Asset Allocation
Stock/bond mixes, rebalancing, and the evolution of allocations like 442.
The ultimate question of asset allocation: if 'up 20 years' and 'down 80%' are each 50-50, which allocation lives well in both?
James says this is the ultimate question every investor must answer for themselves: assume two things each have a 50% chance — the market rises for 20–30 years straight from today, and today is the top with a 80% crash over the next three years. Don't prepare for only one scenario (most people prepare only for 'up forever'). Your task is to find an allocation that, whichever happens, lets you eat well, sleep well, worry-free, earn, and live well — without being forced to change your life by market swings. Investing isn't about making the most; it's about being able to hold with peace of mind and stay alive in any scenario.
Smart Rebalancing: Advanced Rebalancing When You Use Leveraged Funds
An advanced rule for investors who deliberately hold a 2× leveraged fund: in up years, move 30% (or 50%) of the leveraged fund's yearly gain to a money-market fund; in down years, move 2% of total assets from cash back into the leveraged fund. Works without new money.
Cash Is Air, Allocation Is Survival: Retirement Withdrawal Tiers
Asset allocation isn't about earning an extra 1% — it's about surviving a 70% crash plus a family emergency without being forced to sell at the bottom. Workers keep 6–12 months of cash and put the rest in QQQ; retirees pick one of four tiers by withdrawal rate.