Stability before growth: why investors need a financial safety net

When people talk about a financial safety net, they usually picture something simple: money “for a rainy day,” a cash reserve, a bank deposit. This is true – but only at the basic level. For someone with meaningful capital, the concept is broader: a financial safety net is not merely a sum of money, but a properly designed “Plan B”: a separate liquid layer of capital, insurance policies covering key risks, alternative residency options, contacts of specialized professionals in different countries, and clear instructions for trusted persons. All of this can be activated quickly and without damaging the long-term strategy.

A family may own deposits, real estate, a business stake in a business, securities, currency, gold, and other assets. On paper, the picture looks solid: there is capital – “if something happens, we’ll figure it out.” Yet in a stressful situation it suddenly turns out that:

• the business itself may need liquidity at exactly the same time
• real estate cannot be sold “at the snap of a finger” without a substantial discount
• selling stocks during a drawdown is disadvantageous
• part of the money is tied up in places where access is slow and cumbersome

Having deposits, a “stash under the mattress,” real estate, or securities does not yet mean that the family has a real financial safety net. It is not everything that can “someday be sold,” nor money that lies “idle.”

A safety net is the foundation of financial resilience. It creates conditions for other assets to work effectively: the business develops, the investment portfolio goes through market cycles, real estate remains a long-term asset, and family decisions are made without stress.

Between income and investment capital

A financial safety net can be imagined as an intermediate layer between active income and investment capital.

• Active income is what you earn day to day: salary, business dividends, professional income, and so on.
• Investment capital is assets intended for the long term: they should grow, generate rent-like income, and help achieve major financial goals.

The financial safety net sits between them. It should not be excessively risky, like an investment portfolio, nor should it turn into “forgotten” money that loses purchasing power.

The idea of a reserve fund has existed for a long time. Quite simply, our grandmothers preserved food for the winter. Also a kind of “safety net,” if you quantify the cost of cucumbers and tomatoes, grandmother’s labor, and the “warehouse costs” of storing it all in the cellar. States build gold and foreign exchange reserves. Businesses have “cash and cash equivalents” on their balance sheets.

In all cases, the goal is the same: to get through a period when the usual flow of income is disrupted.

Why an investor and entrepreneur need it

For an investor, a financial safety net makes it possible not to sell promising assets during a drawdown. Markets fall periodically: bonds may temporarily decline in price, while stocks may remain in negative territory for months or even years. If, during such a period, money is urgently needed for living expenses, medical treatment, relocation, or other family costs, the investment portfolio ceases to be long-term – it turns into an “ATM” from which money has to be withdrawn again and again.

An entrepreneur needs a financial safety net because of typical business risks: cash-flow gaps, payment delays, falling demand, tax payments, or sudden expenses. Complete dependence of the family’s financial stability on the business may force the owner to withdraw money for personal needs at the very moment when the business itself needs liquidity. Bad timing.

For an affluent family, a “safety net” creates a sense of calm and makes it possible to make decisions without haste, weighing all the pros and cons.

It is usually recommended to have a reserve covering 3–6 months of expenses. This amount suits those with stable employment, predictable income, and clear obligations. If your income depends on a business, projects, bonuses, or the market situation, it is more reasonable to aim for a reserve equal to 12 months of life without active income.

How much to hold and where to keep it

There are two ways to calculate it. The first is based on expenses: add up all mandatory payments, loans, medical costs, expenses for children, rent, property maintenance, and other regular spending. For example, if a family spends 700 thousand rubles per month, a 12-month safety net would amount to 8.4 million rubles.

The second, more conservative approach is based on income. It is suitable for those who want to maintain their usual standard of living during a difficult period: support the family, invest, pay for insurance, and keep up with obligations without shifting into strict austerity mode.

Where should this money be kept?

Maximum return is not the priority here. A financial safety net must meet three key criteria:

• liquidity, access to funds within a few days
• low volatility
• and at least partial protection against inflation

Unfortunately, no single instrument meets all three criteria perfectly.

The optimal solution is a multi-layered safety-net structure: cash for 2–3 months, a portion in deposits, part in money market instruments or short bonds, and several gold bars of different weights. If desired, diamonds, USDT, and other stablecoins in a “cold” wallet can also be added.

Beyond deposits: insurance and a “fallback plan”

Life, health, property, and liability insurance do not generate income. In most cases, insurance is simply an expense. However, insurance can significantly reduce financial risks when unforeseen circumstances arise that are not related to loss or reduction of income, and prevents chance events from seriously damaging already accumulated capital.

