If you’re someone who has read a number of personal finance blogs, you’ve likely run across plenty of penny pinching bloggers living in penury to claw their way out of debt or invest as much money as they can.

That was me for two full decades: tighter than bark to a tree.

I began investing when I was nineteen. I paid for my own college expenses, and I stacked my investment account at every possible opportunity.

I built a million dollar investment account by the time I was 38 years old, on a school teacher’s salary.

Today, I can afford to relax. I’m no longer especially frugal.

If you’re interested in how my money is invested (and how I’ll keep investing it) please read on:

1. I used to invest in stocks and index funds. But I recently sold my stocks, added to my indexed holdings, and I won’t ever switch back to stocks. You can read about the day I did it here:

2. I don’t know where I’m going to retire. My wife and I are “people of the world”—or so we like to think. For that reason, I don’t have a huge lean towards one financial market over another. I believe that you should have the bulk of your investments in the market representing the currency you’ll be paying your future bills in. I have no idea where my wife and I will end up. So our portfolio is globally represented (with a slight lean towards my home country, Canada).

My investment account has only three index funds in it. Here’s the composition:

  • 40% Short Term Canadian bond market index
  • 30% U.S. Stock Market Index
  • 30% International Stock Market Index

3. Over the past decade especially, I have made very significant profits by rebalancing my account. I don’t wait for a specific time of year to do it. I just purchase the lagging index every month. If one of my indexes has underperformed the other during a given month, that’s the index I put fresh money into. I used to initiate this rebalancing with individual stocks, bond indexes and stock indexes. But now—as mentioned—my account is comprised solely of the three index funds above.

4. I love falling stock markets. Only retirees or people hoping to retire within the next five years should hope for rising stock markets. For the rest of us, falling stock markets and news of economic meltdowns should be our best friends (as long as we can keep our jobs). When markets have fallen heavily I have taken advantage of public fear to sell hundreds of thousands of dollars in bonds to buy stocks (or stock indexes) at bargain levels.

Here are three time periods that set a precedent for huge personal profits:

  • September 2001 (World Trade Centre Crash)
  • 2002/2003 (Iraq War)
  • 2008/2009 (Financial Crisis)

The markets fell. I sold bonds. And I bought stocks (or stock indexes) like a sex starved man in a harem. When the stock markets began rising again, putting my portfolio out of alignment, I sold off some of the stocks (or stock indexes) to ensure that I had my desired allocation between stocks and bonds. For the past ten years, I have had an allocation of bonds equivalent to my age. I’m 41 years old, so roughly 41% of my money is in bonds. Those without future pensions to look forward to, I believe, should have bond allocations running roughly parallel to their age.

5. If you stick to a disciplined allocation between stocks and bonds (buying the laggard and/or rebalancing when markets go crazy) you can make a fortune in a volatile market.

6. I’m not a “trader” and I don’t follow the economy. And because of those two factors, I invest circles around most people who do. You can read a post on my view here