No. of Recommendations: 5
Then again, if you just held any reasonably diversified portfolio and rebalanced annually over the past 20 years, your biggest problem would be whether to buy a boat or an airplane to soak up the excess cash flow … intercst

I didn’t take the time to do a 20yr analysis but allow me to consider a $100,000 investment starting on 1/3/2007. I will to pick the Total Stock Market fund (VTI) and the Total Bond Market fund (VBTLX) as my investment vehicles and assume a 60% stock / 40% bond allocation /w a rebalance on the first trading day of each year.

If I follow a straight buy & hold /w reallocation methodology, my portfolio on the first trading day of 2015 would be $170,147.

But, if I followed the same buy & hold /w reallocation method with the additional requirement that I would switch the stock portfolio to cash when the switching model suggested that a severe decline was in progress and reestablish the stock portion of the portfolio when the switching model suggested that the decline was over, my portfolio on the first trading day of 2015 would be $201,566.

In that 8yr period, I would have switched the stock portion of the portfolio to cash 3 times … once to avoid the 2008 crash and twice for smaller market disturbances.

Instead of giving up a substantial portion of my portfolio to a severe bear market and then wait for the market to recover those losses, I’ll do the small number of switches of the stock holdings to cash and end up with a 18.5% larger portfolio … allowing me to buy an even larger boat or airplane!
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