Want to earn much of the upside of the stock market without any risk?
Sounds impossible, but it isn’t, and we’re not talking about an equity-indexed annuity (rebranded as a fixed indexed annuity). It’s actually quite simple and can be done with ultra-low fees and high tax-efficiency. Here are two ways, and both involve buying a single Treasury Bond and investing in a stock index fund. Let’s take a $100,000 portfolio as an example, and a long investment horizon of 20 years.
Away we go.
SUBSCRIBE: Receive more of our free Advisor Upside newsletter. READ ALSO:America is Still No. 1, Says Goldman SachsandWill Millionaire Taxes Send UHNW Clients Packing?
We start with a zero-coupon Treasury bond, which is hopefully risk-free. It pays no coupon income, and the entire return comes at maturity. The current yield of a 20-year, zero-coupon bond as of Dec. 31, 2025, is 5.09%. Buying about $37,049 of this bond will result in receiving $100,000 when the bond matures. That leaves about $62,951 to go into equities, such as a low-cost diversified stock index fund. This translates to about 63% equity and 37% fixed income allocation. Even if the stock market lost all of its value, the investor would get back the original $100,000.
A 100% loss in a broad stock market index essentially means capitalism has failed (and I’m not sure the government would survive, either.) Even the so-called lost decade in the beginning of this century had about a 0% return. Below is a chart showing the return of this stock and bond portfolio, depending on how stocks perform. A catastrophic 10% annual loss still results in a positive return. Even an 8% annualized stock return results in a total portfolio return of 7.1% annually. And a 12% annual return gets a double-digit return, without risk. By comparison, Morningstar shows a 10-year annualized return on the Vanguard Total Stock Index Fund (VTI) of 14.36% as of Dec. 22, 2025, so it’s quite possible to get a double-digit return with this risk-free strategy.
Of course, this only guarantees a nominal risk-free return and not a real positive return after inflation. Should stocks have another lost decade with a zero return, the 2.5% nominal return of the portfolio would be negative if inflation is higher than the 2.5%. In other words, spending power would decrease.
Nobody knows future inflation (and I must admit the government’s lack of financial discipline and the spiraling deficit and debt concern me.) An 8% annualized stock return is bad if inflation comes in at 10%. That’s where Treasury Inflation Protected Securities come into play. Using the same $100,000 portfolio and 20-year time period, one can buy a single 20-year TIPS yielding 2.57% plus inflation. An investment of $60,235 in the single TIPS will mature at an inflation-adjusted $100,000 in 20 years. That leaves $39,765 to go to the stock index fund. That’s almost a 40% stock portfolio.