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Dave wrote: The S&P has periodic drawdowns of at least 53%. These cannot be waived away as insignificant risks to a naked buy & holder, and they cannot be waived away as insignificant because the drawdowns can be "waited out." Waiting out a drawdown is simply replenishing the principal from work earnings, which are already included in the initial principal calculation no matter how you slice it. In order to invest $100,000 (all at once, *or* over time) in the S&P B&H approach with a guarantee you’ll never have less than $100,000 liquid cash, you must *also* have a side reserve account of (rounding down from 53%) $50,000 to fill the bucket during the drawdowns. That means you must actually have $150,000 of cash, in order to invest $100,000 safely, in an S&P B&H strategy.

My translation. The S&P has historically declined as much as 53%. This means that to preserve principal of $100,000, you'd need a reserve account of (rounding) $50,000.

But, Dave, the decline could be more or it could be less. And money is money, whether you call it "principal" or "reserves." So I don't see how having reserves of $50,000 makes putting your principal at risk more tolerable.

To me, it's a matter of how much risk can one tolerate. One strategy (S&P B&H) may allow you to end up with more money than the other strategy (insured account) but then again, maybe not. The older I get, the less risk I'm willing to bear. Knowing this about myself, I'd rather end up with less, but have it guaranteed, than bear the risk of a 50% (+/-) loss when I can least tolerate it.

By my calculations--which I still don't know how to post to this board--one would end up with more money with a S&P B&H, but not without a lot of risk of loss at an inopportune time that I'm unwilling to bear.
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