qandaQ: Should I reduce my stock exposure?

Q: I am retired and holding 40% of my portfolio in stock funds and feeling like I should probably reduce my stock exposure to 30%. What do you think? 

A: If you move from 40% to 30% equity position you will reduce your worst-case losses of the last 45 years by about 1/3. If your goal is to reach your needed return with the lowest possible risk, the question is: will 30% in equities get you there? If it will, I would move to the lower equity position. If you are considering the move to reduce your equity exposure because you think the market is going down, that’s a market-timing decision and my buy-and-hold recommendations are totally unrelated to what a timer should do. 

I have a new Fine Tuning Table that will be released in an upcoming article. I hope it will help in your decision making process as it will compare the worst 3, 6, 12, 36 and 60-month periods for 11 levels of risk, plus the same results for the S&P 500. The 45-year period covered in the study does not necessarily represent the future, but the period did include 3 of the worst bear markets of the last 100 years.