Cautious Income
A capital preservation portfolio with an income focus. Heavy in bonds, TIPS, and cash, with modest equity and REIT exposure for growth and inflation protection.
Allocation
What if you add Bitcoin?
Adding Bitcoin changes the risk-return profile. Here is how different allocations compare, reducing other positions proportionally:
| Portfolio | Return | Volatility | Sharpe |
|---|---|---|---|
| Base (Cautious Income) | 5.11% | 6.38% | 0.31 |
| With 3% Bitcoin | 5.41% | 6.63% | 0.35 |
| With 5% Bitcoin | 5.61% | 6.91% | 0.36 |
Returns are geometric (compound). Sharpe ratio uses 3.10% risk-free rate (US Cash, JPM LTCMA 2026). Forward-looking estimates, not predictions.
Capital preservation first
The Cautious Income portfolio is the most conservative model on this site. Its goal is plainly stated: protect the capital you have and generate steady income, accepting modest growth as the price. Around 70% sits in cash, Treasuries, corporate bonds, global government bonds, and TIPS; the remaining 30% in equities and REITs provides just enough growth and inflation sensitivity to keep the portfolio from going backwards in real terms.
This is a portfolio for money you can't afford to lose much of — a near-term goal, a conservative retiree's core, or the stability sleeve of a larger plan.
What to expect from it
Forward-looking return is the lowest of these models, by design, and so is volatility. The numbers above reflect a portfolio that should rarely suffer a large drawdown — but also one that won't compound wealth quickly. With 20% in cash alone, a meaningful share of the portfolio is doing little more than waiting.
The trade is explicit: you're buying stability and liquidity, and paying for it in foregone growth. Over a long horizon that cost compounds, which is why this allocation only makes sense when preservation genuinely outranks growth.
The quiet risk: inflation
A cautious portfolio feels safe, but safety from market volatility is not the same as safety from inflation. A mix dominated by nominal bonds and cash steadily loses purchasing power when prices rise — the dollars are intact, but they buy less each year. That is the central, under-appreciated risk of conservative portfolios.
This version pushes back with 10% TIPS and 10% REITs, both of which tend to hold real value better than nominal bonds. It's partial protection, not a cure. For investors who want a small, asymmetric hedge against both inflation and low forward returns, the table above shows a 3-5% Bitcoin allocation, sized so that even a severe Bitcoin drawdown is a minor dent in an otherwise stable portfolio.
Who the Cautious Income portfolio is for
It fits an investor whose first priority is not losing money: someone close to a spending goal, a conservative retiree, or anyone parking capital they'll need within a few years. It's also a sensible safe component within a larger, more aggressive plan.
It's the wrong portfolio for long-horizon growth — the low return and inflation drag make it costly to hold for decades — and for anyone who can tolerate volatility in pursuit of higher returns. If preservation is the goal but inflation is the worry, the TIPS, REIT, and optional Bitcoin elements are where this portfolio earns its keep.
How these numbers are calculated
Expected returns and volatilities come from J.P. Morgan's 2026 Long-Term Capital Market Assumptions (30th edition). Portfolio risk is computed using the full 27x27 correlation matrix, not simple weighted averages. The Sharpe ratio uses 3.10% (US Cash) as the risk-free rate.
For full methodology details, see the methodology page.
Customize this portfolio
Adjust weights, add constraints, try different optimization methods.