Back when I was a hedge fund manager investing millions of dollars for clients, there was one question I got asked over and over.

It's the same question I get these days whenever I attend a conference or start talking with friends about the markets...

"Zach, how are YOU investing your family's money?"

It's a reasonable question. After all, my hedge fund clients of old and my current readers alike want to know that I'm putting my money where my mouth is. 

So am I really investing alongside my readers, customers and clients?

Back in the hedge fund days, the answer was pretty simple. I kept the majority of my wealth invested in the funds that we managed. So when our clients did well, we also profited.

Today, the answer isn’t much different. I also invest my own money in the same areas that I recommend here at Rich Retirement Letter.

Let's peel back the curtain and take a closer look at how I implement these ideas with my investment accounts.

Starting With a Balanced Barbell Approach

At its most foundational level, I think of my investment approach like a balanced barbell with two very important sides.

On one side, I keep my conservative, income-generating investments. The positions on this side of the barbell are designed to build wealth slowly and steadily with a minimal amount of risk.

On the other hand, I also keep a portion of my investments in much more aggressive trades. These carry more risk but also have the potential for significant gains — often in a short time.

At this point in my life, I have about two-thirds of my investments in conservative positions and the other third geared more aggressively.

For reference, I'm 46 years old with a reasonable income that covers my day-to-day expenses. So I can afford to take a bit more risk with my retirement accounts. 

But as I get closer to retirement, I’ll shift more of my investments into the conservative side of the barbell so my risk is more balanced toward the season of life that I'm in.

Each quarter, I take a look at the gains (or losses) on each side of the barbell. 

And I make adjustments so that neither side of the investment process gets too heavy, causing me to become too cautious or too aggressive with my investments.

Once I make this strategic allocation for my overall investment picture, it's time to look at the positioning on each side of the barbell.

Allocating the Income Portion of My Barbell

The conservative side of my investment account is heavily focused on generating income. And I have two favorite ways to generate investment income.

The easiest (and most low-maintenance) way is to invest in dividend stocks. These stocks typically pay quarterly dividends which flow directly into my investment account. 

And since I don't need these cash payments for my day-to-day expenses, I can have the payments automatically reinvested into new shares.

This way, I continue to accumulate more shares, which then pay more income every time a new quarterly payment is sent out.

I love this set-and-forget type of investing. But since I'm an active student of the market, there's an even better way to collect income on the conservative side of my barbell approach.

You may already be familiar with the strategy of selling put option contracts for income. This is how I invest the majority of my capital on the conservative side of the barbell.

When you sell a put contract, you're entering an agreement to buy shares of stock — but only if the stock is trading below your agreement price on the expiration date. 

Best of all, you get paid upfront for entering the agreement and you can collect payments on your favorite stocks multiple times a year!

Just like any other type of investing, this strategy involves risk. But it’s actually less risky than a typical buy-and-hold approach. And I love the reliable cash flow this strategy generates.

If you're willing to spend a bit of time reviewing your favorite stocks each week, I highly recommend trying this strategy out!

Consider starting small with just one or two contracts until you get the hang of the process. 

Once you complete a few trades, I'm confident that you'll want to add this trading approach to your investment toolbelt.

The Best Aggressive Trades for Reliable Profits

I'm willing to take some bigger risks with the aggressive side of my barbell strategy. But I want to make sure my potential reward is worth the risk along the way.

Over the last two-plus decades, I've been refining my approach to aggressive trading. 

I've found that my best returns come from buying in-the-money call option contracts from stocks I expect to trade higher and in-the-money put option contracts for stocks I expect to trade lower.

These contracts work well when a stock moves in my favor, giving me nearly a one-for-one profit while muting my losses if the stock moves against me.

Bottom line, these option contracts tend to give you more profit when your picks are correct and generate smaller losses when picks move against you.

No one gets every stock idea right.

But if you can trade in a way that gives you more profit when you're correct and smaller losses when you're wrong, it can go a long way in helping you grow wealth over time.

In today's market, I'm placing some aggressive bullish trades on energy stocks, some healthcare plays, and a few select (and profitable) tech stocks.

Meanwhile, I'm placing a handful of bearish bets on long-term Treasury bonds and unprofitable tech stocks.

In-the-money option contracts give me a great opportunity to profit from the trades I get right while protecting my capital when things don't work out as planned.

Find the Right Balance for You

I'm not currently licensed to give individual investment advice. And that's not the business we're in here at Rich Retirement Letter.

But here are some general principles that can help you use this barbell approach effectively to give you the income you need to enjoy this important time of your life.

First off, if you've got several years left until retirement and an income that covers your day-to-day expenses, you can afford to be more aggressive with your investments.

I still think it makes sense to have a large portion of your investments in income-generating strategies. 

But you can swing for the fences with a bit more of your capital if you've got your day-to-day expenses covered.

Remember, the aggressive side of your investments can decline quickly if too many trades move against you. 

So don't get too concentrated on these trades and risk losing your investment capital!

As you get closer to retirement, it makes sense to shift more capital to the conservative side of the barbell. That way you don't wind up with a nasty surprise if a few trades move against you. 

Preserving your capital in this stage of life is much more important than growing your wealth aggressively.

Finally, don't forget to review your barbell periodically.

A handful of winning aggressive trades could quickly double this portion of your investment capital. 

If this happens, you may want to move some of those profits into the conservative side of your account. That way, your profits are protected so you won't have to worry about giving them back.

Incidentally, this barbell approach is a big part of the inspiration behind my Income Alliance trading program.

The Income Alliance includes two real-money portfolios, each covering one side of this balanced barbell. 

Members get real-time notifications any time I make a new trade in my investment account. And they can decide if the trades make sense for their investment accounts.

Stay tuned for more information about The Income Alliance in the weeks ahead.

In the meantime, I highly encourage you to consider adopting this balanced barbell approach to your retirement investment accounts.