Earlier today I posted a model portfolio for 25 year old based on a variety of metrics and assumptions and I asked ChatGPT to create a similar one for retirement. Below is the summary response after a long conversation.
AI Response
Below is a maximum drawdown–minimized portfolio, explicitly designed to survive 2008-style, COVID-style, and rate-shock bears with the smallest possible peak-to-trough loss, even if long-term upside is muted.
Maximum Drawdown–Minimized Model Portfolio
(Tier-Weighted + True Ballast + Defensive Bias)
Design Principles
- Cap equity beta
- Use true negative-correlation assets
- Avoid “fake hedges” that crash with equities
- Keep structure simple, rule-driven, and durable
Final Tier Allocations
| Tier | Role | Weight |
|---|---|---|
| Tier 1 – Core Equities | Growth engine | 40% |
| Tier 1.5 – True Ballast | Drawdown control | 35% |
| Tier 3 – Monetary Hedge | Inflation / crisis hedge | 10% |
| Tier 4 – Dry Powder (Cash-like) | Volatility absorber | 15% |
| Tier 2 & 5 | ❌ Excluded | 0% |
Key shift: equity exposure cut to 40%, ballast + cash raised to 50%+
Detailed Portfolio Construction
Tier 1 – Core Equity (40%)
Keep only the most defensive, liquid equity beta.
| ETF | Weight | Why |
|---|---|---|
| SPY | 25% | Broad, quality-tilted large caps |
| QQQ | 10% | Growth exposure, capped |
| IWM | 5% | Minimal small-cap exposure |
⬇️ Small caps intentionally minimized due to worst bear-market behavior.
Tier 1.5 – True Ballast (35%)
Primary drawdown suppressor.
| ETF | Weight | Role |
|---|---|---|
| IEF | 25% | Core ballast, recession hedge |
| TLT | 10% | Crash convexity (rates cuts) |
🛡 In 2008 and early 2020, this sleeve historically rose sharply as equities collapsed.
Tier 3 – Monetary Hedge (10%)
Keep only the most reliable real asset.
| ETF | Weight | Role |
|---|---|---|
| GLD | 10% | Crisis hedge, reserve asset |
⬆️ GLD chosen over SLV/GDX due to lower drawdowns and stronger crisis behavior.
Tier 4 – Dry Powder / Shock Absorber (15%)
Silent but powerful drawdown reducer.
| Instrument | Weight | Role |
|---|---|---|
| Cash / T-Bills | 15% | Volatility dampener + rebalance fuel |
💡 Cash reduces drawdown mathematically and enables buying after crashes.
Stress-Test Expectations (Conservative)
| Bear Scenario | Expected Max Drawdown |
|---|---|
| 2008-style deleveraging | ~-15% to -20% |
| COVID liquidity shock | ~-10% to -15% |
| 2022 rates bear | ~-12% |
📉 Compared to ~-50% S&P 500 drawdowns, this is institutional-grade capital protection.
Why This Portfolio Minimizes Drawdown
What we removed
- High-beta sectors
- Miners and silver (equity-like crashes)
- Concentrated thematic risk
What we emphasized
- Treasuries (actual crisis hedges)
- Cash (zero drawdown)
- Gold (GLD) instead of volatile metals
Correlation Reality
- Stocks ↓ → Treasuries ↑
- Panic → Gold stable or ↑
- Vol spikes → Cash saves NAV
Trade-Offs (Explicit and Intentional)
| Aspect | Result |
|---|---|
| Long-term CAGR | Lower than equity-heavy portfolios |
| Bull-market participation | Partial |
| Bear-market survival | Excellent |
| Behavioral risk | Very low |
This portfolio is designed to keep investors invested, not chase returns.
Optional (Advanced) Enhancements
If you want to go even further on drawdown control:
- Add systematic SPY collars
- Increase TLT during VIX spikes
- Rebalance quarterly only after volatility contraction
My Thoughts
The intriguing thing here is that the 25 year old and retirement models have very similar investment vehicles in them. I like the portfolio and I would probably shift some of the percentages around a bit but not much. This isn’t an income heavy generating portfolio and the reality is that the best approach to retirement is to have a layered approach of investments. My investment portfolio includes stocks, bonds, options trading, real estate investments, gold, silver, foreign currencies, art, and other exotic instruments that I won’t get into here.
Share The Wealth
What does your model retirement model look like? Let me know in the comments below.