Should You Change Your Investment Strategy?

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Investors love to talk about their winners, but you rarely if ever hear about their bad decisions. This selective memory is true across all levels of investors, from people you and I may meet at a dinner party to the most prestigious venture capital funds in the world.

I’m going to go against the grain. A few years ago, I made some changes to our portfolio. I reviewed the outcomes of changes I made to our personal investments.

I’ll share the good, the bad, and the ongoing challenges these portfolio changes create moving forward….

Creating and Changing a Personal Investment Policy Statement

I encourage all investors to create a personal investing policy statement and I’ve created a PDF to help you do so. The purpose is to have a well reasoned written plan to which you can refer. This can prevent emotional decisions when you are not calm and thinking clearly.

But no plan is perfect. We change and the circumstances around us change.

This was where we found ourselves in 2020.

Timeless Principals vs. Timing the Market

We were faced with a dilemma. Our written investment plan called for us to be long-term buy and hold investors in stock and bond index funds with an allocation of approximately one year of living expenses in cash.

The pandemic downturn made us realize we were exposed to more stock market volatility than we were comfortable with. We felt lucky to have a “do-over” when the stock market rebounded quickly. We wanted to decrease our portfolio’s volatility, ideally without sacrificing too much return.

However, we didn’t know where to put money if we took it from our stock allocation. Our previously outlined plan called for us to put more money in bonds over time to decrease volatility and preserve capital. 

We failed to do so at the end of 2019. Due to the poor-risk reward profile of bonds with interest rates near all time lows, adding more bonds made little sense. During the pandemic, rates were cut even further. At that point, bonds made no sense.

Related: Retiring With Extreme Low Interest Rates

We could increase our allocation to cash. However, with a long time horizon and with extreme low interest rates, we knew getting too conservative held its own risks. There were risks that our money’s purchasing power would be eroded by inflation.

Fear and greed lead to many investment mistakes. The past two years seem to have been a real time case study of greed. We were not caught up in that FOMO crowd chasing ever larger returns…. but were we allowing fear to dominate?

I decided to start looking at investments that were not in our current asset allocation and investment policy statement.

Being Right Once….

If I can set aside humility for a second, I have to say I nailed it by seeing how risky bonds had become. Allan Roth recently published a piece in Barron’s explaining that By One Measure, 2022 Bond Crash Is Worse Than Stocks During The Great Depression.

Roth writes that 2022 aggregate bond returns compared to expected returns are “5.5 standard deviations, which should happen once every 50 million years.” To again find my humility, I must admit I had no idea interest rates would rise this much this fast or that returns would be as bad as they’ve been.

However, I do know the basic fundamental reasons we initially chose to include bonds in our portfolio, and two of three of these fundamentals no longer were true in mid-2020. I also know the fundamentals of the relationship between interest rates and bond values.

So I had strong conviction and solid reasoning to not want to add more bonds to our portfolio, and was even considering decreasing our bond allocation at that time.

…. Isn’t Necessarily Enough

However, here lies the real challenge in any investing strategy that involves straying away from a defined plan and formula. Even if you are right one time, that’s not enough.

You have to be able to determine what is going to happen. You also have to determine when it will happen. And you have to be right AT LEAST twice, knowing if and when to get out of an investment, and then if and when to get back in.

I looked back at the blog. I was writing about altering our portfolio in May and June of 2020. Shortly after, I started to make some changes.

I’ll analyze changes I made compared to the status quo. I also need to consider an uncertain path forward from today. I obtained pricing data used in my analysis from

The Status Quo

Our status quo portfolio consisted of 75% stocks, 20% bonds, and 5% cash.

I will use the Vanguard total stock market index (VTSAX) as a proxy to the stock portion of our portfolio. The first change I made was shifting 5% of our portfolio away from stocks to a new asset class, gold, starting in July 2020.

The bond portion of our portfolio was split evenly, 50% allocated to a total bond market index fund and 50% to intermediate term TIPS. I’ll use Vanguard’s Total Bond Market Index Fund (VBTLX) and Vanguard’s Inflation Protected Securities Fund (VAIPX) to assess bond performance.

I also elected to purchase the maximum allowable amount, $10,000 each of I Bonds for my wife and I over the past two years. This replaced an equivalent amount that would have been allotted to our original bond investments when rebalancing.

Cash is held in a high yield savings account. We did not change this allocation.


Stocks have had a rough 2022. The price of VTSAX shares has dropped from a high of $118.25 on January 3 to $96.51 as of November 15th, 2022, a decrease of 22.5% (not accounting for dividends paid).

