Capital preservation strategy

[chang]

Pulling together a few thoughts that have been discussed haphazardly in the past.

I was a B&H, stay-the-courser most of my life, and continue to believe that's the best approach during the accumulation phase. But that's not the point of this post, so let's please not debate market timing.

I'm at a point where I have "won the game" and have enough dough to live on, even if I put it all in the bank and suffered the ravages of inflation. However, that is obviously too risk-averse a position to take. I have not actually changed my AA very much at all; it remains roughly 55% stock. I will try to inch that down a bit by: (a) selling some more equity; (b) not "buying the dip" anymore; (c) rebalancing if the market climbs higher, rather than "letting it ride".

Now to the point. Let's pick some hypothetical numbers. Suppose my balance stands at $8m. I'm at an age now where I don't want to ride out a bear market and take a 50% cut. I expect to buy a piece of real estate soon, which may run $1-2m including renovations. Let's say that I do not want my balance to fall below $7.2m under any circumstances. That would be a 10% drop.

My thinking is to start selling fast when the market drops 5%, and to get out completely when the market drops 10%, and my balance hits $7.2m. At that point, if I stick to my guns, I can never get back in, because I would risk a further drop. Maybe at that point I just declare victory and spend my time on other hobbies. In other words, maybe investing is a process that comes to hard stop at some point in life, IF you really want to preserve your capital.

Of course, getting out is probably the wrong thing to do, and staying in the market (at some level) is probably the right thing to do. But the only way to certainly have $7.2m is to get out and stay out. The key words are in bold italics, and I presume the point is clear. Once we start admitting probabilities into the picture, who knows what might happen?

Of course, I'm making this more black-and-white than I need to. "Getting out" doesn't necssarily mean going to cash. I can stay in safe* short-term bonds and still earn 1-2%, which isn't an entirely negligible income. (*I know, nothing is "safe", but let's assume so for the sake of argument - a mixture of VUSFX, VBIRX, RPHIX, DODIX, etc., maybe some VWEAX and RCTIX, too.)

But my point is: Is this a reasonable retirement portfolio management strategy? 

To be honest, I get less and less pleasure out of investigating and monitoring investments with each year, and I foresee a time when I won't spend more than a few hours a month on it, if that. So I am not interested in strategies which require more time, effort, sophistication and complexity. I have a good AA now, and I'm happy with how everything looks. If the market goes up another 5%, 10%, 15%, 20% -- great! But if it starts to go down, I think it may be time to pull the plug. I lived through the 2000, 2008 and 2020 crashes, and suffered ugly losses. I came back stronger each time. BUT, to coin a phrase, this time is different. I'm not a spring chicken anymore.

[uncleharley]

Your real estate will probably give you the hedge against inflation that you may need. The fly in the ointment is the actuary tables. What if you live to be 100 or 110. People are doing that and it is rarely mentioned in anyones plan. unexpected inflation and an unexpected long life could make your plan questionable, however, as I said, your Real Estate should or could cover that. jmho

[chang]

uncleharley Well I would not want to face a situation where I have sell the RE at some point and downsize, just to raise money. We plan to build our dream house and leave it to the heir. Whether I get out [of the stock market] or not, I hope to spend dividends and avoid harvesting capital. I don't want to be in a situation where I've spent it all down to $0 at a certain age.

I am expecting my expenses to go down with age. I've traveled to just about every country in the world, so my idea of retirement is to plant myself in one spot with three or four dogs, and stay put. No flights, cruises, hotels or tour packages. Just dogs, fresh gazpacho and good wine.

[uncleharley]

Then you may have a problem if you live a long life and there is an inflation problem. again jmho

[chang]

That's a valid point, uh. Perhaps one alternative is not to sell anything in my IRAs, and take action only in taxable accounts. (Ratio of taxable/tax-deferred is about 3:1.)

[jongaltiii]

If you live a long life, you have no problems if you leave it alone. If you attempt to market time, you have big problems and your paper losses (if a crash takes place) become real losses. At some point, isn’t this a problem for your heirs? Why do something that will impede their future growth? Time is on our side…unless you plan to take it with you. 😉 When there appears to be only 2 choices, find the third.

[uncleharley]

Bingo!!!! Along time ago I was told that money needs to be managed. If you cannot or don't want to manage it, hire a manage. FIDO charges 3/4% annually to manage high balance accounts. Fisher Investments charges 1.5%. D Y O D D.

