Warren Buffett once shared a simple strategy for novice investors, including his children and heirs: allocating 90% of his portfolio to index stocks and 10% to bonds.

While it sounds simple, this approach has proven effective and relevant to this day, including for investors in Indonesia who want to manage their long-term portfolios in a practical and hassle-free manner.

What is the 90/10 Investment Strategy?

The 90/10 investment strategy is an approach recommended by Warren Buffett for investors, especially beginners, who want to manage their portfolios simply and effectively.

Essentially, this strategy places 90% of funds in stock indexes, such as the S&P 500, to maximize long-term growth, while the remaining 10% is allocated to short-term government bonds as a safety cushion.

The philosophy behind this strategy is to balance the growth potential of equities with the stability of bonds, thus protecting investors from market fluctuations.

Its advantages lie in its simplicity, transparency, and ease of implementation, making it suitable even for those just starting out in investing.

Warren Buffett’s Rationale

The rationale behind the 90/10 investment strategy stems from Warren Buffett’s view of how most retail investors invest.

Buffett believes that it is difficult for most individual investors to consistently outperform the market or an index like the S&P 500.

Therefore, he recommends a passive approach by placing the majority of funds (90%) in low-cost index mutual funds or ETFs.

Meanwhile, 10% of the funds are allocated to short-term government bonds. The function of bonds here is not for significant growth, but rather to dampen volatility when the stock market experiences turmoil or sharp declines.

This way, the portfolio maintains a safety cushion and adequate liquidity.

Buffett’s philosophy emphasizes a long-term mindset, emphasizing that investing is not a get-rich-quick scheme, but rather an effort to maintain consistent growth over decades.

The 90/10 strategy allows investors to focus on growth through stocks while remaining protected by bonds, and does so in a simple, transparent, and easy-to-follow manner, even for beginners.

How the 90/10 Strategy Works

The 90/10 investment strategy follows a simple, yet effective, principle developed by Warren Buffett.

90% of funds are allocated to stock index funds, such as the S&P 500, which have a long-term historical track record of average returns of around 10% per year.

This allocation maximizes the portfolio’s growth potential through broad exposure to the stock market. Meanwhile, the remaining 10% of funds are placed in short-term government bonds.

The role of bonds here is to provide stability and liquidity, protecting the portfolio during stock market downturns or high volatility.

The 90/10 approach can also be applied in Indonesia. For stocks, investors can choose IDX30 or LQ45-based ETFs.

Meanwhile, for bonds, available options include retail Government Securities (SBN) such as ORI and SBR, or money market mutual funds.

In this way, the 90/10 strategy maintains Buffett’s philosophy of simplicity, transparency, and a focus on long-term growth while maintaining capital security.

Advantages of the 90/10 Strategy

The 90/10 strategy offers a simple yet effective investment approach, suitable for both beginner investors and those seeking long-term growth with controlled risk. Here are some of its advantages:

1. Long-Term Growth

Investing 90% of funds in a stock index such as the S&P 500 or a local ETF gives investors exposure to hundreds of large companies simultaneously.

This creates the potential for higher cumulative returns over the long term compared to other investment instruments.

2. Simple & Cost-Efficient

This strategy requires minimal transactions because it only requires periodic rebalancing, thus reducing management fees and trading costs that can typically reduce investment returns.

3. Minimal Diversification

A combination of index stocks and government bonds provides sufficient diversification to maintain a balanced portfolio without the need for complex instruments.

4. Reduces investor stress

With the majority of funds invested in a diversified stock index and a smaller portion in bonds, investors are better able to withstand emotional stress during market fluctuations because the portfolio has a liquidity reserve to cushion market volatility.

Risks & Limitations

While the 90/10 strategy has many advantages, investors need to understand its risks and limitations, including:

1. High exposure to stocks

With 90% of funds allocated to stocks, the portfolio is highly sensitive to market fluctuations. This strategy is more suitable for those with a high risk tolerance and prepared to face temporary declines in value.

2. Not suitable for the short term

This strategy is designed for long-term growth, so investors seeking quick profits may be frustrated by market volatility.

3. Different market conditions

The performance of indices like the S&P 500 in the United States is not always directly reflected in the Indonesian market, so the same results cannot be guaranteed.

4. Bond risk

A 10% allocation to short-term government bonds provides stability, but the yield is relatively low, especially during times of high inflation, limiting protection against stock market declines.

Is It Still Relevant in 2025?