This represents a typical bear market in stocks and is the reason we wanted to shift some our portfolio away from them. However, this also represents cherry picking the worst data since stocks reached an all-time high at the beginning of the year.

I looked back to July 1, 2020, when we decided to change our portfolio. VTSAX shares were trading at $76.61. Had I simply stayed the course, despite stocks’ poor performance in 2022, I would have seen my investment increase by nearly 26% over the past two plus years through November 15th.

I was right that stocks were at risk of a significant drop. I was wrong by eighteen months and $42 about when and from what price point that drop would occur. In the interim, they went up significantly. I would have been better off staying put.

I shifted 5% of our portfolio out of stocks. On a hypothetical $1 million portfolio that is $50,000. Had I stayed put, I would have been up about $13,000 without dividends. With dividends, the total return would have been closer to $15,000.


Bonds have had a similarly rough 2022. The simultaneous decrease in stocks and bonds was the exact scenario I was worried about and the reason I didn’t want to put more money into bonds.

VBTLX started the year at $11.19 per share and dropped to $9.39 per share as of November 15th. This is a decrease of 16% (not accounting for interest paid). This drop coincided with the rapid rise in interest rates this year.

Looking back to when I initially made my decision to change our portfolio, VBTLX shares were trading for $11.61 on July 1, 2020. From this price point, VBTLX prices have dropped 19%. However, getting out of bonds would mean giving up interest payments produced in the interim. Factoring those payments in, VBTLX is down closer to 15%.

VAIPX, a fund of treasury inflation protected securities, have followed a similar trajectory to other bonds despite recent high inflation. From the beginning of the year, through November 15th, VAIPX share prices have dropped 16%. From July 1, 2020 their price has dropped about 13% before factoring in interest paid.


High yield savings account rates were under .5% in 2020. They’ve gradually risen since. Ally, a popular online bank, is advertising a 2.75% rate at the time of this writing.

The benefit of having money in cash in an FDIC insured bank account is that you will never lose any nominal value. The risk, which has been highlighted recently, is that the actual purchasing power of your cash will be eroded by inflation over time. 

This year, having this asset that has at least maintained its nominal value while starting to produce a little bit of interest income has been a valuable piece of a portfolio in comparison to other assets that have lost substantial value.

However, we must again remember that over time money held in cash is losing purchasing power. While cash looks pretty appealing this year, if we would have gone to cash in July 2020, we would have missed out on substantial price appreciation and dividend payments stocks have produced.

The Changes

I decided to make two changes to our portfolio. In summer 2020 I decreased our stock allocation by 5%, shifting the proceeds to a gold ETF (IAU). One year later, I began shifting a portion of our bond portfolio into I Bonds. 

The motivation for these moves was to address the potential risk that both stocks and bonds would perform poorly at the same time and not provide the diversification benefit we’ve become accustomed to. I felt this was a strong possibility due to market and interest rate conditions at that time. 

That is exactly what happened this year. But that only matters if the alternatives did better. Let’s take a look.


As I looked at alternatives to those already in my portfolio, I was hoping to find something not correlated to stocks and bonds. Gold has an interesting profile. Over the long term, it is very volatile, provides no income, and little to no growth in value above inflation. Not a great investment!

Yet in small doses, it significantly increases portfolio returns and decreases portfolio volatility in backtested portfolios. This is due to the benefits of rebalancing this asset that has low correlation with stocks and bonds, particularly in periods when stocks and bonds are both doing poorly.

I decided to take 5% of our stock allocation and shift it to an allocation to gold. At the time I reported this decision, several readers commented that adding some gold was smart, but 5% of a portfolio wasn’t enough to make a difference.

Related: Going for Gold

I didn’t have a lot of conviction in holding any gold. So I chose a small enough allocation that I was confident I would stick with it as a long term holding despite my lack of conviction, but a large enough position that it could make some difference in portfolio performance based on my backtesting.

This year, both stocks and bonds have done poorly. So how has gold done?

Gold is down 3% year-to-date as of November 15th. Looking back to when I made the decision to add it to our portfolio, gold is essentially the same price as it was in 2020, but with considerable volatility, no income produced, and nontrivial holding costs incurred along the way.


As I was doing my research on gold, I read compelling arguments that gold may not perform as it has in the past. There was an argument that Bitcoin would assume that role, functioning as a “digital gold.” 

These arguments led me to give serious consideration to adding Bitcoin to our portfolio. I decided not to do so for two reasons. 