[chang]

Note: I appreciate the critical and challenging posts. That's the reason I made the OP. A critical post is worth 100 times more than an agreeable one.

H a v i n g    s a i d    t h a t . . . . .

There's no way I am going to tolerate a 50% drawdown again. Remember Japan's 30-year long bear market? I am not going to allow myself to be a lab mouse in an experiment to prove that the market always rebounds from a deep correction. Even if I know intellectually the odds vastly favor B&H (which I believe they do), I want to avoid the mental stress of watching $4m go down the gurgler.

As I said above, my OP painted an overly black-and-white picture. I would probably keep some equity in my IRAs, especially the Roth. (The Roth has 100% US Growth stocks, but is only about 3% of PV.) If the market does drop 50%, I would probably invest on the way back up ..... but I realize that what I am implicitly saying is that I will successfully time the market, selling high and buying low -- which is exactly what I also said I cannot and will not try to do. So I'd better tread lightly regarding what I might or might not do after I sell.

R e g a r d i n g    m o n e y    m a n a g e r s . . . . .

uncleharley as far as hiring a money manager goes, I wouldn't. I think I could beat 99% of them by throwing the $8m into Wellesley or Wellington, instead of the 1-2% ER Advisor funds they would sell me on top of their 1% fee. I can easily put my portfolio on autopilot and walk away, if I want to.

[richardsok]

Oct 7, 2021 1:05:04 GMT chang said:

Note: I appreciate the critical and challenging posts. That's the reason I made the OP. A critical post is worth 100 times more than an agreeable one.

H a v i n g    s a i d    t h a t . . . . .

There's no way I am going to tolerate a 50% drawdown again. Remember Japan's 30-year long bear market? I am not going to allow myself to be a lab mouse in an experiment to prove that the market always rebounds from a deep correction. Even if I know intellectually the odds vastly favor B&H (which I believe they do), I want to avoid the mental stress of watching $4m go down the gurgler.

As I said above, my OP painted an overly black-and-white picture. I would probably keep some equity in my IRAs, especially the Roth. (The Roth has 100% US Growth stocks, but is only about 3% of PV.) If the market does drop 50%, I would probably invest on the way back up ..... but I realize that what I am implicitly saying is that I will successfully time the market, selling high and buying low -- which is exactly what I also said I cannot and will not try to do. So I'd better tread lightly regarding what I might or might not do after I sell.

R e g a r d i n g    m o n e y    m a n a g e r s . . . . .

uncleharley as far as hiring a money manager goes, I wouldn't. I think I could beat 99% of them by throwing the $8m into Wellesley or Wellington, instead of the 1-2% ER Advisor funds they would sell me on top of their 1% fee. I can easily put my portfolio on autopilot and walk away, if I want to.

"There's no way I am going to tolerate a 50% drawdown again. Remember Japan's 30-year long bear market? I am not going to allow myself to be a lab mouse in an experiment to prove that the market always rebounds from a deep correction. Even if I know intellectually the odds vastly favor B&H (which I believe they do), I want to avoid the mental stress of watching $4m go down the gurgler."

-----------

Bravo !

[ignatz]

Oct 6, 2021 21:23:52 GMT chang said:

My thinking is to start selling fast when the market drops 5%, and to get out completely when the market drops 10%, and my balance hits $7.2m. At that point, if I stick to my guns, I can never get back in, because I would risk a further drop. Maybe at that point I just declare victory and spend my time on other hobbies. In other words, maybe investing is a process that comes to hard stop at some point in life, IF you really want to preserve your capital.

Of course, getting out is probably the wrong thing to do, and staying in the market (at some level) is probably the right thing to do. But the only way to certainly have $7.2m is to get out and stay out. The key words are in bold italics, and I presume the point is clear. Once we start admitting probabilities into the picture, who knows what might happen?

A few ramblings:

Is the green part just "thinking" or somewhere near a blood oath?

You can't be a little pregnant, despite what you may have heard recently.

You are analytically inclined. I suspect you will remain in that mode over the last 100k you have in the market.....as well as over the millions you would then have outside the market.

Call it "exit strategy" or "market timing" or whatever you want, I don't think you will get a satisfactory answer. I've fished for an answer on this and other forums in the fairly recent past and get nothing but vague answers, tea leaves, "thinking", and hope.

