Allocating to cash is certainly an option. It's what I did in part since late 2018/9.
If it goes to 90% down, yes I will have lost a lot of money. But what if it goes down 35% and then goes back up? or what if it goes down 70% and you hold all cash waiting for it to drop 90%?
In my view, the best way to think about future returns is in probabilistic terms. Since we're making predictions, my assumed probabilities may be different than yours, and that's ok.
Again remember my goal is not "to be right", because otherwise I would be picking outcome over process. My goal is to position myself in what I consider to be the best way to deal with the future.
My assumption is that the probability of the stock market tanking 90% is much lower than it tanking 50%. I also think US markets have more downside VS rest of the world because they start from higher valuations.
The consequence of the above assumptions is that I am very much underweight USA, and I will go all in* equities at 50% drop, because I also know that should it keep falling, I will (most likely) have fresh money coming in every month.
*except fr a cash cushion of two years barebone expenses, that I ALWAYS keep under any circumstance. I pretend that money doesn't exist.
Seppia wrote: ↑
Sat Mar 21, 2020 4:08 am
Depending on how sure one is about it, he/she should cash out of the relevant amount of equities.
Ie if you’re 100% sure you should go all cash
If you’re 50% sure it would make sense to sell 50% of your equities now.
What are you doing with your money?