The 90/10 strategy remains highly relevant in 2025, especially for beginner investors and those focused on long-term growth and wanting to avoid excessive stress from market fluctuations.

However, to better align with local conditions, investors can invest 90% of their funds in Indonesian stock ETFs and 10% in government bonds, such as retail government bonds (SBN).

Furthermore, portfolios can be enriched with additional diversification, such as digital gold, stablecoins, or blue-chip crypto assets, to increase exposure and potential returns without sacrificing the overall stability of the portfolio.

Example of Applying the 90/10 Strategy in Crypto

Warren Buffett’s 90/10 strategy can be adapted to a crypto portfolio using similar principles: 90% stable primary assets and 10% speculative assets.

1. 90%: Relatively Stable/Blue-chip Crypto Assets

Warren Buffett’s 90/10 strategy can actually be applied to the crypto world with simple adjustments.

For the remaining 90%, investors are advised to invest in relatively stable or blue-chip crypto assets such as Bitcoin (BTC) and Ethereum (ETH).

These two assets have large market capitalizations and widespread global adoption, with BTC known as “digital gold” and ETH as the “main DeFi ecosystem.”

By investing the majority of the portfolio here, investors can focus on long-term growth with relatively controlled risk.

2. 10%: Speculative/Emerging Assets

Meanwhile, the remaining 10% of funds can be allocated to speculative or emerging assets, for example, meme tokens like BONK, WIF, or DUPE, newly listed tokens like ANOA and CST, or niche altcoins in the AI, DeFi, or RWA sectors.

This portion has the potential for higher returns in the short term, but also carries greater risk.

With this small portion, investors still have the opportunity for additional profit without disrupting the stability of the main portfolio built from blue-chip assets.

90/10 Crypto Portfolio Simulation

Imagine you have Rp10,000,000 in capital for crypto investment. The majority, Rp9,000,000, or 90%, is invested in relatively stable crypto assets like Bitcoin and Ethereum, with equal portions of 50% each.

The remaining Rp1,000,000, or 10%, is allocated to more speculative tokens recently listed on Indodax, such as DUPE or ANOA, which will be listed soon.

With this strategy, if the 10% altcoin increases fivefold, your profit will be significant without jeopardizing your overall portfolio.

Conversely, if the altcoin suffers a total loss, the impact remains manageable because 90% of your capital remains secure in the primary asset. This strategy allows you to pursue high profit potential while maintaining overall capital stability.

Insight for Traders

The 90/10 principle is particularly relevant for crypto traders because the concept is easy to understand. 90% of funds are placed in relatively strong and stable crypto assets, such as Bitcoin (BTC) and Ethereum (ETH).

The remaining 10% is allocated to new or hyped tokens with the potential for significant returns.

This strategy allows you to maintain the opportunity for “big profits” without having to engage in excessive FOMO (Fear of Missing Out) in high-risk assets.

The key to this strategy is allocation discipline, ensuring that the 10% speculative portion doesn’t grow to 50% simply because of emotions or market hype.

This way, potential profits can still be pursued without sacrificing overall capital stability.

Conclusion

So, that was an interesting discussion about the 90/10 Investment Strategy: Warren Buffett’s Secret to Long-Term Profits. You can read more about it at the INDODAX Academy.

In conclusion, the 90/10 strategy is a classic Buffett approach: simple, cost-effective, effective, and suitable for the long term.

This strategy is suitable for investors who want to focus on growth while maintaining a risk cushion. For Indonesian investors, this strategy should be adapted to local instruments for optimal results.

By the way, besides broadening your investment horizons, you can also stay updated with the latest crypto news and monitor digital asset price movements directly on the INDODAX Market.

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FAQ

1.What is the 90/10 investment strategy?
Allocation 90% to index stocks, 10% to government bonds.

2.Why does Warren Buffett recommend this strategy?
Because most investors struggle to beat the market, a passive strategy is more effective.

3.Is it suitable for beginner investors?
It’s suitable because it’s simple and doesn’t require complex stock analysis.

4.Is this strategy safe?
Safer than investing entirely in stocks because it includes bonds, but still carries a high risk in bear markets.

5.How do I implement the 90/10 strategy in Indonesia?
Use index ETFs (IDX30, LQ45) + retail bonds or money market mutual funds.

6.Is it still relevant in 2025?
Relevant, but needs to be adjusted to local conditions and the investor’s risk profile.

Author: Boy