I think the risk of a 35% drawdown is too big with this strategy. Even if 20%, it's still too big. Perhaps 15% would be about at the borderline of okay.
No matter how you minimize drawdown from a backward perspective, there is a reasonable chance there will be an event in the future where you will have a 50pct drawdown.
Many of these strategies stopped working in 2008 because the markets became too crowded with players exploring them. Especially the ones that have low drawdowns attract a lot of competition. The writing was already in the wall with the quant bloodbath of 2007.
While I entirely agree in spirit and in context, and I get the point too, the historical specifics as clarified by GPT were:
During the period from 2000 to 2013, the S&P 500 did experience significant drops, particularly during the dot-com bubble burst in the early 2000s and the financial crisis of 2007-2008. The largest drawdowns in this period were:
1. *Dot-com Bubble (2000-2002)*: The S&P 500 fell significantly after the peak in March 2000, dropping about 49% until it bottomed out in October 2002.
2. *Global Financial Crisis (2007-2009)*: The index again suffered a major drop, losing approximately 57% of its value from its peak in October 2007 to its low in March 2009.
However, these drawdowns did not last continuously for 13 years, nor did they result in a cumulative drawdown of 60% sustained over that entire period. The S&P 500 recovered from these lows and even reached new highs within the timeframe specified.
Makes sense. The reason I highlighted is because I'm finding that most people overestimate how safe some investment strategies are without actually looking at the historical data.
Many of these strategies stopped working in 2008 because the markets became too crowded with players exploring them. Especially the ones that have low drawdowns attract a lot of competition. The writing was already in the wall with the quant bloodbath of 2007.