Diversification Helps You Blend In With The Times

Identity diversification may be even more important than investment diversification because it directly affects opportunity. If you can’t get into a good school or land a good job due to your identity, you won’t even have the chance to aggressively save and invest for the future. It’s unfair to be judged or discriminated against for who you are, but that’s a reality in today’s culture. The best we can do is recognize this truth and find ways to adapt.

Let’s look at some examples of how identity diversification can help you survive and thrive.

1) New President Of The United States

Let’s say you’re half Asian, and an Asian American becomes the next President of the United States. Chances are there will be more Asian American cabinet members, ambassadors, and senior officials. Despite historically ignoring Asians before, the media will likely elevate coverage of Asian Americans. You could strategically lean into your Asian heritage.

Like it or not, people tend to take care of those who share similar backgrounds, which is partly why minorities often face an uphill climb. Just look at your company’s executive leadership, your school’s senior administrators, the committee that votes on awards, or even your recreational sports league.

Even in incredibly diverse cities like San Francisco or New York, leadership circles often show surprising homogeneity. It’s not blatant discrimination, that’s simply how human nature works.

2) New CEO At Your Company

Now imagine your company’s new CEO is Tongan, and you discover you have 5% Tongan ancestry. Thanks to identity diversification, you suddenly take your first trip to Tonga, learn a bit of the language, immerse yourself in the culture, and bring up the Tongan rugby team in casual conversation with the CEO.

Given how rare a Tongan CEO is in America, you’d almost certainly forge a stronger personal connection than colleagues without that cultural link.

3) New Mayor in Town

Imagine your new mayor is Jewish and even attended the same private high school you did. You’re 6.25% Jewish and share that connection.

At the next mayoral fundraiser, you could ask him what he and his family did for Yom Kippur, then mention your own observance. After reminding him of your donation, you highlight your company’s experience with a city housing project you’re bidding on. Who knows. When it’s time to award the contract, the mayor might give you the nod for building such a strong personal connection.

Goodness knows our old San Francisco mayor handed out plenty of favors to friends and family. But some considered this government graft, which is partly why she lost her re-election campaign.

4) The Strong Return Of DEI

And if the DEI movement gains momentum again? Even if you are part of the majority, you might take a page from Senator Warren’s playbook and emphasize your sliver of ethnic heritage – say 0.1% to 1.6% – to improve your chances of getting into school, landing a job, winning an award, or securing a deal in an environment where identity carries extra weight.

Merit will always matter most in getting aead. But at the margin, belonging to a highly sought-after group – whatever it happens to be at the time – could tilt the odds slightly in your favor. At the very least, your identity could decide a tie-breaker in this ultra-competitive world.

The more identities you can authentically tap into, the more adaptable you become. Identity diversification allows you to align yourself with whichever group is in power, making it easier to navigate an uncertain future.

Time To Learn More About Who You Are

Getting ahead takes hard work, intelligence, and luck. But we also know that people naturally gravitate toward those who share similar backgrounds. That’s why it’s worth making the effort to understand your ethnicity and heritage more deeply.

Even if you feel it’s too late for you, it’s certainly not too late for your children. They are the ones who will have to navigate an increasingly complex and competitive world.

Unless you plan to be a solopreneur, don’t be naive in thinking merit alone will take you to the promised land. Learn how to build relationships and blend in with the powers that be. Some may call this “playing corporate politics” or “being a chameleon.” I see it as a natural strategy for survival.

What do you think? Do you believe identity diversification is a smart way to get ahead, or is it gaming the system? Have you ever benefited—or been held back—because of your identity? Should people highlight even tiny percentages of their ancestry, or should there be a threshold for claiming a heritage? And finally, how much weight should identity carry compared to merit in shaping success?

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After turning in two straight years of triple-digit returns in 2023 and 2024, Bitcoin (BTC 2.27%) is on track in 2025 for its weakest performance since 2022. The world’s most popular cryptocurrency is down 6% over the past 30 days, and is only up 20% for the year as I write this.

So what’s going on? There are three possible reasons why Bitcoin is pulling back.

Reason No. 1: Overall macroeconomic weakness

For much of its history, Bitcoin has been uncorrelated with any major asset class. It could zig when other assets zagged. That made Bitcoin particularly attractive to investors. In just about any market conditions, Bitcoin could offer the potential for sky-high returns.

