I’ve never believed in getting right out of equities. Odds are it will only reduce one’s returns. However one never wants to be in the position of having to sell low.
So I always try to keep in mind a few past events to challenge my optimism as over the last 40-45 or so years I’ve normally been 80%+ in equities: the Great Depression and Japan 1980-2000
Huge numbers of people were invested in equities in the 1920s and huge numbers of those people had to sell into the massively collapsing markets of the early 1930s. Down around 80% over about 4 years post 1929 crash.
Japan’s economy was the second largest in the world. From its peak it fell about 75% and then stayed way down for decades. So in a risking market institutional money and retail investors tend to pile more and more money into the winning asset category. I imagine that is what had happened in Japan. By about 1990 the retail money management sector had shrunk by close to 90%!!! That shows how disastrous the collapse was to retail investors. Imagine a japanese citizen approaching retirement in 1980 and seeing his/her nikkei equity portfolio fall by 75% and essentially stay there.
On “expectations”, I once owned a 1937 3.25% GoC perp. Before selling it I photocopied it with its remaining attached coupons to show friends and family. Its one of the best examples i’ve found in terms of people looking in the rear view mirror thinking that the future will be like the past!!! A 3.25% perp!!! Unbelievable!
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