You can come up with a dozen reasons why you shouldn't sell on ANY particular day. I'd guess all of them ultimately driven by "what if I am wrong" and the quest for affirmation of one's current strategy.

5%? The SP will be off 5% from the all time high on 9/2/21 at 4310. That's 54 points from right now. Could well happen tomorrow.

You say "inch down" from 55 equity. Describe the downside of going to 45 tomorrow? Mainly regret if the market goes higher and you were "wrong"?

I gather you did little selling in 2000/2001 or 2008/9 or 2020. If you do reduce equities, you will find yourself in the strange position of frowning on up days. That feeling does not pass, but it does become less acute.

Here's something else you already know: you have far less control over various aspects of your life than you'd like to have. Hard pill that I have never been able to swallow.

I went from 64/36 to 58/42 a couple of weeks ago. My portfolio appreciates it, but I personally got little relief from anxiety. Not surprised. I yam what I yam.

[Deleted]

This thought of living till 100 sounds scary and worrisome. But makes sense, we should plan for at least one of us (My wife or I) living that long.

My grand parents lived till late 90s and my parents are in mid 80s and quite healthy for their age (declining eyesight and teeth issues is pretty much it.)

Is there a retirement calculator or website that you guys like? though I guess it is not that I can save more than I do now. So kind of no use to calculate and plan.

[chang]

Oct 7, 2021 2:01:37 GMT ignatz said:

I gather you did little selling in 2000/2001 or 2008/9 or 2020. If you do reduce equities, you will find yourself in the strange position of frowning on up days. That feeling does not pass, but it does become less acute.

Correct. But I did sell about 3% of equity last month, and I noticed this: on up days I told myself, "Oh well, so what? I still have plenty. more than I'll ever need." But on down days, I felt like Albert Einstein had nothing on me.

Norbert once articulated it well, but I can't recall his formulation. Basically, losing money you needed hurts more than not gaining money you didn't need.

[chang]

Oct 7, 2021 2:01:37 GMT ignatz said:

Is the green part just "thinking" or somewhere near a blood oath?

The latter. It needs to be an oath, that's the whole point. It needs to be a promise that I'll stick to when the time comes. If it's just a loosey-goosey idea, then it's worthless.

The sell-off plan can be more complicated; say, sell X% of portfolio for every Y% the market drops. But whatever the plan is, it needs to be a straightforward plan with rigid rules that can't be flexed or bent, otherwise it is of no value.

[roi2020]

Here's one way to approach the problem.
This is based on an article by Jonathan Clements.

Current Value:  $8M
Lowest Value:   $7.2M
Maximum Loss: $800K

Maximum Loss / Stock Decline = x
x  / Current Value = Equity Allocation

To avoid a loss greater than $800K during a 50% stock decline, you can limit your equity holdings to 20.0% of your total portfolio.

To avoid a loss greater than $800K during a 35% stock decline, you can limit your equity holdings to 28.6% of your total portfolio.
Since the maximum loss is only 10% of the current value, low equity allocations are the result when using this method.

[Mustang]

It would seem to me that if you have won the game and can live off the lower returns then moving to a very conservative portfolio of only 20-30% stock would be the answer.

I have been reading a little about retirees using an upward glide slope or rising equity strategy for investments, starting retirement with a a very low percentage of stock then increasing the stock allocation as time passes. Apparently, this method was discovered by analyzing the effect of the bucket strategy during bear markets. The simplest way to implement it is to start with a low equity exposure and re-allocate 1% point more to equities each year. It might be more of a verification than a re-allocation if withdrawals are coming from the fixed asset side and not the equity side. www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/

I've only scratched the surface of this. If interested you might want to dig deeper.

[chang]

Oct 7, 2021 8:29:55 GMT Mustang said:

It would seem to me that if you have won the game and can live off the lower returns then moving to a very conservative portfolio of only 20-30% stock would be the answer.

I really had not contemplated shedding that much equity as a pre-emptive measure. I have wanted to get down to 50% for a while, but haven't gone that far. Another 4% or so will get me there.

I will resume some selling at the end of the next little bump, which should continue today.

[Chahta]

With a large portfolio why worry about about markets so much? If you get your AA where you want it, set aside $1m cash to live on (consume). Put it into a CD ladder. Let the portfolio ride. Last year EVERYTHING tanked so what good are "safe" ST funds? You could still lose 50%. And if you wanted back in the market it could be tough timing it. I dare say the heir will get plenty if that is your goal.

