Sorry for off topic, but what I find amazing in this last simulation is that it is actually 100% stocks portfolio that preserved real value, two others with bonds have lost it.
what a nice tool, thanks @Wolverine!
Fascinating is that if you extend the time horizon to before the dotcom crash, 20 years later in March 2020, everything is again at the same point:
So according to this, my theory would be:
- stay invested in 40/60 stocks:bonds
- wait until a stock market crashes and ride it out with the 40/60 portfolio. The stocks portfolio will be more volatile and thus undercut the 40/60
- somewhere along the bottom of that wave*, switch to 100% stocks on the first real sign of economic rebound, until the stocks portfolio catches up its minuses (which it will much faster), then sit back to your cozy 40/60 and wait
- wait for the storm and repeat
*Now only if we could know where the bottom is
zooming out to 27 years (max the graph can do) would still be OK with this approach
blue brackets above are 100% stocks, orange brackets are 40/60
it’s not trying to guess where the top is and the last 2 years are a bit shaky cause the stocks portfolio didn’t fall under the stocks portfolio, so ideally you would’ve not switched and now you would sit in a 40/60, still.
that’s where the theory might break
I actually roughly ran the numbers based on the chart above.
If you watch closely both first and second switch to stocks had a false positive and was plunging afterwards a little more.
However, you are still coming out on top and arrive at a level of… drumroll - about the height of the red line
Personally, I find that the two portfolios including bonds, especially the 40:60 portfolio weathered the situation best!?
I was talking about the final balance and the fact that two portfolios with bonds lost inflation adjusted value.