Investment rules that have worked for decades no longer seem to apply in current conditions.

That’s because the multi-decade trend of rapid economic growth in western countries - and the associated rise in asset prices – seems to be tapering off.

Certainly since the global financial crisis the markets have been marked by severe volatility and my feeling is that this is a pattern that may last for years.

Therefore, the ‘buy and hold’ strategies of the past are going to be much less effective.

Another strategy that may no longer generate healthy returns is the popular rule of thumb that you should subtract your age from 100 and the balance is the percentage of your total portfolio that is

invested long-term in shares.

For example, the theory had it that someone aged 30 should have 70% of their portfolio in shares, while some aged 70 should aim for 30%.

US market commentator Tom Dyson believes both equities and bonds are going to under perform for years to come and the best strategy investors can implement now is to create a “barbell” portfolio.
In this strategy, the two "bells" generate the returns, while the "bar" keeps most of your money safe. With this strategy, 20% of your investments generate 80% of your return... and the rest gets invested in the safest place you can find, such as cash.

Financial author and hedge-fund manager Nassim Taleb (inventor of the influential “Black Swan” strategy that stresses the unpredictability of significant and potentially disruptive events) uses this strategy. He keep 95% of his hedge fund's money in Treasury bills and invests 5% of his fund in high-risk option strategies. If the Treasuries generate 1% and the options generate 100%, the total performance of the portfolio is just under 6%.

To construct a barbell portfolio, first build your bar.

This bar should be composed of extremely safe investments held outside the financial system.

“Own a modest house, without any debt. This is your personal property. Keep a stash of gold and silver bullion. Keep six months worth of expenses in cash.” He also advocates investing heavily in government bonds, both locally and internationally.

The "bar" won't pay you any significant income, but it will keep the bulk of your wealth 100% safe. The "bells" generate the income.

He suggests one bell runs strategies that profit from declining markets. The other bell invests in safe, high-income opportunities.

The key is, these investments must be able to generate income safely in an uncertain environment.

Once you are comfortable with the strategy, you can adjust your barbell, with the appropriate balance between trading, income, and defense.

In general, those with more working years ahead of them should keep their bar shorter and the bells heavier.