Smart investors should have an asset allocation that reflects their risk tolerance.

If your allocation is based on your tolerance for risk, you won't need to change it when the market crashes or booms -- such an allocation is based on the risk characteristics of the assets over the long term, not their current performance.

The time to change such an allocation is when your risk tolerance changes, e.g. as you get closer to retirement you will probably start to prioritize preservation of wealth over growth.

I mean, if you read Random Walk on Wall Street, you'd think that a smart investor wouldn't try to time the market.

I don't have the stat in front of me, but it's often repeated that all of the biggest gains in the market over the past several decades have occurred on just a handful of days. If you missed those days, you missed those gains.

That is to say that if you try and outsmart the market, the odds are pretty stacked against you that you'll not buy back in at the right time (or you could be wrong about the timing of the correction in the first place.)

This isn't investment advice – usual disclaimer, etc. But, I'd definitely skim through Random Walk if you have a chance.

A smart investor will always have a set of numbers in mind - say 60% stocks and 40% bonds - and every 6 months will rebalance the portfolio to that.

Over decades this will return better returns at dramatically less stress than any other approach.

I'm sure there's some dimensions it's not optimal on, but Vanguard LifeStrategy is a single low fee fund that does this for you. IIRC they have 20/40/60/80/100% equity options.

Here’s my own anecdote ...

After hearing so many people say positive things about Vanguard for so long, I set up an account there. They had pretty much all my disposable cash, in a Roth IRA, for about two years. Rather than begin the predictable uptick in wealth I expected, my results, having about $25K parked there, was that I lost about 300 bucks. I sent several messages asking what I could do about it, their responses were gobbledygook that I did not understand, so I took all my money back out. Praying that I don’t wind up with a huge tax burden this year, due to this mistake.

Here’s my message: regardless of the hype, Vanguard is not for unsophisticated investors. I am looking for an actual human being who can help me invest, now.

What did you invest in? If a 1.2% swing (over how long of a period?) spooked you then you probably want a heavy bond to equity fund/balance.

see, those are the exact sort of questions, and answers, that you are prepared to provide. and you're probably pretty good at it! i am not. that's why vanguard didn't work for me.

i am going to pay an actual human being to give me a list of options, with all the pros and cons spelled out, so i can make limited decisions that wind up with my pile of money growing, instead of shrinking. if that's too much to ask, i'll just keep my money under a mattress, thanks.

> see, those are the exact sort of questions, and answers, that you are prepared to provide. and you're probably pretty good at it!

Thank you, but it really has been a recent thing for me. It's only in the past year that I actually worked out what this all means, passive versus active investments, pensions etc.

> i am going to pay an actual human being to give me a list of options

I totally understand that but do me a favour. Before you pay anyone or start down that route, watch this playlist - https://www.youtube.com/watch?v=_chiIIxMGl0&list=PLXy71rkGuC...

It was accidentally stumbling across that which led to me getting my stuff together. At the very least it should give you a grounding in what to read up so as not to be blindsighted by any financial advice you may get in the future from a professional.

> instead of shrinking. if that's too much to ask, i'll just keep my money under a mattress, thanks.

Inflation is always eating away at your money there, no matter how thick your mattress is ;)

> Inflation is always eating away at your money there, no matter how thick your mattress is ;)

while that's true, if i'd kept my money under a mattress for the last two years, i'd have 300 bucks more than i have now. and with a lot less hassle.

so, here's another story. i hate paperwork. hate, hate, hate. i hate it enough that i pay a guy to do my taxes. i send him the forms as they trickle in, sign what he tells me to sign. he answers my dumb questions about my mortgage and my car loan and other financial stuff, when i ask them. i give him a check for like 200 bucks a year, and i consider it money well spent.

i've been working with this guy for over ten years now. he's proven himself to be absolutely trustworthy. i tried to give him even more money to manage my portfolio, but he is not interested in having that job, so he turned me down.

is it really impossible to find somebody like him, to be my money manager? while i hate paperwork, i am a really good judge of character. i dispensed with half a dozen shysters before i landed on my current guy. i could do the same thing with financial planners.

also, for the record, i started watching the videos. i heard that guy tell the same story, twice, about the woman who is far better prepared to invest (or not invest) in microsoft than i am, because she's steeped in it, day in, day out. um, duh? i am well aware that i am not going to do as well as that woman is, or i wouldn't be watching introductory videos on investing.

this is why i just want to pay a guy like my accountant to narrow down the decision tree for me.

If you think a big crash is coming, you basically want to avoid high-volatility assets, right? So IIUC, you'd just want to move into lower-volatility assets: bonds, money-market funds, or TIPS if you want inflation protection.

A broad market ETF.

Over time, it's nearly impossible to beat a diversified index fund with any other strategy.

Market timing is bad for your money and your sanity.

It's really not that hard to beat a broad market ETF... for example, the SP500 could easily outperform a total market index.

I did a quick check and compared VOO (SP500) versus VTI (total market) and they have an equivalent performance over the past five years (within 0.20% gain), VOO didn't exist ten years ago and missed the last big crash. Both hold the same top ten holdings with the slight less weighting for VTI that one would expect. This may be harder than you think.

For instance: SPY

Depends on what the hypothetical smart investor thinks will trigger the big crash, and how long they predict it to last.

I'd go for farmland near clean water.

If your time horizon is long enough, Bogle would suggest that you don't try to time the market. Buffet obviously held some amount of cash so he could deploy it during extraordinary opportunities (such as the 2008/2009 crash).

Bonds traditionally. Commodities if you know anything about them. Gold/bitcoin if intrinsic value is too 20th century.

I heard about this ICO that involves the blood of young models and smart contracts.

Cant go wrong there. Sad but true.

Non coastal real estate. You know, stuff that will still be land after the seas rise.

Plus some company or other in the Netherlands exporting polder technology.

lol might as well get some canned food, bottled water and a shotgun while you're at it.

Don't be ridiculous.

I don't eat canned goods. Said land can be chosen to have a secured fresh water source. And in the post apocalypse, when you can't count on getting bullets, a bow is a better choice than a shot gun. Bonus points: it takes skill to shoot a bow, so most people can't take your bow and turn it against it.

Duh.

You can always buy puts against your holdings.

Canned goods and shotgun shells?

Commodities possibly I guess.

It's a hard one when the stock market has been the only game in town for about a decade.