## Any source for: "If markets fall X%, a X/X portfolio will fall X%?

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hesson11
Posts: 133
Joined: Sat Dec 15, 2007 4:18 pm

### Any source for: "If markets fall X%, a X/X portfolio will fall X%?

I'm pretty sure I've seen statements here like "If broad markets fall (or gain) 20%, a 60/40 portfolio will fall (or gain) XX%, and a 50/50 portfolio will fall (or gain) XX%." Is there a way to calculate this or a source where you can find it? THANKS.
-Bob

AlohaJoe
Posts: 3745
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

Multiplication.

If stocks fall 20% and stocks make up 75% of your portfolio then your portfolio will fall .2 * .75 = .15 = 15%

hesson11
Posts: 133
Joined: Sat Dec 15, 2007 4:18 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

Thanks, Joe. Math was never my strength! A real liability in investing.
-Bob

LFKB
Posts: 512
Joined: Mon Dec 24, 2012 7:06 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

I think what you’re referring to is that people assume the stock portion of a portfolio can fall up to 50% and safe bonds like Total Bond should remain about flat.

So if you’re 100% stocks, your portfolio could fall by 50%

If you’re 50% stock, your portfolio could fall up to 25%

If you’re 80 stock, your portfolio could fall up to 40%

Obviously bonds can fall also and stocks can fall more than 50%, but it seems like many use that a rough rule of thumb

ryman554
Posts: 1094
Joined: Sun Jan 12, 2014 9:44 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

hesson11 wrote:
Sun Jul 15, 2018 10:31 pm
Thanks, Joe. Math was never my strength! A real liability in investing.
-Bob
It is a *huge* liability, because without a decent math background, you will be forced to trust others. There aren't a whole lot of folks in the investment community that have your best interests at heart. Even those with the "heart of a teacher"

This community is here to help, and it might be good for us to add to the wiki (if it's not there already) some "investing math for dummies" section. <note, dummies used as generic newbie, not pointed directly at Bob!>

I strongly suggest you to use a retirement date portfolio while you learn. As long as you can resist the urge to get out when the market turns south, a one-fund portfolio is great for you.

willthrill81
Posts: 5731
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

ryman554 wrote:
Mon Jul 16, 2018 8:28 am
hesson11 wrote:
Sun Jul 15, 2018 10:31 pm
Thanks, Joe. Math was never my strength! A real liability in investing.
-Bob
It is a *huge* liability, because without a decent math background, you will be forced to trust others. There aren't a whole lot of folks in the investment community that have your best interests at heart. Even those with the "heart of a teacher"

This community is here to help, and it might be good for us to add to the wiki (if it's not there already) some "investing math for dummies" section. <note, dummies used as generic newbie, not pointed directly at Bob!>

I strongly suggest you to use a retirement date portfolio while you learn. As long as you can resist the urge to get out when the market turns south, a one-fund portfolio is great for you.

For the majority of investors out there, a inexpensive target date fund like those offered by Vanguard (many target date funds are crazy expensive) is almost certainly the way to go.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

galeno
Posts: 1330
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

If the stock market falls by 50% we expect our 40/60 port to fall 15%.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

goingup
Posts: 3206
Joined: Tue Jan 26, 2010 1:02 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

Here's a chart from the BH wiki:

Asset Allocation %
(Stock/Bond) Exposure to
Maximum Loss
20/80 5%
30/70 10%
40/60 15%
50/50 20%
60/40 25%
70/30 30%
80/20 35%
90/10 40%
100/0 50%

willthrill81
Posts: 5731
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

galeno wrote:
Mon Jul 16, 2018 9:57 am
If the stock market falls by 50% we expect our 40/60 port to fall 15%.
Expecting a bond bump in the event of a stock downturn? Maybe, but maybe not. That certainly didn't happen in the 1970s.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

galeno
Posts: 1330
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

Yes. We expect a bond bounce from the 25% in TIPS and the 33% in Interm US treasuries. The 33% in corporate bonds and the 8% in CASH should stay flat.
willthrill81 wrote:
Mon Jul 16, 2018 10:12 am
galeno wrote:
Mon Jul 16, 2018 9:57 am
If the stock market falls by 50% we expect our 40/60 port to fall 15%.
Expecting a bond bump in the event of a stock downturn? Maybe, but maybe not. That certainly didn't happen in the 1970s.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

hesson11
Posts: 133
Joined: Sat Dec 15, 2007 4:18 pm

### Re: Any source for: "If markets fall X%, a X/X portfolio will fall X%?

Thanks for the responses, everyone. I probably overstated my weakness in math. My abilities, such as they are, have gotten me through 67 years of life in pretty good shape, financial and otherwise! But the wiki does sound like a good idea.
-Bob