But that may no longer be the case. In many ways, Bitcoin may be much more susceptible to overall macroeconomic conditions than once thought. In other words, Bitcoin will face much stiffer headwinds if jobs growth slows, if inflation further rears its head, or if tariffs lead to weaker overall growth. And that’s exactly what appears to be happening right now.

Bitcoin’s pullback makes sense if you consider how much attention it now garners from institutional investors. Just a few years ago, retail investors were driving the pace of Bitcoin adoption. But now it’s deep-pocketed institutional investors, and that likely explains the crypto market’s current obsession with potential Fed rate cuts. 

Reason No. 2: Investors are diversifying into other crypto assets

While Bitcoin still accounts for nearly 60% of the entire market cap of the crypto market, it’s hard to ignore how much interest other niches of the crypto market are now attracting from investors. At one time, Bitcoin was the only game in town for institutional investors. But not any longer.

Take, for example, the rise of so-called digital asset treasury companies. These companies do only one thing: Raise money from outside investors, and then plow that money back into one specific crypto asset. This summer has already seen the appearance of Ethereum, Solana, and XRP treasury companies. All of that is money that could have flowed into Bitcoin.

Or, for example, take the sudden interest in stablecoins. Recently enacted legislation will likely lead to a boom in stablecoin investment. According to a recent report from Citigroup, the size of the stablecoin market could balloon to $3.7 trillion within just a few years. This, too, is money that could have gone into Bitcoin.

This diversification away from Bitcoin into other crypto assets is not a new phenomenon. This is the same pattern, in fact, that the crypto market saw during the previous bull market rally of 2020-21. Bitcoin surged first, followed by Ethereum, and then lower market cap altcoins. Finally, there was an explosion of speculative excess into meme coins and non-fungible tokens (NFTs).

Reason No. 3: The Bitcoin cycle is running its course

That leads us to potentially the most concerning reason for Bitcoin’s pullback: The four-year Bitcoin cycle is running to where it usually drops. If you’re a Bitcoin investor, that’s the last thing you want to hear, because it means Bitcoin’s recent pullback may be a portent of things to come later in 2025.

There are no guarantees in investing, but if history is any guide, the Bitcoin halving every four years is the catalyst for a massive run-up in price. So far there have been four halvings, and the post-halving period of price appreciation typically has lasted anywhere from 12 to 18 months, followed by a classic “blow-off top”– a steep, rapid rise followed by a steep, rapid drop. In that scenario, Bitcoin reaches a new high all-time high before eventually collapsing in value. In 2022, for example, Bitcoin declined by a gut-wrenching 64% after hitting a new all-time high in November 2021 following the May 2020 halving.

The problem, quite frankly, is that Bitcoin’s most recent halving event took place in April 2024. That means we are now 17 months into the period of expected to be rapid price appreciation. In a worst-case scenario, there might only be a few months left before Bitcoin has another blow-off top, and the whole cycle begins anew.

Certainly, there are plenty of signs of this blow-off top in progress. Billions of dollars are being invested in highly speculative digital assets, money-losing businesses are rapidly transforming into digital asset treasury companies, new crypto companies are rushing to go public before the crypto IPO window closes, and Wall Street is rushing to reassure investors that “this time it’s different.”

So, if you are thinking of investing in Bitcoin now, remember to do your due diligence and keep your investment small. There are several very concerning signs that Bitcoin’s summer pullback might be a red flag for a difficult and tumultuous final quarter of the year.

Citigroup is an advertising partner of Motley Fool Money. Dominic Basulto has positions in Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.

Ever since I left my day job in 2012, I’ve used a form of the dumbbell investing strategy to grow my wealth while protecting against large losses. It’s a framework that’s helped me stay invested during uncertain times—especially when I felt the urge to hoard cash or sit on the sidelines.

If you’re in a situation where you know you should take some risk, but you’re also worried about losing money, the dumbbell investing strategy is worth considering.

What Is the Dumbbell Investing Strategy?

The dumbbell investing strategy involves allocating a roughly equal portion of your investable assets into high-risk, high-reward investments on one end, and low-risk, capital-preserving investments on the other.

If you’re operating with a 50/50 risk split—like I suggest in my post about when to stop taking excess risk—you’re already applying a version of the strategy. It’s especially useful when you’re uncertain about the macroeconomic environment or your personal financial situation.

