Loss tolerance — what each allocation lost in three real crashes

Each of the three episodes carries a peak-to-trough drawdown for global equity and one for global bonds, and each allocation from all-bonds to all-equity in twenty point steps is charged the weighted blend of the two. The 2022 row is the one worth reading twice: bonds fell about eighteen percent while equities fell about twenty-seven, so the usual cushion was barely there. Your stated limit is then compared against the worst of the three for each mix, and the mixes that stay inside it are marked. There is no simulation and no probability anywhere — these are fixed historical figures applied arithmetically.

Blending two separate peak-to-trough figures assumes both assets bottomed together, which is conservative for 2008 and 2020, where bonds held up while equities fell, and close to accurate for 2022, where they fell in step. The equity and bond numbers are broad global index proxies, so a portfolio concentrated in one region, one sector or long-duration bonds will have done materially worse. Past drawdowns are a sample, not a bound — nothing says the next one stops where these did.

Why show a loss in euros rather than a percentage?

Because people answer the two questions differently. A thirty percent fall sounds survivable in the abstract, and the same fall stated as the price of a car, or a deposit on a house, is the version that predicts whether someone sells. The failure this page is trying to prevent is not holding the wrong allocation, it is holding the right one and abandoning it at the bottom, which converts a paper loss into a realised one.

Was 2022 really that unusual for bonds?

For a generation of investors, yes. Bonds are held in a blended portfolio on the premise that they rise, or at least fall much less, when equities fall. In 2022 rising interest rates pushed both down together, and a sixty-forty portfolio lost roughly sixteen percent with no cushion to speak of. It is the single best argument on this page for choosing an allocation you can hold through a correlated fall rather than one that assumes diversification will always work.

Does a longer horizon justify a higher allocation?

It raises your capacity to take risk, which is not the same as your tolerance for it. Time lets a portfolio recover; it does nothing for whether you will still be holding when the recovery starts. Both have to be true, and this page is deliberately about the second one — the glide path page is about the first.

• Glide path calculator — equity allocation by age
• Sequence of returns risk — the same returns in a different order
• Lazy portfolios: five configurations that need no maintenance