[birdman]

Lurker mode Off:  My wife and I have been retired for approx 5-years now having compiled a comfortable nest egg; not in your financial neighborhood Admin/Chang, but as John Bogle has written, “Enough.”  Since entering my early 60s I reduced our equity allocation to 35% after being in, what I considered the nose bleed seats of 65% till then.  Now at 33% equity and 10% cash my thoughts toggle between BTD and reducing the equity stash lower.  This may or may not resonate with your challenge; don’t want to miss a possible upside, and certainly don’t want to experience a significant loss. 

During early 2020 I did not sell while watching our total equity funds bleed out, knowing it would eventually recover, and bought into the drop by exchanging bonds for equity.  it was, for me, like jumping out of a plane.  I told my wife at the time that we would have enough to cover our lifestyle even if the market dropped even more dramatically. Still at 35% equity the short-term hit was distressing as I’m sure it was for everyone who hunkered down without panicking.

So I understand the mindset of wanting to continue capturing a market’s expansion while dreading it’s (impending?) potential contraction, not knowing if it will recover as it did in 2020 or what I recall is the calculated norm of 2-3 years for recovery (or more).

So I too, want it both ways, just as most folks do - both gains and preservation. Can that be done? Don’t know. My thoughts toggle with the market.  But they are only thoughts and not actions.  I have been BTD with modest amounts, as if we were in an accumulation phase.  What I know is a 50% drop in the market will impact our investments to the tune of approx 17%.  I can live with that.  You can live with an 800K drop. I think roi2020 has offered an excellent solution and worth considering based on your (and my) conditions. 

Best,
Birdman

[win1177]

Oct 7, 2021 12:51:38 GMT Chahta said:

With a large portfolio why worry about about markets so much? If you get your AA where you want it, set aside $1m cash to live on (consume). Put it into a CD ladder. Let the portfolio ride. Last year EVERYTHING tanked so what good are "safe" ST funds? You could still lose 50%. And if you wanted back in the market it could be tough timing it. I dare say the heir will get plenty if that is your goal.

Chang,
I’m more in support of what Chata is proposing. Set aside an “emergency” bucket (of a Million) in safe high quality bond funds/ CD’s. This is there in case the market tanks for years, you can slowly withdraw from it and you don’ have to tap the rest of your principle. Then leave the rest of your portfolio in a conservative 50:50 allocation. Don’t know your total size, but suspect this will make you maybe 40:60 or so. Still VERY conservative with modest growth. 

I’m in a similar situation. I’ve “made it”. Large portfolio, way more than we need. Retiring at the end of this year, just finished moving into our dream home on a large lake in SC. No mortgage, all bills paid in full each month, no debt. I’m thinking about putting about 1 million in safe higher quality intermediate bond funds (mainly muni funds due to our high bracket), leaving the rest of the portfolio ALONE. Just monitor it. It throws off plenty of dividend income, but Im not getting out of equities. I’ve got mainly high quality dividend growers, that our heirs will inherit (hopefully with step up in basis). In our taxable accounts, we have over 5.5 million in untaxed capital gains, why sell and realize them? I don’t think AAPL, MSFT, WMT, XOM, BRK.B, CSCO, MMM, UPS, KO,, DUK, SO, INTC, JNJ, ABT, AABV, LOW, BLK, AMGN, CL, etc. are going away any time soon. Just my two cents. 

Win

[Norbert]

Building on Win's and other proposals, I recommend:

* Put $1M into cash and equivalents now to avoid any cash flow or forced selling situations.

* Move $2M (or whatever) into cash now to cover the upcoming RE purchase.

* Set a target asset allocation that you can handle with the other $5M. Maybe 35-50% equities.

* Forget about the timing idea of dumping everything after a 10% dip in portfolio value. It's quite likely you'll experience that sooner or later with 50% equities, so better to reduce risk exposure now with high equity prices.

With an investment portfolio of $5M and 50% in equities, a 50% fall in equity prices means just a $1.25M downdraft (plus any bond losses). You can probably ride that out, given that the RE is paid for and you have $1M in cash for living expenses.

I think it's foolish to lose sleep about potential or real losses given that you have enough money now! Get out there and enjoy life.

N.

[galeno]

For me your approach is an unworkable DESIRE.