I realized that part of the allure of Bitcoin was that it had much more potential for price appreciation than gold. But as I reflected, the reason I was looking to make changes was to be more defensive. Bitcoin also had much more potential to go to zero than gold. In a worst case scenario gold has value for jewelry and industrial uses.

Second, I was concerned about storing Bitcoin securely. Storing it on a hard drive where it was at risk of fire, theft, loss of passwords, etc. was unappealing. The exchanges didn’t seem mature and thus secure. This further increased the risk that my investment in Bitcoin could go to zero, even if Bitcoin itself continued to have value.

It is interesting to also compare this change that I didn’t make to our portfolio, but seriously considered.

As disappointing as gold has been during this time of poor stock and bond performance, there is no comparison to Bitcoin. Year-to-date, Bitcoin is down a whopping 65% as of November 15th.

Interestingly though, looking back to July 2020 when we were altering our portfolio it gives a different picture. Bitcoin was then selling for $9,134. It peaked last November at $64,400. 

Even after losing 75% of its value from its peak price, Bitcoin is still up 81% from its July 2020 price.

I Bonds

The other change to our portfolio was to add I Bonds. In 2021, I compared I Bonds to TIPS. Shortly thereafter, I began buying the maximum allowable allotment ($10,000/person/year) for Kim and I.

Unlike adding gold, I Bonds were not a great departure from our previous holdings. I Bonds function similarly to TIPS. 

However, due to the extreme interest rate environment at that time, I Bonds were starting with a higher fixed rate (0% for I Bonds vs. negative rates for TIPS). I Bonds also don’t have any interest rate risk if rates go up, while TIPS do (see TIPS poor 2022 performance despite very high inflation as reported above.)

Unlike adding gold, I bought the I Bonds with great conviction. I purchased our maximum allowable allotment of I Bonds in 2021 ($20,000) and then did the same again in January 2022.

Despite the rise in interest rates that hurt other bonds, non-marketable I Bonds have lost no value. Due to high inflation, our I Bonds have increased in value by over 10% while our other bonds are down by over 10%.

However, due to the purchase limits on I Bonds, the net effect is only a couple thousand dollars difference. Nice, but not life changing. And not enough to make up for the lost return attributed to buying gold.

Moving Forward

I spent time and mental energy analyzing and altering our portfolio. My thesis that bonds and stocks were likely to both lose significant value simultaneously was correct. Still, the results were not impressive.

I would have been significantly better off through this point just sticking with my stock allocation and never having added gold. Now I have to decide if my thesis that gold would do well when everything else does poorly was wrong. Or am I judging too quickly and at risk of giving up on gold at exactly the wrong time?

Bitcoin returns have far outpaced the stocks I sold off and the gold I replaced them with. However, it has been an incredibly volatile ride. Bitcoin has been highly correlated to stocks and bonds this year, when I wanted something uncorrelated. And all of the reasons I didn’t allocate to Bitcoin in the first point are even more prescient today.

On the bond side, I was absolutely right at the time. But conditions have changed.

I Bonds with a 0% fixed interest rate don’t look as promising as TIPS which now have positive yields. The flip side of no interest rate risk that was so attractive when rates were so low is that I Bonds have no potential for price appreciation if rates drop, again a possibility.

I Bonds also require holding them for at least one year before redeeming them. You also surrender the last three month’s interest if redeeming them after a year, but before a five year holding period is met. So the I Bond gains I have on paper would be reduced for the bonds bought in 2021. I can’t yet sell the 2022 bonds.

Take Home

By straying from a simple buy and hold strategy I underperformed the status quo and created more decisions going forward.

At the recent Bogleheads conference, I heard the well known John Bogle investing mantra that flies in the face of advice that you hear in almost every other aspect of life. “Don’t do something, just stand there.”

In investing, doing nothing is often the hardest thing to do. Yet it is also the best decision more often than not. The time and mental energy can better be allocated elsewhere.

If you are going to do something, it is wise to take your time and make small incremental movements. It can give the feeling of doing something, without actually doing anything that causes substantial harm.

Allocating 5-10% of a portfolio to underperforming speculative investments can be a drag over time. But it is a lot better than going to extremes. Ask the fearful investor who sold out of stocks in 2009 and is still waiting to “get back in” or the greedy investor who went all in on the wrong tech stocks or cryptocurrency in late 2021 and got wiped out.

Finally, be careful to judge your successes and failures accurately. 

Don’t beat yourself up too badly if you get these decisions wrong. Learn from your mistakes. Investing is hard.

More importantly, don’t get too full of yourself if things turn out well. Sometimes you just get lucky. Investing is hard.

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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. Now he draws on his experience to write about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. You can reach him at]

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