Why I First Embraced the Dumbbell Strategy

The most uncertain times in my life were:

• Graduating from college without a written job offer in finance (came a month later while I was traveling in Japan)
• Leaving my career at 34 and wondering whether I had made a huge mistake betting on myself
• Becoming a father in 2017 and questioning whether our passive income was truly enough to keep up with inflation

Each time, I wanted to invest in my future and my family’s, but fear of loss made me hesitate. That’s why I turned to the dumbbell investing strategy after I retired and became a father. It gave me the psychological permission I needed to take action. Because the longer you sit on the sidelines avoiding risk, the more likely you are to fall behind.

Note: When I started working at Goldman Sachs in July 1999, I felt like I had won the lottery and decided to invest 100% of my savings into stocks. With strong income potential and modest expenses, going risk-on seemed appropriate. But I quickly received a rude awakening when the dot-com bubble began to burst on March 10, 2000. The NASDAQ would bottom on October 9, 2002, down 78%, and it wouldn’t fully recover until April 24, 2015—a long 15-year wait just to get back to even.

Why I’m Deploying the Dumbbell Strategy Again in 2025

Today, I’m more financially secure than in the past. But I’m also a lifelong investor, and right now the market gives me pause. Between tariffs, new legislation, stretched valuations, elevated interest rates, and AI hype cycles, I’m not rushing to load up on the S&P 500 at 22X forward earnings.

Still, I believe in dollar-cost averaging and that the market will be higher over time. But when uncertainty is high, the temptation to hoard cash increases. The problem? By the time certainty returns, the easy gains have often already been made.

Take the March–April 2025 tariff-induced selloff. If you waited for resolution, instead of buying the dip during the period of most uncertainty, you would’ve missed out on a 20%+ rebound. The best returns tend to go to those who act when others are frozen.

This is why, rather than stop investing, I’m leaning on the dumbbell strategy again.

The Conservative End of My Dumbbell

As the person responsible for our family’s financial well-being, I feel constant pressure to deliver a good-enough lifestyle, if not a great lifestyle. Every dollar saved or invested in risk-free income is a step closer to peace of mind.

My ultimate goal is to generate $380,000 in gross passive income a year, up from about $320,000 currently. That $60,000 gap is what I’m methodically trying to close by the end of 2027. Once achieved, I will deem us financially independent once more.

With Treasury yields still above 4%, I saw an opportunity to lock in solid returns with no risk. So I deployed capital into a mix of short-term and longer-duration government bonds.

On one end of my dumbbell, I purchased:

• $100,993.74 in 3-month Treasury bills yielding ~4.4%
• These will mature soon, and I’ll continue to roll them into similar duration or longer-term bonds, depending on interest rate trends

Over the next 12 months, this position alone will generate roughly $4,400 in risk-free passive income, reducing my annual deficit to about $53,600. Passive income progress feels wonderful!

The Aggressive End Of My Dumbbell

Now that I’ve shored up the conservative end of my dumbbell investing strategy, it’s time to swing to the aggressive side.

I could simply invest another $100,000 into the S&P 500, which I normally allocate around 70% of my public equity exposure to. But the S&P 500 feels expensive today, and I’m already heavily invested. Instead, I want to put capital toward what I’m both most interested in—and most concerned about: artificial intelligence.

AI is already disrupting the job market, and my biggest worry is that it will make spending a fortune on college an increasingly poor financial decision. Entry-level jobs are at the highest risk of being automated or eliminated. As a parent of two young children (8 and 5), this concern weighs heavily on my mind.

To hedge against a potentially difficult employment future for them, I feel it’s imperative to invest in the very technology that might harm their prospects. Ideally, they’ll learn how to harness AI to boost their productivity, or even join an AI company and build wealth of their own. But those outcomes are uncertain.

What I can do now is invest directly in the AI revolution on their behalf.

Investing In Artificial Intelligence

As a result, I’ve invested another $100,000 in Fundrise Venture, which holds positions in leading AI companies such as OpenAI, Anthropic, Databricks, and Anduril. If AI ends up eating the world, I want to make sure they have a seat at the table—at least financially. I’m also investing additional capital through closed-end venture capital funds as they call capital.

My hope is that owning a basket of private AI companies will compound at a much faster rate than the S&P 500, given these companies are growing much faster. But of course, there are no guarantees.

The Dumbbell Investment Strategy Is Best for Deploying New Cash

The dumbbell investing strategy made it easy for me to reinvest a little over $200,000 in cash from my home sale. Allocating $100,000 into T-bills gives me peace of mind that, no matter how bad the economy or markets get, at least half of my investment is completely safe and earning risk-free interest.

