Most of us think we are agressive investors because we all want best returns.
We see agressive funds deliver high historical returns but these are at the end of a good cycle
These decisions happen in hindsight and at the peak of good times. We regret when cycle turns, which it normally does.
The above chart shows that the % gains needed is always greater than the % loss, just to be even & break even.
(if a portfolio has dropped by 60% then a 150% gain is required to Break Even )
The best way to handle market drawdown is through Asset Allocation strategy.
AA is the process of diversifying across different types of negatively correlated investments and determining how much % to invest in each of them.
This is done scientifically using investor's risk tolerance score, investment goals, and market conditions.
This helps in participating when markets fall and preserve profits when markets zoom
Whenever everyone is gripped by Greed or FOMA- Fear of Missing Out- remember Asset Allocation
