Is Now the Right Time to Start Using Stars?

With the market extended by many measures and Stars delivering two strong performance years, the big question is: When should you start investing?

To answer that, we need to weigh the lost opportunity cost of staying out of the market versus the drawdown “risk” of being in. But let’s redefine risk-because drawdowns don’t equal actual losses.

Looking at historical data:

• Over the past 14 years, the ratio of up years to down years is 11 to 1
• The average downside per year over 26 years? Just 6%
• The 20/40 model’s average return over 14 years? 25%
• The reward-to-risk ratio? 4 to 1

Everything points to investing now rather than waiting.

For those just getting started, a gradual approach could work:

• Start with the 10/20 model now
• Move to 20/40 next year
• Shift to 30/30 in year three

My recommendation? Begin with 20/40 this year and hold steady until the next down year-then transition to 40/40 from that point forward.