Right now, US Vice President Pence and Iran’s top negotiator are flying out to Geneva, Switzerland. In the midst of this, Trump and the Iranian government are locked in a fierce media war, both claiming they will start collecting transit fees in the Strait of Hormuz in 60 days. Trump argues that since the US provides the military presence to keep the strait safe, Uncle Sam should be the one taking the toll.
From where Asian countries sit, this is completely absurd. Japan, South Korea, and China all rely heavily on crude oil imported from Iran, the UAE, and Saudi Arabia. If someone starts slapping a toll on those waters, the cost of imported oil goes up, which inevitably triggers long-term inflation.
To fight off this inflation, Asian central banks will eventually have no choice but to hike their government bond yields. In fact, Japan has already bumped its JGB yield from 0% up to 1%. For years, global hedge funds have loved borrowing Yen at 0% interest to dump that cheap cash into global markets and emerging economies—the classic Yen Carry Trade. Now that Japanese yields are touching 1%, there's a real risk of a carry trade unwind. Hedge funds might start panic-selling emerging market equities and US tech stocks all at once just to pay back their Yen-denominated loans.
Fortunately, analysts think the scale of this current Yen carry trade isn't massive enough to completely break the global stock market this time around.
<What Does Compounding Actually Mean for a Retirement Portfolio?>
Since it's the weekend and the US stock market is closed, I wanted to take some time to look into the magic of compounding assets. When you're managing a retirement portfolio aiming for a steady 10% annual return, two things matter most: keeping volatility low and avoiding a single negative year.
The easiest way to ensure your retirement returns never drop below zero is to pick up SGOV (iShares 0-3 Month Treasury Bond ETF). With short-term US interest rates being as high as they are right now, it pays about a 3.3% yield. Every month on the 1st, SGOV drops that monthly distribution straight into your brokerage account, net of taxes.
You can let this cash pile up and use it to buy your core target assets, whether that's VTI, QQQ, MAGS, VXUS, SGOV, BND, or IAUM.
To put it into perspective, if you hold about $10,000 worth of SGOV, you get roughly $27.50 a month ($10,000 x 3.3% / 12). After accounting for a standard 15.4% withholding tax, you're left with around $23.23 hitting your account.
Sure, $23.23 isn't enough to buy a full share of VTI or QQQ, but you can easily use fractional shares to plow that money right back into the market.
<Can My Retirement Portfolio Beat Inflation?>
If you look at historical backtests, the US average inflation rate over the past 50 years hovers around 3.45%. Let's just call it 3.5% for simplicity. Since SGOV pays about 3.3% right now, it actually lags behind inflation. That means the real purchasing power of your cash is technically shrinking.
To protect your wealth from being eaten away by inflation, you absolutely need upward-trending growth assets. Even if you just buy and hold VTI for the long haul, it has grown at an average of 6% per year in USD terms over the past half-century. If you convert that to Korean Won, the return jumps to around 8-10% due to currency dynamics. If you want to spice things up with aggressive assets like MAGS or QQQ, their 20-year average return sits around 15%—though you have to brace yourself for massive drawdowns of up to -80% during brutal market crashes.
<How Do You Survive a Dot-Com Style Crash?>
After the dot-com bubble burst, QQQ collapsed by a staggering -83%. Even if you were dollar-cost averaging (DCA) every single month, it took 3 years and 6 months just to get back to even. This is exactly why the Bogleheads community—a massive US retirement investor network—advises staying away from heavily concentrated sector ETFs like QQQ. Instead, they champion broad-market, well-diversified assets like VTI and advise holding them tightly for 30 to 50 years.
The classic Boglehead 3-Fund Strategy looks like this:
VTI: 30%
VXUS: 30%
BND: 40%
According to them, these three ETFs are all you really need.
<Did the 3-Fund Strategy Hold Up During the Pandemic Bond Crash?>
During the COVID crisis, the US government printed an infinite amount of debt and even started buying up private corporate bonds, which sent Treasury prices into a tailspin. BND—which holds over 20,000 short-to-medium-term US Treasuries and high-grade corporate bonds—wasn't immune and saw its price drop.
However, looking closely at various backtests, I found a clear insight: sticking to your 3-fund target allocations and consistently investing every month—even when bonds are bleeding—is the ultimate way to keep your retirement portfolio grinding higher over time.
In Ray Dalio's books analyzing over a century of European and American economic history, one major takeaway is that gold plays a massive role in preserving wealth when empires begin to fracture. When you backtest the All-Weather portfolio over the last 50 years, the returns come out to around 4%. It’s an incredible shield against inflation, but if you actually want your wealth to grow, you need to outpace that 3.5% average inflation by at least 2-3%.
Warren Buffett famously noted in his will that after he passes, his trustee should put 90% of the cash in an S&P 500 index fund (like VOO) for his wife. While he suggested short-term bonds for the remaining 10%, adding a bit of GOLD (like IAUM) to that mix smoothens out your equity curve beautifully. Lately, I've found myself preferring a simple setup: 90% in an S&P 500 fund and 10% in Gold.
In the short term (say, 2 to 3 years), a combo like VOO + IAUM might feel painfully boring and look like a drag on your performance. But if you’re like me—someone who mechanically buys the plan and prefers spending weekends writing blog posts or working on a side hustle—a dead-simple portfolio is your biggest advantage.
<What If Your Active Income Is Massively High?>
Look, if you're a regular 9-to-5 corporate worker, your salary isn't going to skyrocket overnight. That’s why consistent, smart investing is non-negotiable. If you run your own business or own a corporation, you can reinvest your massive profits to build economies of scale. But for a salaryman, that monthly paycheck is the only liferaft. We don't own the company, and we don't have equity. Our only option is to take that hard-earned cash and systematically stack it into assets that grind upwards forever.
