Maximizing Returns with an All-Weather Portfolio Strategy

In this video, Matt Blocki highlights the risks of trying to time the stock market and advocates for a diversified, “all-weather portfolio” approach. He shares data on average stock returns during different economic stages, showing the highest returns occur in early cycles, with overall long-term averages around 10-11%. Attempts to outperform the market by timing often result in much lower returns, averaging less than 4%. Blocki recommends focusing on asset allocation, mixing equities, foreign equities, and bonds to achieve consistent, inflation-adjusted returns of around 7% across all economic cycles. This strategy aims to provide financial stability and flexibility to access funds as needed without losses, regardless of market conditions.

Video Transcript

I found that trying to guess, you know, is the stock market going to go up or down? Are we in a recession? Are we in a, you know, early stage? These are questions that if the goal is to, you know, adjust the portfolio but stay in the market, can be healthy questions. If the goal is to try to time the market, they can be really devastating. So I wanted to show some data to back this up. So on the left hand side of the screen here, we have the average returns based upon the type of economy, early, mid, late recession. And the stocks have returned the best in early stage economy cycle. So this makes sense because almost 24% average returns in early because that’s falling after a big drop off. Mid that tapers down to about 14%. Late tapers down to about 5% with stocks. And then during recessions, on average, they perform a negative seven. Now, if you look at all time periods like S and P, over the last 100 years has averaged between ten to 11% compounded. But when you look at the really good, the good, the okay, and then the bad, that’s how it averages out. Trying to time where we are we in an early, mid, late recession and literally take money in and out of the market. Studies have shown that investors that do that end up getting, trying to beat that ten to 11%, end up getting on average less than 4%. So timing and getting in and out of the market is really a fool’s game. It’s an impossible game to figure out long term. So a strategy behind not guessing and just making sure that you have a balance sheet that always supports your life by design all weather portfolio. So if we look at asset allocating, having a mix of equities, foreign equities and bonds here, and depending on your age group, you may not want any bonds, but this is the real return. So this is after inflation. So if we add without inflation, these would be about 7% would be the median returns. Whether you’re in an early, a mid, a late, a recession, 7% compounded growth you’re getting no matter what. And this allows you to stay in and take the timing out of it also allows you to, no matter what’s happening in the market out there, if you have an event that requires your money, whether your kids are going to college, or whether you need money for a distribution, for an emergency or retirement, whatever it is, you’ll have an optionality of where you get the money without taking at a loss.

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