At SageFusion, we emphasize that the insights shared here are for educational purposes only. This post reflects on the year 2020, during the height of the COVID-19 panic, and explores an intriguing portfolio with minimal correlation to the S&P 500. In hindsight, it performed surprisingly well during that period.
One noteworthy portfolio we designed during the March 2020 COVID-19 market crash exemplifies how strategic diversification and currency exposure can help reduce retirement portfolio volatility. In times of market turbulence, many investors panic, but our team at Investment Science relied on data-driven insights to craft a portfolio that aligned with the unique needs of a 62-year-old investor seeking lower-risk exposure with upside potential.
Key Insights from the Portfolio Design

1. Gold’s Performance During Market Crashes: While gold is often considered a safe haven during economic crises, its performance during market crashes has been volatile. In both 2009 and 2020, gold saw significant drops of 60% and 30%, respectively. This shows that while gold may serve as a hedge, it’s not always immune to market turbulence.
2. Retirement Capital Needs: A typical retirement goal often requires roughly $3 million, depending on lifestyle and life expectancy. For those seeking additional income streams, renting out real estate or selling a property to downsize can be viable options. Furthermore, social security may play an important role in retirement planning. The "Rule of 72" is a key concept: dividing 72 by the expected interest rate tells you how long it will take for an investment to double in value.

       A Thoughtful Portfolio DesignTo address the concerns of low-risk tolerance in older investors, we curated a portfolio with diversified bond exposure and strategic currency allocations, ensuring that volatility was minimized while still providing international upside potential.
Suggested Portfolio Breakdown

• Bonds (62% of Portfolio): Bonds are a primary vehicle for stability in retirement portfolios, especially when recession risks loom. With the current economic climate suggesting a 1-2 year recession, bonds provide the necessary stability, while exposure to international currencies could enhance returns. Below are several bonds we recommend for their security, attractive yields, and currency diversification:
  1. Pepsi Bonds (Swiss Franc) - 2% of Retirement, 8% Yield
     Link to bond
  2. Albertson’s Inc Bonds (USD) - 2% of Retirement, 7.46% Yield
     Link to bond
  3. ADT Bonds (USD) - 2% of Retirement, 8.03% Yield
     Link to bond
  4. American Express Bonds (USD) - 2% of Retirement, 7.56% Yield
     Link to bond
  5. General Dynamics Bonds (USD) - 2% of Retirement, 9.67% Yield
     Link to bond
  6. Verizon Bonds (USD) - 2% of Retirement, 8.04% Yield
     Link to bond
  7. Toyota Bonds (USD) - 2% of Retirement, 5.11% Yield
     Link to bond
  8. United Health Group Bonds (USD) - 2% of Retirement, 5.92% Yield
     Link to bond
  9. Viacom Bonds (USD) - 2% of Retirement, 5.83% Yield
     Link to bond
  10. Mortgage-Backed Security (NOK) - 2% of Retirement, 5.4% Yield
      Link to bond
  11. South African Bonds (ZAR) - 1% of Retirement, 10.21% Yield
      Link to bond
• Stock Exposure (32% of Portfolio): In times of market uncertainty, the stock market may experience significant downturns. However, focusing on low-cost, value-focused exchange-traded funds (ETFs) that trade below their net asset value (NAV) can provide an opportunity for long-term growth once the market stabilizes. Here are some stocks and ETFs to consider holding until the market hits bottom, with the potential to deliver stable returns in the long run:
  1. EWEM - 1% of Retirement, Safe and Trading Below NAV
  2. RAVI - 2% of Retirement, 2% Yield
  3. GSY - 2% of Retirement, 2% Yield
  4. CYB - 2% of Retirement, 2% Yield
  5. LDRI - 2% of Retirement, 2% Yield
  6. MBSD - 2% of Retirement, 3% Yield
  7. SCHO - 2% of Retirement, 2% Yield
  8. AGZ - 2% of Retirement, 2% Yield
  9. GNMA - 2% of Retirement, 2% Yield
  10. PHDG - 2% of Retirement, Safe ETF
  11. CBON - 2% of Retirement, 3% Yield
  12. BTAL - 1% of Retirement, Long-term Hold

The Takeaway: The key to minimizing retirement portfolio volatility lies in diversifying your assets, incorporating strategic bond exposure, and balancing currency risks. This thoughtful approach provides stability during market downturns and potential for growth as the market recovers. By staying informed and considering the right mix of bonds, real estate, and equities, you can help protect your retirement savings and achieve long-term financial success.

If you’re looking to explore ways to manage your retirement portfolio more effectively, consider scheduling a consultation with one of our experts at SageFusion. We’re here to help you navigate the complex world of investments with the latest tools and insights.

While many financial experts advocate a long-term "buy and hold" strategy, it’s essential to recognize that severe market downturns can coincide with pivotal life events, such as retirement, resulting in prolonged recovery periods.

Moreover, the perception of gold as a safe haven during market volatility requires reevaluation. For instance, gold saw a 60% decline in 2008 and a 30% drop in 2020. These downturns occur because, during extreme market stress, both individuals and institutions often engage in a "flight to safety," leading to the liquidation of all assets, including bonds. Consequently, almost all asset classes can crash simultaneously—a phenomenon that is further exacerbated by the widespread use of exchange-traded funds (ETFs).

Since ETFs encompass a diverse range of assets, their mass liquidation can lead to correlated declines across various asset classes, undermining traditional diversification strategies.

To gain a comprehensive understanding of potential drawdowns, refer to the attached spreadsheet detailing maximum drawdowns during financial crises. This information can aid you in evaluating the resilience of your investments against significant market downturns.

Maximum Drawdowns During Financial Crises

• Please open the attached spreadsheet to analyze your potential drawdowns in various financial crises.

​         drawdowns__1_.csv