How does your asset allocation impact your returns – and your path to Barista FIRE?

When we started investing in 2019, we had one major problem: we knew nothing about investing or asset allocation. We simply bought individual stocks, some altcoins in crypto, and P2P loans.

It wasn't until much later that we discovered what asset allocation truly means. Since we started applying it, our returns have become more stable and, most importantly, we have more peace of mind in our (financial) lives.

Perhaps this sounds familiar. Or perhaps you simply want to know how to allocate your assets as effectively as possible to achieve FIRE . In this article, we combine our own experiences with historical data to help you avoid making mistakes.

What is asset allocation? (and why is it so important)

Asset allocation is, simply put, how you distribute your money across different investment categories, such as stocks, ETFs, real estate, bonds, crypto, cash, pensions, or P2P lending.

The right mix determines:

• Your return – how quickly your wealth grows.

• Your risk – how much fluctuation you have to tolerate.

• Your liquidity – how quickly you can access your money.

Our distribution at the start looked like this:

• 70% crypto (now 20%)

• 10% individual shares (now 7%)

• 10% P2P lending (now 2%)

• 0% in real estate (now 63%)

• The remainder in cash (now 8%)

Result? In a (crypto)bull market, I felt like an investing genius. In a bear market, everything evaporated, and I lost all my courage and confidence in the market.

In 2018, Bitcoin dropped from $16,000 to $3,000. I didn't dare buy more, even when my wife wanted me to. I still hear that at home…

The Early Stage: Lots of Cash, Little Return (and Why That's Okay)

Those just starting with FIRE often have a large cash buffer:

• Emergency buffer – in our case +- 3 months of fixed costs -> We would like to increase this slightly.

• Investment money on hold – waiting for an entry point

A cash buffer naturally generates a very low return (negative after inflation). Last year, our cash buffer was still over 50% of our invested capital (excluding our pension assets). This significantly impacts returns. We've put a large portion of our cash to work in some bricks and mortar, which will yield more in the long run than the interest rates from Raisin or a Dutch bank.

Our asset allocation and returns (Aug 2024 – Jul 2025)

Asset class	Return (%)	Liquidity	Risk	Personal lesson
Shares (individual) + ETFs	+16.03%	High	High (individual stocks) / Medium (ETFs)	Invest in companies you understand. Or diversify through ETFs.
Property*	+7.2%	Low	Low	Stable income, but more work than expected.
P2P lending	+9.5%	Average	High	Spread across trusted platforms.
Pension fund**	+10.1%	Very low	Low	Boring, but a solid foundation.
Crypto	+57.8%	Very high	Very high	High peaks and deep valleys (Between 13% and 83% in the last 12 months)

* Net rental income, without capital appreciation

** Set to a very high-risk allocation. See the comparison of the pension fund versus the S&P 500 .

Historical averages

* Historical average Real Estate: ~5.2% real price increase + ~6.4% rental income, excluding costs.

What does this mean for your FIRE strategy?

1. Shares and ETFs – your growth engine

• Broad distribution, low costs.

• Declines of 20–40% occur, but long-term recovery often follows.

2. Real estate – cash flow + capital appreciation

• Stable income, but low liquidity and risk of high unexpected maintenance costs or vacancy.

• If you manage your own property, you will have regular contact with tenants (not everyone gets energy from that)

3. P2P lending – often fixed return, higher risk (platform dependent)

• 6–12% per year possible, but always a chance of default or platform issues.

4. Crypto – high risk, high potential

• Only invest with money you can truly afford to lose. Expect extreme fluctuations (in value and emotion).

• High-Risk/High Reward. No one knows what the future holds for crypto. So be careful.

5. Retirement – boring but solid

• Slow but steady growth, plus tax benefits.

• It is also possible to invest extra outside of your employer with tax benefits.

Risk and volatility

• Real estate : low volatility, prices move slowly. But also a risk of vacancies and unexpected maintenance. (Or tenants who refuse to pay).

• Stocks/ETFs : medium volatility (±15–20% per year). They move with the market. With an individual stock, you can also lose everything if the company goes bankrupt.

• P2P : Low volatility, but illiquid. Loans are often outstanding for extended periods, and default rates can sometimes be very high.

• Crypto : Extremely volatile, fluctuations of 5–10% per day are normal. Larger coins like Bitcoin (BTC), Ethereum (ETH), or Ripple (XRP) are relatively stable (for cryptocurrencies), but many other alternative coins sometimes lose 90% of their value in just a few days. So never rely on hype about such a coin.

“Some coins are quite stable, but with certain altcoins we have lost up to 90% of the value in just a few weeks – worth thousands of euros in losses. (e.g. XVG coin )”

How do you optimize your asset allocation?

1. Map out your current allocation – use a spreadsheet or investment app.

2. Do you align your investment mix with your goal —more growth (stocks/crypto) or more security (real estate/pension investments)? -> Also consider the timeframe carefully. The shorter your investment horizon, the less risk you want to allow in your portfolio.

3. Rebalance – for example, every six months.

4. Measure your returns by category – this way you can assess whether certain risks are worth the return compared to other types.

5. Stay consistent – automatic deposits prevent emotional decisions.

Conclusion

There's no perfect asset allocation. There's only a mix that suits your goals, lifestyle, and risk tolerance.

For us, that meant less gambling, more diversification, and consistent investing. Our crypto portfolio has grown enormously recently, and we're now gradually reducing that and investing in less volatile alternatives.

💬 Your turn - What does your asset allocation look like? Write it down: what percentage is in stocks, real estate, cash, crypto? What stands out to you?