Investment Strategy Considerations/Objections
The uniqueness of this plan is The Cake Trend Identification Line. This indicates in a strong manner what the trend is showing, thus giving confidence at the point of entry. Also, the fact that this strategy is providing a monthly signal means that much of the “noise” of the markets is filtered out, giving a stronger more powerful entry signal.
Mirroring the S & P 500 fulfils the first two pillars of our philosophy. It is the lowest cost way to invest and owning one fund that mimics the broad market is very simple to understand.
In 2019 43.6% of the sales of the S & P 500 came from foreign counties, which provides plenty of foreign exposure without any currency risk.
Simply because adding asset classes like commodities, real estate, small cap equities, etc. only drags down performance (as can be seen on the results page) and raises costs. It also adds a level of complexity that is unnecessary.
Bonds are typically in a portfolio for safety. That safety in this strategy is provided by moving out of the market when the Cake Trend Identification indicates it is time to do so. Also, bond ETFs are relatively expensive and therefore needlessly add to costs.
Doing this would produce higher returns but clearly violates the 4th. Pillar, as it is not emotionally attainable. The max drawdown for a buy and hold of the VTI is twice that of the Cake Investment Plan, which means the vast majority of investors would ultimately panic and sell out near the bottom. This is in fact what happened during 2008-2009.