Meanwhile, if AI mania continues, I have $100,000 positioned to ride the wave higher. Both allocations make me feel good—and how you feel about your investments matters. The more confident you are, the more likely you’ll stay invested and keep building wealth by investing more regularly. That’s why, if I receive another influx of cash or want to redeploy existing funds, I’ll likely continue growing this dumbbell strategy.

The dumbbell approach works best when you have new money to invest or idle cash sitting around during uncertain times. However, rebalancing an existing portfolio into a 50/50 split between risk-free and risk assets is a different matter. Your broader asset allocation should reflect your age and stage in life. A 50/50 allocation might be appropriate, but large rebalancing moves can trigger tax consequences you must consider carefully.

Example Of Using The Dumbbell Strategy To Get To An Ideal Overall Net Worth Allocation

For example, suppose I already have a $1 million investment portfolio and inherit $200,000 in cash, bringing my net worth to $1.2 million. At 38 years old with 15 more years of planned work ahead, I’m comfortable taking more risk. I’d be fine investing 90% of my net worth ($1,080,000) in risk assets and starting a side business to pursue growth opportunities.

If my original portfolio consisted of $980,000 in risk assets and $20,000 in cash and bonds, I could easily apply the dumbbell strategy by allocating $100,000 of the new cash to municipal bonds and $100,000 to stocks. This would bring my total to $1,080,000 (90%) in risk assets and $120,000 (10%) in risk-free investments—perfectly aligning with my ideal 90/10 allocation.

A Simple Investing Framework for Peace of Mind and Growth

The dumbbell investing strategy offers a clear and practical way to deploy new cash, especially during times of uncertainty. By allocating capital to both low-risk and high-risk assets, you gain the emotional reassurance of safety while maintaining exposure to upside potential. It’s a flexible approach that can be tailored to your financial goals, risk tolerance, and stage in life.

Whether you’re investing an inheritance, reallocating proceeds from a home sale, or simply sitting on excess cash, the dumbbell strategy provides structure without sacrificing opportunity. Best of all, it helps you stay motivated and confident—two essential ingredients for long-term investing success.

So the next time you find yourself with idle cash and decision paralysis, consider the dumbbell approach. You just might sleep better at night while still building wealth during the day.

Readers, have you ever considered using the dumbbell investing strategy during times of uncertainty? What potential flaws or additional benefits do you see with this approach? I’d love to hear your thoughts.

Balance Risk and Reward With a Free Financial Check-Up

If you’re sitting on new cash or reevaluating your portfolio during uncertain times, a second opinion can make all the difference. One smart move is to get a free financial check-up from a seasoned Empower financial advisor.

Whether you have $100,000 or more in taxable accounts, savings, IRAs, or a 401(k), an Empower advisor can help you spot hidden fees, unbalanced allocations, or overlooked opportunities to improve your risk-adjusted returns. It’s a no-obligation way to stress-test your current strategy—whether you’re building a dumbbell portfolio or considering a full rebalance.

Clarity brings confidence. And when it comes to investing, confidence helps you stay the course.

The statement is provided to you by Financial Samurai (“Promoter”) who has entered into a written referral agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.

Diversify Beyond Stocks and Bonds

A classic dumbbell strategy includes bonds and equities—but don’t forget about real estate. I like to treat real estate as a hybrid: it offers the income stability of bonds with the potential appreciation of stocks.

I’ve invested over $400,000 with Fundrise, a platform that allows you to passively invest in diversified portfolios of residential and industrial properties—many in the high-growth Sunbelt region. With over $3 billion in assets under management and a low $10 minimum, Fundrise has been a core part of my investment strategy, especially when I’ve had cash to redeploy.

Fundrise also offers Venture, giving you access to private AI companies like OpenAI, Anthropic, and Databricks. As mentioned earlier, I’m heavily focused on AI’s transformative potential and want exposure not just for returns—but for my kids’ future too.

With a dumbbell strategy, it’s not just about balance—it’s about positioning yourself for both security and growth. Fundrise is a long-time sponsor of Financial Samurai as our investment philosophies are aligned.

To increase your chances of achieving financial independence, join 60,000+ readers and subscribe to my free Financial Samurai newsletter here. Financial Samurai began in 2009 and is the leading independently-owned personal finance site today. Everything is written based off firsthand experience.