You Cannot Time the Next Correction

A subscriber who retired recently asked me what she should do with her portfolio now that nothing in the market makes sense. She has to start pulling money out of her portfolio and is trying to balance growth with income.

Once you start withdrawing money in retirement, the order your returns will show up in matters more. This is the thing to build around. It is called sequence of returns. You can do that by holding a few years of spending in an asset class that will not drop. This protects you from selling stocks at the bottom.

That number will depend on your lifestyle. But a good rule of thumb is to have two to three years of what you actually spend from your portfolio.

I published the five engine framework and the five signals I watch for an AI correction recently. She read both of these articles and asked a follow up question.

She retired recently after working thirty years in digital marketing. She has been running her own IRA accounts for years and has built a significant portfolio. But her portfolio is primarily tech and AI focused. Her goals are to derisk and build a balanced portfolio with growth, income and safety as the pillars. Her challenge is the tools and data she used to make those calls have stopped working. For example: The Fed has stopped giving future guidance. Forecasters cannot agree on anything.

Her words: fundamentals and technicals which used to help guide my decisions seem irrelevant.

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