Your main risk in the C Fund will be losing
money during bear markets, although you technically do not accept the loss until you sell your entire position.
After all is said and done, if you simply aim to not lose
money during a bear market to protect yourself, do nothing.
Not exact matches
This doesn't mean there isn't a great deal of
money to be made
during the
bear market (on both the long and short side), but at some point we must recognize that our global imbalances all remain.
Using the Mr.
Money Mustache Simple Math method, you'll mostly retire
during a bull
market, and often
during the last part of the bull
market, right before the peak and the next
bear market!
Is the counter that they would behave better
during a
bear market if their
money was in an actively managed fund?
In the introductory text for Part I of their 2016 book, Adaptive Asset Allocation: Dynamic Global Porfolios to Profit in Good Times — and Bad, Adam Butler, Michael Philbrick and Rodrigo Gordillo state: ``... we have come to stand for something square and real, a true Iron Law of Wealth Management: We would rather lose half our clients
during a raging bull
market than half of our clients»
money during a vicious
bear market.
Take too aggressive a stance and your lump sum could take such a hit
during a severe
bear market that it may have trouble recovering even when the
market eventually rebounds, which could result in you running out of
money before you run out of time.
With the C Fund you won't run the risk of your
money being eroded by inflation the only considerable risk you are taking is having your
money invested
during bear market cycles.
This approach generally has been vindicated in the past, as value investors tended to outperform a majority of
money managers over full
market cycles; and this outperformance has been achieved principally
during bear markets, by losing less than most.
The only difference is where a smart investor puts their
money in a
bear market, or a down economy, as opposed to the choices of investment
during a bull economy.
Disciplined investor
During the
bear market, Mr. Ferris not only stayed invested but worked extra hours to generate
money to buy stocks while they were on sale.
However,
during secular
bear markets, staying long produces poor results at best and you could lose a lot of
money.