Take the best ETF you can find with an expected 50% max draw down. Put 20% of your money in that ETF, and the rest in cash.

Outstanding summary.
Also not such a bad idea right now, as (for the moment) cash and T-bill returns are positive after inflation.

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There might (?) be some non-ETF strategies that offer a meaningful positive return on average with a very low chance of a large drawdown.
Some are not intuitive, and perhaps a fair bit of work, but this is potentially an interesting read
http://www.datahelper.com/mi/search.phtml?nofool=y...

If done correctly this offers (to overgeneralize) a decent positive return most years, roughly flat in a few years, and a few years that you know in advance that it's not worth bothering so you have to do something else. This is how I kept myself fed for a number of years, though I stopped using the hedging strategy described. My fund management company was managing some cash for a public company and I used this strategy (almost precisely) for them right through the credit crunch. They made (very low) double digit returns each year, after costs and my fees.

Jim

Mechanical Investing FAQ

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