I'm equally invested in foreign and domestic stocks. So my plan is to watch the average of the S&P 500 percent loss since its peak and EFA's (the ETF) loss since its peak. That came really close to 20% this morning.
When it hits 20% that's a pretty good low. I'll put 20% of my available cash back into equities, as well as reduce my bear market hedge (bearx and fsagx) target asset allocations by 20%. I also rebalance bearx and fsagx when they exceed the allocation by 20%, which I have had to do once already. I've been at 10% of equities) bearx and 5% fsagx for at least a year now. That excludes about 20% cash I've had out for at least a year as well. My first step would be to 8% bearx, 4% fsagx, and 16% cash.
Every time the market average falls another 5% (25%, 30%, 35%, 40%) I'll put another 20% (of the original cash and hedge targets) back into equities. So I'll be fully invested if it drops 40%. That looked like it would be pretty good during 2000-2002.
If the market loses 50% I'll take out some money from a HELOC and add that in too. Maybe only 10% though.
That's the easy part. The thing I haven't figured out yet is what I will do if the market just goes up from here. I won't be adding to my bearx or fsagx in any case. I think maybe when the markets get back to 10% down from the peak or so and the economy looks like nothing else really negative is coming I'll start reducing my hedge positions. The other plan might be to start when the hedge positions are about back to the point where I purchased them, or maybe equal in return to my equities. The cash will probably just stay out and I'll burn it during these first years of my retirement. My DW forgot to retire, so that may take a while. The ideal of the cash was to let it carry us through the first few years of retirement in relative safety, then be 100% equities as long as the market was not spiking upwards.
The first part of the plan, buying on the way down, is strictly a mechanical process. The alternate part requires a call of the market bottom, which is not going to be very accurate. But so far I like the results. I can't wait for the market to hit that -20% point!
Dan