The answer is avoiding loss can be exponentially more important than achieving gains
This is consistent with Warren Buffett’s Rules for Investing:
- No. 1: Never lose money
- No. 2: Never forget rule No. 1
As you can see the gain required to make-up for a large loss grows …
Fact: 62% of secular market cycles are bulls (gains) and 38% are bears (losses)
Unfortunately the standard asset allocation strategy (“strategic asset allocation”), is not designed for bear markets. It is only designed for bull markets.
That’s a problem because the growth you earn in a bull market can be decimated when you experience large losses in bear markets. Here is some history…
Secular Bear Cycles
1930s: -71%, 1940s: -49%
1929-1932: – 89%, 1987: – 31%, 2000-2002: – 44%, 2008-2009: – 54%
However there is a flipside to large losses. They create an opportunity to invest at the best point in time … when prices are lower.
Solution: Dynamic Asset Allocation for greater return, less risk, and greater growth
Through a prudent decision making algorithm which utilizes valuations, short and Intermediate indicators, the dynamic asset allocation strategy trims the stock allocation when the primary trend has turned bearish. It’s that simple.
Period: 1966 – 2020
- To see the above backtest, download this xlxs file …
– Start a 3 month trial –