Agree. Understand your viewpoint
That’s exactly original query … what can be plan B or C ?
I also do not have an answer for it. so Trying to find out what I can do, in order to ensure plan A does not fail.
Agree with the second part that complexity can be overkill and like most other things in life like simple strategy wins most of the time.
However, when I am at retirement, the first part needs to be relooked.
This is a graph from psychology of money which tells how “inflation adjusted” US stock market behaved in different time periods.
Experts may disagree but there is no assurance that it may not happen in India for an extended period of time. or how Japan stock market moved… There can be black swan effect.
What I am simply saying is that once I am retired the risk tolerance goes down .and that’s what the original question is.
Agree. Multi Asset portfolio and periodic rebalancing is not designed to beat the best performing asset in that year. It will never be.
It just ensures that drawdown is capped. and again it works best if complexity in decision making about asset allocation is removed.
It is supposed to reduce fluctuation
Ok… I do not have any patented secret! however now I think the thread should be moved to “personal finance” from “Versity” 
Although its not rocket science, trying to give a bit of a detailed explanation so that I can get feedback on where I can improve…
it might test your attention span though !
fundamentally I wanted to build retirement portfolio or part of it using asset classes which are uncorrelated (as far as possible) to minimize drawdowns and maximize returns
This table indicates (one way) to achieve a point of minimum variance.
Effectively start with an equal proportion of all four components
- Nifty
- US NASDAQ
- Gold
- Liquid
and re-balance every year once. (while withdrawing money from kitty)
However, I do believe in India’s growth story , and wanted to ensure NIFTY has more weightage to be on efficient frontier. Its possible to allocate more % to nifty but it (slightly) complicates rebalancing.
So my current retirement portfolio looks like equal weight of
- Nifty index
- Nifty Next 50 index
- 200 Momentum 30 index
- Low volatility index
- Gold index
- US Total market index
- Medium duration debt fund
- Liquid fund
And aim is to rebalance every year to have exactly the same amount in every class. Esp while withdrawing.
Selected momentum and volatility index as intuitively (haven’t calculated) they seem to have low co-relation with each other. no particular resoan to select Next 50. I could have selected two different nifty index to ensure equal distribution.
Is it the only way?
There are may ways to skin the cat, e.g. Probably alpha index would have been better fit than momentum index.
Does it work?
When we are withdrawing… less drawdowns seems to help in preserving capital.
The 7/12 study shows asset diversification “and” rebalancing helps in preserving capital .
100 % Nasdaq equity only portfolio gave 9.52 % returns during study period and 7/12 diversified portfolio gave 7.76% returns
However, something strange happens when you are withdrawing every year from kitty.
After 20 Years of Withdrawals balance Value is less for equity only portfolio than diversified portfolio.
What is magic here?
Its because lower drawdown combined with sell high strategy helps lower erosion of capital (with respect to single asset portfolio.)
Even after inflation adjusted 4% (any fixed number) withdrawal every year , my capital is increasing irrespective of economic cycle/phase. This will ensure that I don’t have to make decisions when I am in my 80s or 90s… Its like buying annuity plans but far greater returns.
I think this what my expectation from retirement fund,
Questions/Feedback/comments/suggestions welcome !