A residence permit or second citizenship can provide strategic flexibility – the ability to move quickly to another country, open a foreign bank or brokerage account remotely, give the family access to a higher level of medical care and education, and diversify and protect capital. According to an estimate by Henley & Partners, in 2025, 142 thousand millionaires, including from Russia, relocated to another country – often for the freedom of choice: where to live, keep money, educate children, pay taxes, and build the next stage of life.

In a broader sense, financial resilience combines a “cash reserve,” insurance, and access to different jurisdictions – everything that helps maintain control over the situation during unstable periods.

Case study: a bond safety net – one step beyond deposits

Below are the results of a strategy I use with clients as an element of the financial safety net in the Russian securities market.

Key metrics as of the beginning of June 2026:

• Return: 18.3% p.a. in rubles
• Maximum drawdown: −2.6% for 11 weeks
• Return/risk ratio (RR): 7.04
• Expected alpha: 0.9% p.a.
• Beta: 0.64

The benchmark showed the following results over the same period:

• Return: 18.4% per year
• Drawdown: −3.3% lasting 18 weeks

Returns are almost identical, but the risk profile is different. The strategy’s maximum drawdown is shallower than that of the benchmark. The recovery period is shorter. Alpha is positive, beta is below one. I will soon write a separate article on how to properly evaluate investment portfolios.

The benchmark is a composite one. It is periodically revised in line with the structure of the investment portfolio.

• Until October 4, 2024, the bulk (95%) consisted of first-, second-, and third-tier corporate bonds ( indices RUCBITRL1, RUCBITRL2, and RUCBITRL3 in equal shares). Russian equities (MCFTR index) and gold (the “VIM – Gold. Exchange-Traded” fund) accounted for 2.5% each.

• From October 4, 2024 to January 9, 2026, the share of corporate bonds became lower (87.5%). The shares of equities and gold increased accordingly to 6.25% for each asset class.

• Since January 9, 2026, corporate bonds have accounted for 85% of the portfolio (a different index – RUCBTRNS), while government bonds (RGBITR index), Russian equities (MCFTR index), and gold (the “VIM – Gold. Exchange-Traded” fund) now account for 5% each.

When calculating alpha, the yield on one-year OFZs is used as the “risk-free” rate.

In January 2026, I simplified the portfolio composition by abandoning the selection of individual bonds – the strategy moved entirely into ETFs. Working with funds is much easier for clients, while the result is the same or even better:

• fewer transactions and manual actions
• bond coupons inside ETFs are automatically reinvested, rather than lying idle for weeks in a brokerage account

Clients ask me:

“Previously, I received coupons into my brokerage account; now I do not. Maybe it would be better to return to individual bonds?” Coupons indeed no longer arrive in your personal account, but they do not disappear – they are simply received on your behalf by the management company and, importantly, reinvested in a timely manner. For many investors, this is more beneficial: the money is not subject to personal income tax and returns to work faster.

“Yes, ETFs have made things simpler, but the return is probably lower. I am ready to make more transactions.” It is important to distinguish the feeling of being involved from actual efficiency. It seems that a good investor should constantly select securities, analyze issuers, and make trades. But simpler does not always mean worse. The key question is whether market activity leads to a result better than the market itself (the benchmark), taking into account commissions, taxes, mistakes, and time spent.

Such a bond portfolio is a stable, clear, and sufficiently profitable layer of a financial safety net.

The selection of individual securities is justified where the potential “risk premium” is higher – for example, in the equity market. Where beating the market is difficult, it is better to simplify the process. Besides, it is important to lay a solid foundation first.

The strategy is implemented through individual investment recommendations , which, after the investment advisory agreement is signed, are delivered to you by email or Telegram. Rebalancing is carried out 4 times a year.

A similar strategy can be used for the foreign-currency part of a financial safety net in a foreign brokerage account.

Not investment advice. Investments involve risk. Returns are not guaranteed and may differ from expectations.

Stability first, growth second

A financial safety net will not make you wealthy and does not replace a full-fledged investment strategy; it does not promise rapid growth and does not turn capital into a source of passive income. Its task is more modest, but no less important: to reduce a person’s vulnerability to financial risks.

A safety net helps:

• the investor to avoid selling assets during a drawdown
• the entrepreneur – withdrawing money from the business at moments when the business itself needs liquidity
• the family – urgent expensive loans, forced changes of plans, and decisions made under financial stress

I prefer to begin working with clients not with the question “what to buy,” but with an understanding of which part of the capital is responsible for what. A clear allocation of roles is critically important: some capital must be readily accessible, some should protect against inflation, and some should work for growth, and so on. Mixing these functions makes the system fragile, even if the amount of capital seems sufficient.

A financial safety net is the first layer of such a system, not “lazy” money. On the contrary, its key value lies in allowing the other assets to remain untouched during difficult periods.