All that information didn't really answer anything. The long held view on investing is still sound advice; that one should stay diversified and become more conservative as you age . That is a broad brush and everyone's situation is different. Not everyone has the same time frame or starting at the same point. It's really a function of where you are starting from and where you want to go. It's not unlike planning a trip. GPS has been a major boon to travel planning, so perhaps something similar would be helpful for investing. It's my vision for InvestEngines.
We do start with one ominous observation mentioned earlier: the 2020's may significantly under-perform the previous 10 years. So what's an investor to do? There is no precise answer, just a likely range of possibilities. In the long term, the possible outcomes are a bit more predictable than in the short term. But even with good historical models there is no precise answer. I could argue that total returns for equities over the 2020's may average anywhere from about -2% to 6% per year. The odds favor the lower end of that range, especially if interest rates rise significantly. The odds favor the higher end if they rise little or slowly.
So sit tight?
More often than not, over the long run getting out of the market during a crisis is net negative relative to simply hanging in and doing nothing other than staying diversified. If you are a long term investor and don't have the time or stomach to deal with a more active and potentially risky strategy, just stay in the market and stay diversified. The Vanguard 5 portfolio, or its equivalent from "The Bucket List" will do the job. But be willing to accept lower average returns and more relative volatility in the 2020's. (Consider using a Monte Carlo simulator, as discussed in the RISK article, with sequence risk to test what that means to you.)
Or plan a trip!
It may be difficult for you to simply adopt a passive acceptance of a diminished future, as it is for me. So, what are the options beyond simply accepting "expert advice"? My biggest complaint about expert advice is that it is rarely accompanied by a detailed view into how that same expert advice failed in the past, and how it can fail in the future. (Since the financial crises, almost any investment strategy has worked well as the market rose off historical lows and interest rates have stayed low, so please ignore anyone who uses the past 5 or 10 years performance as indicative of what lies ahead.)
The path I've chosen to explore is whether or not learning machines could "smooth out" investing returns and guide my investing decisions. My first effort, the algorithm focused InvestEngines 1.0, proved helpful. Armed with all the insights gleaned from the mountains of data it consumed, I've kept at it. The latest iteration of the learning machines, InvestEngines 2.0, uses a slightly different approach. It is a very simple neural net that seeks out more consistent risk adjusted returns than a benchmark diversified portfolio. It generates more insight into asset allocation options and the difference between elevated risk and actionable risk.
Over the past 25 years, the worst 10 year average return for the benchmark diversified portfolio was just under 4%. InvestEngines' asset allocation raised that worst 10 year average return to just over 10%. It's worth a closer look to see if a learning machine could help improve things going forward.