Subject: Re: low draw down ETF portfolio allocation
I just thought about one way to reduce the MaxDD. It's not zero effort though, and it doesn't get down to -10% DD. But it does cut the MaxDD from -46% to -23%. 1962 was a very bad time. As was Black Monday (1987). Not much way to predicably avoid things like those.


That is the the S&P500 using the 43 week (10 months or 200 days) SMA. Sell at 4% below the SMA.
Increases the Sortino Ratio from 0.92 to 1.30.
Backtest is monthly S&P500 including dividends, 1950-2017.

Some of that and some of 10 year T-bills could improve the MaxDD (while also reducing the return.)

80/20: -18% (B&H is -39%) (CAGR is 10.7%)
60/40: -13%
50/50: -11%
40/60: -9% (B&H is -20%) (CAGR is 8.3%)

You are giving up a lot of return to get that lower MaxDD. Over the long term, that is a bad deal. But if your period of concern is smaller, like maybe 10 to 20 years, that might be okay.