How to diversify your portfolio to protect yourself from market risks? (15/20)

So we end up with a portfolio quite similar to Marc Faber's, with different weightings. For the sake of completeness, let's also note that there is a method similar to that of Marc Faber, the Swiss, recommended by Meb Faber (not to be confused, he's an American). His system allocates 5 assets at 20% each: gold, bonds, real estate, domestic stocks and international stocks. The subtlety is that the portfolio is re-evaluated once a month thanks to a hint of technical analysis.

For each asset, we examine the 10-month (or 200-day) moving average. If the price is above, we stay invested; if the price is below, we switch to cash. Implicitly, cash is therefore the 6th asset in the portfolio, but only during certain periods and for certain positions. Meb Faber would obtain a slightly higher return than the market, but with a volatility much less.

As I am always wary of technical analysis I did some tests on the ETFs gold, Swiss bonds, Swiss real estate, Swiss stocks, and international stocks. The results are interesting, but not extraordinary, because transaction costs must also be taken into account. The method is quite effective for stocks and bonds (slightly higher than buy&hold and with less volatility), but mediocre for gold and real estate. You have to play a little with the moving averages to get the desired effect for each asset. I will soon present, once a month (as in Marc Faber's strategy), a short status report for each type of asset.

Of course, you can also choose to stay invested in stocks at 100%. As long as you can keep a cool head, it's worth it, even if it's riskier in terms of volatility. After all, no matter what happens along the way, it's the result that counts. However, I advise against anyone who doesn't have an investment horizon of at least 10 years and good stock market experience to do so (especially with current prices). Let's not forget that our worst enemy is always ourselves, as Graham said. And I agree with him.

Beyond all the thoughts on portfolio composition, ultimately, it's the stocks you select that are more important. Even if you invest 100% in stocks, you can actually get away with a volatility that remains reasonable if you stick to stocks that pay growing dividends and acquired at the right price. We also reduce risk by practicing dollar cost averaging.