You will NOT beat everybody out the door. With your equity allocation you'd better be REAL comfortable with a 20 to 25% portfolio decline.

If you want to keep your port drops to less than 10% you need to cut your equities to 20 - 30%.

[win1177]

Oct 7, 2021 17:24:55 GMT galeno said:

For me your approach is an unworkable DESIRE.

You will NOT beat everybody out the door. With your equity allocation you'd better be REAL comfortable with a 20 to 25% portfolio decline.

If you want to keep your port drops to less than 10% you need to cut your equities to 20 - 30%.

Agree with both Norbert and Galeno! I don’t think it’s reasonable to expect to “beat everyone else to the exits”. When the market goes down it can be quick and ugly. Look at 2020, quick drop, caught all of us by surprise. By the time you realize we’re in a bear market, we’re already down significantly, and it may be too late. Set aside your “safe bucket” in high quality CD’s, bond funds, and then set up the rest in asset allocation you are “comfortable” with, say 30:70 or 40:60.

I’m OK with holding a high equity allocation as I’m going to ride out any volatility. Leaning strongly towards having a “safe bucket” of 1 million, just as a fall back in case we had a BAD stretch.

I think your fooling yourself if you think you can time it and get out “early”. Just my humble opinion. 

Win

[chang]

Oct 7, 2021 2:21:14 GMT roi2020 said:

Here's one way to approach the problem.
This is based on an article by Jonathan Clements.

Current Value:  $8M
Lowest Value:   $7.2M
Maximum Loss: $800K

Maximum Loss / Stock Decline = x
x  / Current Value = Equity Allocation

To avoid a loss greater than $800K during a 50% stock decline, you can limit your equity holdings to 20.0% of your total portfolio.

To avoid a loss greater than $800K during a 35% stock decline, you can limit your equity holdings to 28.6% of your total portfolio.
Since the maximum loss is only 10% of the current value, low equity allocations are the result when using this method.

This is straightforward math, and guarantees a maximum drawdown ($) based on an assumed drawdown (%), also assuming no investor action whatsoever. My problem with this is that it is superficial and simplistic -- also, that I am prepared to take some specific, pre-planned action(s) as specific events take place. 

[chang]

Many thanks - all - for the feedback. This is exactly why this forum is so useful to me. I will clarify a few things below, but I perceive a few common themes and a coalescence of views from smart people, and I plan to act on them. (In fact, I already have.)

Just to clarify - I already have a large part of my 45% FI in "cash equivalents", namely UST bond. I don't want to digress into what is or isn't a "cash equivalent"; suffice it to say that I consider it to be "cash" within an acceptable margin of error.

I look very favorably on Norbert 's suggestion to carve the money for planned real estate aside, and keep that out of the equation. There was a thread a while back on how to allocate/modify your AA for future events (planned purchases of RE, expected inheritances, Soc Sec., etc.) and there was a considerable population that advocated for not catering for any such expected happenings in your AA. But I was a fence-sitter on that one.

Just to be clear (or not), I was not suggesting or claiming that I would "beat anyone to the exits". Apart from a true one-day crash where the market plummets within hours, I do believe that it is possible -- though perhaps not wise -- to establish a strategy that guarantees getting out with a minimum amount. My OP does that, albeit crudely. We all know that it takes a click of a button to sell. Many people have avoided crashes by setting hard limits on the losses they are prepared to tolerate. The better performers ramp their sales up as the market falls. AGAIN: I am firmly in the camp that timing the market is a fool's game long-term, and agree with Bogleheads that "you need to be right twice" (blah, blah) when you time the market. BUT, once again, I have ridden through three crashes without doing anything, and I think I am extremely fortunate to have survived. I didn't enjoy the experience when I was earning a paycheck, and I suspect I might enjoy the experience even less when I am not.


Based on respected feedback I'm getting here, it seems prudent to do some pruning now, after 18 months of astounding gains, and get my equity at least down to the 40%-ish level, at which point perhaps I will feel more confident resuming a traditional B&H, STC approach, which would undeniably prove to be more efficacious in managing inflation should I live well into my 90s. 

(Edit: richardsok , I saw your note in BSW and figure I am one of the miscreants you are referring to ..... I agree wholeheartedly with your reminder, and also point out again that the $$ numbers in my OP are illustrative and not accurate to my specific case. I am within an order of magnitude of these, but my specific circumstances are beside the point. The issue, in the broadest sense, is how to handle market drawdowns/bears in retirement once your nest egg has reached "critical mass" without imperiling your financial security.)

