There is no one model, no matter how successful, that will work for all because each individual has a unique expectation of what "success" looks like. Each individual has a level of risk tolerance, balancing expected gains against possible losses. Some people get very upset if their earnings are not matching market averages. Some get very nervous if they lose some of their principle.
One thing for sure, if you are in the market, you WILL lose money at one point or another. People that find that intolerable put their assets in CDs and make almost nothing at the moment. I have a view that if the market is earning 7% on average and I am in cash at 1/2% I am LOSING 6 1/2% by being in the wrong investment. I also understand that seeking that rate of return exposes me to more risk and possible losses. Personally, it's worth it.
My investment group has a philosophy of minimizing draw down losses because you then recover any losses much faster. For example, in a very bad year the market might drop 25% but I might lose only 8%. When the market recovers I am in a better position and recover faster than the general market. The trade off to that is less up side gain. A hot market might be making 25% but I might only get 14%.
Further, the group uses a mathematical model to guide their decisions. When the model says "Go to cash", they do. When it says "Buy", they do.
Also, the investments are based on MY risk tolerance, which is moderate. I am willing to risk some loss balanced against seeking a little better rate of return. The balance of stocks, bonds, and other instruments is matched to that risk level.
My risk tolerance is moderate because I am not dependant on the income. We have enough earnings, pensions, and Social Security to cover all bills and then some. The investment income is for the perks. An average year will allow a very nice vacation, an upgraded TV, new clothes, some nice gifts, a little extra for church, etc. A great year might allow a new car, redoing the kitchen, buying a new living room set or putting a little aside to offset a bad year. A bad year means you forgo most of the extras. My overall philosophy is that I spend the investment earnings and preserve the principle.
My financial management is matched to my circumstances and personality. There is an infinite number of such combinations of personality and circumstances. The "best" investment strategy is the one that meets YOUR needs and gives you peace of mind.
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