Most investors try to time the market - by loading up in stocks or bonds near the peaks, and unloading positions near the troughs.  This is due to psychological pressures of fear, greed and anxiety primarily. Perhaps the best way to combat this human weakness is to run a well-balanced, passive allocation strategy through thick and thin. 

Perhaps the best way to combat this human weakness of getting in at tops and selling near bottoms is to run a well-balanced, passive allocation strategy like WealthMaxBuilder through thick and thin. 

As mentioned above, psychological forces of fear, greed anxiety and even peer pressure make us want to intervene - usually at the wrong times.  Also, most if us would like to think that because we read and study financial reports and journals that we can get an edge over other investors.  With a plethora of information out there today, we can easily get confused and lost in a forest of financial advice.  This often results in us not being able to stick to one viable, simple investment strategy like WealthMaxBuilder.  

Knowing AATR% and risk characteristics of the major asset classes (stocks, bonds, real estate, commodites) as well as of our overall investment portfolio enables us to know how much to allocate to each asset class.  This is achieved by maximing the reward-to-risk ratio of the overall portfolio mix.

The King of the Mountain chart is a long-term line graph with over 90 years of data - showing the cumulative real total returns of the major asset classses (stocks, bonds, real estate, commodites).  It is useful because it is a visual representation of the long-term performance of these key asset classes - it gives us a clearer understanding of the rewards and risks (volatility) of the investments we use to build our passive allocation.

Investment-grade bonds add stability to an investment portfolio.  Because they are contractual obligations that generate interest payments, investment-grade bonds exhbibit much smoother, positively sloped equity curves than stocks, real estate or commodities.  Investment-grade bond funds, especially Treasury bond funds, offer a yin-yang effect when paired with stock funds.  That is, bonds are inversely correlated with stocks, which also helps to smoothen out the equity curve of the overall passive investment portfolio.

If you do the math, you realize that it takes a +100% return to recoup a -50% drwdown - NOT a +50% return. This is because after a significant drawdown, we're working with a smaller pie.  This is a critical concept, because we should try real hard to limit our annual drawdowns to -10% or less.  This is especially relevant to time horizon and compound growth.  Older investors especially can't afford to sit through a -50% drawdown of their overall portfolio as it takes about a decade to recoup such losses.  An -85% drawdown, as was experienced during the Great Depression years of 1928-1932, required over 20 years just to get back to break-even if you were 100% invested in stocks.