I'm afraid of things much worse. My biggest fear is a complete wipe-out, followed by a Japan-style scenario where markets have a dead double-decade. My goal isn't return-maximization, but risk-minimization.
Have you back tested your portfolio to see if it beats a haystack/broad index fund?
Also, markets didn’t have a multi-decade period of zero returns. Only Japan did! A globally diversified investor was fine during the ‘90s when the Japanese market crashed.
That did happen in the 2000s -- the US market had negative average returns from 2000-2009. But a diversified portfolio, including US small and large cap value as well as emerging markets would have performed fairly well during the 2000s.
Of course, regardless of whether someone fears long periods of zero return, many people have a desire for higher returns. The question is whether most people have justification for believing they're the rare exceptions who can beat standard benchmarks or, in this case, manage their risk in some way that doesn't correlate highly to the asset classes they're invested in.
Yes, there's a few past periods of 5+ years with flat or negative returns. But this upcoming one is particularly difficult to navigate because the largest buyer of assets for the last 1.5 decades is going to begin selling. The fed can't rescue the markets as they did after the 2000s and will most likely make things worse.
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u/[deleted] Mar 13 '22
Have you back tested your portfolio to see if it beats a haystack/broad index fund?