How do you mitigate risk of investment loss?

[Hamlet]

Yes, a lot depends on where you are in the accumulation phase. I rode out 2000-2002 without much difficulty.

I had been avoiding Tech and dot.bombs because it was apparent to me that there was going to be a disaster at some point. So I missed most of the ride up, but my decline was much smaller. While everyone else was buying AMZN and EBAY, I was buying REITs and Berkshire

The decline I did face was much easier to deal with because I was buying into the drop, and the amount I was buying was still enough to almost keep up with the declines in my existing portfolio.

Now that my portfolio is much larger than my additions, a drop is going to be harder to deal with. I'm still 100% equities though. With REITs, banks, drug stocks, and utilities available, I've never been able to get myself to bother with bonds. I've upped my cash to about one year of my mortgage, though.

I'm only 35, so maybe bonds will look more appealing when I am closer to retirement. On the other hand, the ~10% drop we had this year didn't phase me at all, so maybe I will just keep on truckin'.

It was somewhat painful but with the increasing equity in my home and my additions to savings, we basically went sideways net-worth wise from about 2000 through 2002 or so.

Then in 2003 it looks like the index went up 28% or so. That year was good to me.

Many people talk about the 2000-2002 slide. If you were in dot-coms or sold on the way down, yes, you didn't do well. If you stayed reasonably diversified, held on, DCA'd into it, and waited for the rebound, you did OK.

But like I said, the heartburn for me the next time may be too much.

2Cor521

 

[lucija]

...
The decline I did face was much easier to deal with because I was buying into the drop, and the amount I was buying was still enough to almost keep up with the declines in my existing portfolio.

Now that my portfolio is much larger than my additions, a drop is going to be harder to deal with. I'm still 100% equities though. With REITs, banks, drug stocks, and utilities available, I've never been able to get myself to bother with bonds. I've upped my cash to about one year of my mortgage, though.
...

My situation in 2001 was very similar... I remember my 401(k) balance getting a bit smaller every month even with new contributions coming in...

Just out of curiosity... is that one year worth of mortgage a part of your AA? If so, you're not really 100% equities. If, on the other hand, that cash is a part of your emergency fund only - what up it now?