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You have probably heard the story of the Three Little Pigs. The first pig built his house of straw, the second of sticks, and the third of bricks. Then came the Big Bad Wolf, who blew the first two houses down with ease. Luckily, the first two pigs took refuge with the third, whose brick house stood firm despite the wolf’s huffing and puffing.
But wait — isn’t this supposed to be an article about investing?
Exactly.
Stories often carry powerful lessons, and this one is no exception. The brick house survived because it was built on a solid foundation — a strong framework.
Merriam-Webster defines framework as “the basic structure of something: a set of ideas or facts that provide support¹.” When a framework is robust and well-designed, it provides safety, stability, and peace of mind.
The same is true for investing. A sound investment framework helps you weather market storms and reduces the emotional rollercoaster that volatility can bring.
Warren Buffett, arguably the world’s greatest investor, once said:
“To invest successfully over a lifetime doesn’t require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions — and the ability to keep emotions from corroding that framework².”
This kind of framework is more important than ever in today’s fast-moving, noisy investment environment. News headlines can swing your emotions wildly from one day to the next. A well-structured plan helps you stay grounded, confident, and focused on what truly matters.
At Unicorn, we call our framework The Three Bags Strategy. As the name suggests, you divide your funds into three distinct “bags,” each serving a specific purpose.
Bag 1: The Contingency Fund
This is your financial safety net — the cash you set aside to cover emergencies and unexpected events. It should be large enough to support you and your family during difficult times so you do not have to liquidate investments at a loss.
For example, during the 2008 sub-prime crisis, retrenchments were common. Those without adequate emergency funds were forced to sell investments — often at depressed prices — just to cover daily expenses.
The size of your contingency fund varies from person to person, and keeping too much cash can also hurt your long-term returns. A professional financial consultant can help you strike the right balance.
Bag 2: The Invested Fund
Inflation never sleeps. Simply parking your money in the bank is no longer enough to keep pace with rising costs. This second bag is where your money works for you — carefully invested in well-researched, valuable assets.
At Unicorn, we actively look for high-quality assets trading at attractive prices — the kind of opportunities value investors like Warren Buffett love. Strategic asset allocation plays a crucial role here.
For instance, in 2009, we advised investors to allocate up to 30% of their portfolios into U.S. equities, which had been heavily battered during the sub-prime crisis. Many investors stayed on the sidelines, but those who followed our advice saw their portfolios grow significantly — the S&P 500 rose nearly 80% before we advised taking profits in 2013³.
This bag is also perfect for Dollar Cost Averaging (DCA) — consistently investing a fixed amount at regular intervals (e.g., monthly). When markets dip, your money buys more shares; when markets rise, you buy fewer. This discipline takes emotions out of the equation and builds your portfolio steadily over time.
Bag 3: The Value Cost Averaging (VCA) Fund
Warren Buffett’s famous advice is to “be greedy when others are fearful and fearful when others are greedy⁴.” Markets often fall because investors panic, creating opportunities for those with cash ready to deploy.
This third bag is your “opportunity fund.” It allows you to take advantage of underpriced assets during market corrections — without touching your contingency fund.
For example, in 2016, we activated this bag and recommended that our investors buy gold after its price had fallen from its 2011 peak³. Our analysis suggested that volatility and uncertainty were likely to rise, and gold typically performs well in such environments. That call turned out even better than we expected as gold prices surged in the years that followed.
Putting the Framework to Work
Together, these three bags form a simple yet powerful framework that removes the guesswork from investing. Your first step should be to work with a trusted family wealth consultant to establish these foundations before — or as — you begin your investment journey.
The next step is to choose the right advisor. Your consultant should have the skill and discipline to select the right assets and guide you through good times and bad.
At Unicorn, we take pride in aligning our interests with yours. We remain vigilant, proactive, and transparent — keeping you informed not just when times are good, but especially during market turbulence. Because when your framework is solid, you can focus on building a future you and your family can feel secure about.
Source
1 – Merriam-Webster
http://www.merriam-webster.com/dictionary/framework
2 – The Intelligent Investor
3 – Bloomberg
4 – Investopedia
Warren Buffett: Be FearFul When Others Are Greedy https://www.investopedia.com/articles/investing/012116/warren-buffett-be-fearful-when-others-are-greedy.asp
