The 80/20 Rule Is the Stock Surfer’s Compass in Turbulent Markets

Every investor wants two things at once: to sleep peacefully at night and still feel that electrifying hint of risk that makes the stock market so addictive. In this push and pull, the 80/20 rule works like a simple yet surprisingly effective compass: 80 percent for stability, 20 percent for opportunity.

What does 80/20 actually mean?

The core idea is to divide your portfolio into two layers, starting with the 80 percent that anchors you.

Most of your capital is invested in high-quality, cash-flow-positive, and predictable companies — the blue chips that may not double in value within a year but also won’t sink at the first sign of headwinds. These are the small, steady waves you can surf without worrying about wiping out.

The remaining 20 percent is allocated to opportunity. This portion goes into bolder growth stories: small-cap companies, newly listed firms, or promising tech players with bright but uncertain futures. These are the waves legends ride. They can knock you off the board, but they can also carry you far — just as Nvidia, Meta, and Alphabet once did.

So, the rule isn’t about building a bunker. It’s about planting the seeds of growth without letting the entire portfolio become reckless.

Why specifically 80 and 20?

These numbers aren’t pulled out of thin air. There is no such thing as a perfectly safe, perfectly profitable investment, and the market reminds us of that regularly. A portfolio filled entirely with safe harbors ends up with lackluster returns. But a portfolio made only of high-risk bets can be wiped out by a single serious downturn.

The 80/20 split is a golden compromise. It gives your portfolio a backbone while keeping the door open for future winners. And history supports this: the majority of the stock market’s total returns typically come from a small handful of outperformers. So the philosophy behind the rule is grounded in statistics, not intuition alone.

Investing isn’t just numbers and reports, it’s also emotions: fear, greed, and uncertainty. The 80/20 rule doubles as a psychological support structure. The stable side anchors your portfolio when speculative holdings jump around. Meanwhile, that 20 percent gives you permission to dream and keeps investing interesting but controlled.

How to apply the 80/20 rule in practice

1. Build your core portfolio (80%).
Choose 8–10 solid companies across various sectors. Their job isn’t to surprise you — their job is to carry you.

2. Construct your growth bucket (20%).
Pick 3–5 promising smaller companies with potential to multiply in value. Accept that some of these stories will never grow up.

3. Rebalance with calm discipline.
Review your allocations once a year. If your growth picks have shot up to the sky, trim a little and return the ratio to normal.

4. Stick to the plan.
An investor’s biggest mistake is jumping from strategy to strategy. Any plan only works if you commit to it when the market tries to shake you.

Stock investing is not a sprint. It’s a journey that moves with the rhythm of the waves. The 80/20 rule won’t promise quick wins, but it offers a structure that lets you surf for a long time and with a good chance of doing it successfully.

When 80 percent of your portfolio stands firmly on solid ground and 20 percent is searching for the next great wave, you can look toward the future with both calmness and a touch of adventure.

The original Finnish column text is available in the digital version of Salonjokilaakso, on page 19.