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Would Your Retirement Portfolio Last If The Market Crashed?
This article by author Andrew Hallam has a very simple answer to the question offered in the title of that article: an easy qualified Yes even under stressful market reversals. It's qualified because it uses past market crashes to define the severity of a downturn, and it postulates an investor who has a baseline drawdown schedule of 4% with an unwavering commitment to continue that schedule even as his portfolio diminishes in value. That may not be easy to do.
But if those constraints can be satisfied, Hallam concludes that an easily defined investment program satisfies the portfolio survival issue. Simply buy a set of low cost Index funds and stay the course. No further action is required; don't panic, don't try alternate actively managed funds.
Just buy and go away. Things couldn't be more simple. However, it's not clear to me that spending could be significantly reduced as a retirement portfolio suffers a couple of years of negative returns. It's always good to be flexible, but flexibility has its limits, especially if the food budget comes under attack.
Regardless, not reacting to every market action, and constructing a low cost Index dominated portfolio is not a bad overall strategy.
Comments
This article by author Andrew Hallam has a very simple answer to the question offered in the title of that article: an easy qualified Yes even under stressful market reversals. It's qualified because it uses past market crashes to define the severity of a downturn, and it postulates an investor who has a baseline drawdown schedule of 4% with an unwavering commitment to continue that schedule even as his portfolio diminishes in value. That may not be easy to do.
But if those constraints can be satisfied, Hallam concludes that an easily defined investment program satisfies the portfolio survival issue. Simply buy a set of low cost Index funds and stay the course. No further action is required; don't panic, don't try alternate actively managed funds.
Just buy and go away. Things couldn't be more simple. However, it's not clear to me that spending could be significantly reduced as a retirement portfolio suffers a couple of years of negative returns. It's always good to be flexible, but flexibility has its limits, especially if the food budget comes under attack.
Regardless, not reacting to every market action, and constructing a low cost Index dominated portfolio is not a bad overall strategy.
Best Regards