The period from 2000 to present was pretty scary for investors. First, there was the dot-com bubble bursting, then there was the Great Recession. All told, someone who put all their money in the market on January 1st of 2000 would have had to wait thirteen years to start getting any return — and it was a turbulent 13 years.

For a retirement portfolio, this is not ideal, and it’s understandable that so many people have stayed away from stocks ever since. But if you spend enough time with us, we’re going to convince you that you need to be in the stock market. What we want to do is make that less scary for you.

So let’s take a peek at how two of our very popular Risk Profiles performed in the turbulent period from 2000 to present. First, we’ll consider the 25% Risk Profile, which guards against portfolio losses of 25%. Then we’ll look at the more risky 50% Risk Profile.

Performance of 25% Risk Profile portfolio vs S&P 500

This is a chart of the hypothetical growth of $10,000. A portfolio that invested 100% in the S&P 500 and held for over 18 years (the gray line) ended with a value of $19,753 — a 97.5% gain. Meanwhile, a portfolio that was adjusted once a month in order to prevent 25% losses grew from $10,000 to $16,670 — a 66.7% gain (green).

The risk measures in place for the 25% Risk Profile portfolio determined that the maximum percentage of the portfolio ever allocated the the S&P 500 was 85.26%. The minimum (during 2008) was 12.92%.

Since the gray line represents a portfolio with no risk mitigation whatsoever (100% invested all the time), we expect it to outperform over time (more risk, more reward!), but at what cost? For more than a decade, a 100% investment in the S&P 500 was underwater, and sometimes by more than 50%!

Our 25% Risk Profile portfolio, meanwhile, never lost more than 20% (it’s designed to never lose more than 25%), and still gained 66.7% over the whole period. We don’t need to cite any complex risk metrics — just look at the chart. If we had to pick one of those two lines for our all-important retirement savings to ride on, there’s no question that we’d pick the green one.

But maybe you’re the kind of person who’s willing to take a bit more risk in exchange for more reward. And if that’s the case, you might be happier with the 50% Risk Profile performance.

Performance of 50% Risk Profile portfolio vs S&P 500

It really is as simple as “more risk, more reward!” This portfolio protects against a 50% decline, and it never experienced more than a 30% decline from peak-to-trough. Thanks to more aggressive allocation, the 50% Risk Profile returned 134.98% — quite a bit more than the S&P 500’s 97.5%.

The minimum S&P 500 allocation of the 50% Risk Profile over the period was 30.72% (during 2008). The maximum was 100%. Compare these to the minimum and maximum of the 25% Risk Profile (12.92% and 85.26%) and you’ll understand why this portfolio did better.

Much more important than that, however, is that you understand that by picking your own Risk Profile, you get to fine-tune the control that you have over your investment. Don’t want to risk losing 50% of your retirement savings? Despite what other people say, you don’t have to!

Even better? We’re always on the lookout for the risk of another recession so you’re not one of the people who get caught on the wrong side of the market. The period from 2000 to 2018 was exceptionally painful for some investors, but you can be sure that it’s not the last time we see a choppy market.

Still need some more help picking the right Risk Profile for you? Check this out.

Wondering what it looks like when you add leverage to a Safer 401(k) portfolio? You’ll like this.