Track 3 · Lesson 3 · 7 min
Staying invested, cash and buckets
What selling, holding and rebalancing did through real crashes, and how to build buckets.
When markets look stretched, the instinct is to get out. But getting out is two decisions: when to sell and when to buy back. From 2005, $10,000 in the S&P 500 ETF became about $96,082; missing just the ten best days left about $41,692. Of the 20 best days, 14 came during bear markets, often days after the worst ones.
Try different mixes and plans through real crashes:
Checkpoint
In the simulator, what usually happens to a plan that sells everything at the 2020 peak and buys back 12 months later?
The COVID fall lasted 33 days and the rebound was fast. A year out of the market missed most of it.
Buckets are a planning approach, popularised by Harold Evensky, that sorts money by when you'll need it: near-term spending in cash, the next several years in bonds, the long term in stocks. A crash then never forces you to sell stocks at the bottom.
Try it
Build your buckets
A rough sketch, not a plan. Your income, pensions, taxes and timeline all change the answer.
Rules beat moods. Decide now what you'd do in a 40% fall: rebalance back to your mix, follow a trend rule such as the 10-month rule, or simply hold. Writing it down is the cheapest protection there is. The longer version is in Cash, stay invested, or buckets?
Check yourself