Building a "Safe Haven" Portfolio: Seeking Stability Amid Uncertainty

"True security is not relying on predicting the future, but designing a structure that can survive regardless of what the future holds." This is the core idea in the book "Safe Haven: Investing for Financial Storms."

Overextending risks may harm your wealth over time. At the same time, if you take on insufficient risks, it may also harm your wealth over time.

The author of this book is one of the famous hedge fund managers on Wall Street and a partner of the author of "The Black Swan." The investment company he founded is one of the few funds in the world that truly focuses on "tail risk hedging," achieving significant returns in both 2008 and 2020.

The core of this book is: how to build an investment portfolio that can still protect the principal during extreme events.

Introduction: We are approaching the next major turning point.

History does not repeat itself, but it often rhymes.

On this day in 2025, we find ourselves in a contradictory period: the stock market is reaching new highs, yet long-term bond yields are above 4.5%; the dollar is strong, but consumption is weak; AI is sparking capital frenzy, while the world faces fragmentation and the risk of war.

Israel and Iran have just concluded a round of drone conflicts; India and Pakistan are increasing troop deployments at the border; Russia's Black Sea Fleet has suffered strikes, and the Ukrainian Air Force has been authorized by the West to directly attack Russian territory; meanwhile, in the United States, Trump might regain power, and the era of tariffs + loose monetary policy may return.

1. The ultimate truth of wealth in chaotic times: it is not about earning the most, but about being able to withstand losses.

The author of "Safe Haven" has a unique position in the financial world. He is neither part of the long-term compounding camp like Buffett nor a speculator like Soros.

He focuses on one thing: designing a portfolio that can survive in a "black swan event."

This may sound mundane, but it is an extremely rare form of wisdom—especially in an era where everyone is talking about "growth", "innovation", and "AI". He presents a brutal yet truthful perspective in the book:

"What truly determines your financial destiny is not the average return rate, but whether you can avoid a moment of 'going to zero.'"

He proved with math and history: even if a portfolio achieves a 15% return every year, it can never recover if it encounters a -80% black swan event just once. There is no such thing as an absolute safe asset, only investment structures that can withstand losses.

It is not simply about holding "gold" or "bitcoin", but about building a composite structure that can survive in a storm.

The interruption of compound interest does not occur during the growth period, but during the disaster period.

2. Five Key Investment Principles in "Safe Haven"

In this book, the author not only criticizes the blind spots of traditional asset allocation but also proposes five very practical hedging strategies applicable in "extreme times":

1. Safe assets ≠ Low volatility assets

Many people mistakenly equate "stability" with "security."

In 2008, both gold and bonds experienced a decline, with the only increase being in long-term deep put options.

A true safe-haven asset is one that shows explosive growth during a systemic collapse. A real "safe haven" asset is one that rises when everything is going badly.

2. When a black swan event occurs, the power of "compound interest" will backfire on you

A loss of -50% requires a gain of +100% to break even. However, black swan events are often not -50%, but an instant drop to zero.

His conclusion is simple: one cannot rely on gambling to survive; survival must be ensured through structural design.

"The compounding effect is the most destructive force in the universe." (This stands in stark contrast to Buffett's views)

3. Don't predict the future, but prepare for the "worst-case scenario"

"You can't predict. You can only prepare."

"Prediction" is an illusion for most investors; preparation is the true way to control risk.

You cannot predict war, financial crises, or regime changes—but you can allocate assets to ensure they "do not perish" in any outcome.

4. Convex yield structure is the true hedging tool

The characteristics of a convex yield structure are:

• Normally, a slight loss or break-even

• During extreme events, it can double or even increase by dozens of times.

For example: VIX long position, SPX deep put, gold forward call, USD/sovereign asset hedge position

5. "Geographic Diversification + Custodial Diversification" is a matter of life and death

Where your assets are held, who is managing them, and whether you can control them—these factors are more important than you might think—your geographical location determines whether your assets truly belong to you when a crisis arises.

Do not host in just one country, do not rely solely on banks for custody, and certainly do not invest everything in systemic assets (such as local currency, domestic stocks, or local real estate). Insurance mechanisms often fail during turbulent times.

In addition, the self-custody and convenience of cryptocurrencies are also options worth considering.

3. What is a "Hedging Investment Portfolio" Structure

The suggested structure by the author is:

• 90-95%: Low-risk, stable interest-bearing assets (such as short-term U.S. Treasury bonds, cash, high-dividend stocks)

• 5-10%: High leverage "tail hedge" positions (such as long VIX, SPX put options, gold/bitcoin backup)

For example in the book:

• 80% invested in the S&P 500 index, 20% invested in gold

• 50% invested in the S&P 500 index, 50% invested in trend-following CTA

• 66% invested in the S&P 500 index, 34% invested in long-term government bonds

• 85% invested in the S&P 500 index, 15% invested in Swiss Franc

This structure yields modest returns during normal periods but performs exceptionally well during black swan events (for example: during the pandemic stock market crash in March 2020, a certain fund rose by 4000%).

"The net investment portfolio effect - or the cost-effectiveness of hedging assets - depends on how many hedging assets are needed to achieve a specific level of risk mitigation."

4. The "Black Swan Survival Portfolio" prepared for 2025: practical operation suggestions

Given the current risk environment, a possible "layered asset structure" is as follows:

Level 0: Healthy Body

Maintain good health, avoid chronic diseases, keep moderate body fat, develop a habit of exercising, and cultivate flexible physical fitness; learn to drive various means of transportation and master cooking skills.

Layer 1: Anti-systemic risk assets (self-custodied assets)

Used to save lives in case of a complete system crash.

• Physical gold (preferably coins): 5-10%, not dependent on government recognition, can be used in emergencies
• Cryptocurrency (cold wallet storage): 5-10%, digital gold, globally portable but with regulatory risks
• Overseas land/passport: 5-10%, can be re-established on landing if necessary, change identity

Level 2: Tail Risk Hedge Position (High Leverage Hedge Assets)

Used to significantly increase value during black swan events, replenishing the investment portfolio.

• S&P 500 deep put options: 1-2%, long-term options, maximum alpha source
• VIX Bullish: 1-3%, has high explosive power when market volatility surges
• Gold Call Options: 1-2%, increase in cases of severe inflation or war

Layer 3: Liquidity + Growth Assets (Normal Income Source)

Stable living and cash flow for normal economic periods.

• Short-term US Treasury ETF / Government Bond Money Market Fund: 20-30%, safe and stable, ensuring liquidity
• Diversified global high-dividend stocks: 20-30%, sources of income, reduce single-country risk
• Emerging market real estate + USD-denominated REITs: 5-10%, diversified cash flow

"In investing, a good defense can lead to a good offense."

V. Conclusion: Everything can collapse, but you don't have to collapse along with it.

What "Safe Haven" truly wants to convey is:

You cannot stop wars, crashes, or revolutions — but you can design an asset structure in advance that will never go to zero under any circumstances.