By Guest commentary Friday, September 5th, 2025

By John Grace

For decades, the traditional investment model has been a set-it-and-forget-it approach: keep 95% in a mix of stocks and bonds, 5% in cash, and let the “long term” work its magic. 

That works fine for young investors adding new money during dips. But for retirees taking withdrawals, especially those with Required Minimum Distributions that must increase every year, no matter what your account does per the IRS, that same strategy can be lethal.

Here’s the brutal math: when markets fall 30–50% (which they have done repeatedly), you’re selling more shares just to meet your income needs. 

Those shares are gone forever, so when markets eventually recover, your portfolio doesn’t fully bounce back, assuming you live long enough. This is sequence-of-returns risk — the hidden assassin of retirement plans. Yet the industry’s advice is basically, “Just hang in there.” 

Easy to say when you’re not the one watching your life savings shrink while your bills don’t.

Now, some think the answer is to pivot into “AI stocks” because, hey, they’re the future. And yes, artificial intelligence is transforming industries. 

But so did the internet in the late 1990s, and anyone who chased dot-com names without a sell discipline remembers how that ended. 

The problem isn’t that AI companies aren’t promising; it’s that the stock market prices in expectations years ahead of reality. Even great businesses can be terrible investments if bought at euphoric prices.

AI stocks today are already trading at valuations that assume nearly flawless execution for a decade or more. 

Any stumble — regulatory pushback, technological bottlenecks, or a broad market downturn—could send them down sharply. And unlike a broad index fund, many AI plays are concentrated bets on a handful of companies. 

That’s not diversification; that’s gambling with a tech theme.

The real challenge is that neither the old 60/40 model nor a concentrated tech bet can protect you in a severe downturn while you’re drawing income. 

What’s needed is an adaptive approach — one that can move partially to cash or defensive assets when markets show signs of sustained weakness, and then re-enter when risk conditions improve. 

This isn’t about predicting tops and bottoms; it’s about having a rules-based system that limits losses when the market environment turns hostile.

Retirement is not a video game where you can hit “restart” after a crash. Once the capital is gone, it’s gone. The traditional model assumes you can survive anything by staying put. 

Reality says otherwise, and chasing the latest stock fad without an exit strategy in advance of disaster is just a faster way to find out your assets are on The Titanic. 

This time is different. Vanguard’s latest 10-year annualized return forecast for US stocks is 2.8%-4.8%, according to Morningstar.

• John Grace is a financial planner and president of Investor’s Advantage in Thousand Oaks.