[Deleted]

Apologies if this has been brought up - have you adjusted equity return expectation (reversion to the mean) and for inflation?

[FD1000]

Despite what several said above, I'm in the timing camp. I have already been practicing it since 2000, but since 2013 I sell to cash, see (here).  In my second thread, I explained what I started doing since 2013..."I added 2 new rules based on quicker market movements, sell any stock fund if it loses more than 6% from last top and sell any bond fund with more than 3% lose. This means, sell to cash and wait for the next entry to follow within days-weeks. My numbers show, I was in the market over 90% of the time and missed all the big meltdowns. I was a lot more interested to reach my goals and retire on time."

I retired in 2018. I hold only bond OEFs, but I trade risky stuff for hours to days since retirement. My goal is never to lose 3% from any last top, which follows my 3% rule for bond funds, but I sell prior to that based on my "very risky markets" assessment. That assessment worked pretty well.

The only question is when to enter? It is based on 4 things:
1) Technical analysis 
2) "very risky markets" assessment.  I posted about it so many times and hardly anybody paid attention. 
3) No more than 5 funds, since you can trade very easily when you need to.
4) I was never out more than 3 weeks at any time.
The only way you can learn how to swim is actually doing it. The key of course is to write down your system and execute it under pressure. I don't see any pressure when you have enough. Suppose I made a "mistake" and I stayed in cash 2-3 weeks too long, it had negligible effect on my portfolio. What most don't realized that missing the worse days is much better than the best days. Markets go down much faster. See below.

You can do the above with different asset allocation from 20/80 to 80/20 or you can do with a % of your portfolio.

How much time do I spend on the above? Minutes per year because very risky markets happens every several years. Since 2013 I was out 5 times, three times about 3 weeks and the other two 2-3 days. There is no way to do the above or anything similar on autopilot.

What is the chance that anybody on this forum will do it? Zero 

Attachments:

[saratoga]

Several good target date funds together with several good balanced funds should be able to do the job.

[galeno]

FD. Your trading / timing system looks interesting.

For me it costs too much TIME and attention. Plus it's new and strange. You and those who are successful with it should stick with it.

The beauty of our 2 fund port is I can completely ignore it until we have to raise cash from either our TWSM ETF or our TWBM ETF.

Wife and I went thru 3 stages of investing over the last 36+ yr.

1. Managed mutual funds (10 yr)
2. 75/25 using individual stocks (11 yr)
3. Boglehead (15 yr)

A long slog to keep more of our investment gains in our pockets vs those of Wall Street and governments.

[FD1000]

Oct 7, 2021 21:39:04 GMT galeno said:

FD. Your trading / timing system looks interesting.

For me it costs too much TIME and attention. Plus it's new and strange. You and those who are successful with it should stick with it.

The beauty of our 2 fund port is I can completely ignore it until we have to raise cash from either our TWSM ETF or our TWBM ETF.

Wife and I went thru 3 stages of investing over the last 36+ yr.

1. Managed mutual funds (10 yr)
2. 75/25 using individual stocks (11 yr)
3. Boglehead (15 yr)

A long slog to keep more of our investment gains in our pockets vs those of Wall Street and governments.

 
Boglehead is great KISS buy and hold way, but you can and will lose in the future 15-25%. I don't ever want to lose more than 3%.
All/most categories are inflated/overpriced.

As I said before, it takes very little of my time and I'm mostly invested at 99+%. When I'm gone I have orders for my wife to own just 3 VG funds and have about 1/3 in each (high-rated bonds, high-rated HY bonds, stocks(mainly US)). I also told what is the order to sell when she needs money and from what account. This means, no adjustment, no cash handling, no replenishment. Just like now, several thousands in our bank account and the rest (99+%) should be invested all the time for her. 

The following is a similar case since 2002(link).

[galeno]

I actually like equity bear markets. I expect to lose ~ 20% of port periodically.

The ONLY reason our world equities based port is slightly ahead of our US equity based benchmarks since 2006 is because of over-rebalancing. Twice.

We over-rebalanced in Jan 2009. And again in April 2020.

"Boglehead is great KISS buy and hold way, but you can and will lose in the future 15-25%. I don't ever want to lose more than 3%.
All/most categories are inflated/overpriced."