The Next Market Crash is Coming

Started by BLADEMDA
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BLADEMDA

BLADEMDA

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I have lived through the Dot Com crash of 2000 and the Financial Crisis of 2008 but the next one circa 2028? could be even worse. The numbers being spent on "AI infrastructure" seems to be in the trillions. I am a believer in Ai just like I believed in the internet revolution. However, in both cases the Wall Street got it wrong when it came to valuation and spending. History seems to be repeating itself with Ai, Chips and Data Center infrastructure.
 
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It's not that I don't believe in the merits of Ai or the ability of Anthropic, Gemini, OpenAi, etc to generate profits but rather the scale of money being spent, or overspent, on expensive LLM and Data Centers. We are talking about trillions of dollars for unproven technology to generate ROI on that money. If these trillions don't generate much return then we could be looking at a market crash of historic proportions.
 
Global spending on AI over the next three years (2026–2028) is projected to range between $2.5 trillion and $3.3 trillion annually, depending on how broadly the spending is defined. While core infrastructure and capital expenditures are reaching unprecedented heights, full-stack enterprise budgets spanning software, data management, and services are multiplying the total economic footprint. [1, 2, 3]
 
The Two Catalysts for an AI Market Crash
Economic frameworks identify two primary ways this spending boom could trigger a market collapse:

1. The Equity Scenario (The ROI Mismatch)
  • The Problem: Tech giants are on track to spend nearly $725 billion on capital expenditures, a figure matching almost all of their combined operating cash flow. [1]
  • The Trigger: A single quarter of disappointing earnings reports showing stagnant software growth or corporate reticence to buy high-priced AI tools. [, 2]
  • The Result: A sharp re-pricing of extreme stock valuations. Because companies like Nvidia, Microsoft, and Alphabet dominate retirement accounts, index funds, and pension systems, a concentrated sell-off would erase trillions in retail wealth instantly. [1, 2, 3, 4, 5]

2. The Debt Scenario (The Leverage Fire)
  • The Problem: AI-related corporate debt has climbed to nearly a quarter of all investment-grade bonds. Tech conglomerates and private data center developers are taking on massive loans, using physical GPUs as collateral. [1, 2, 3]
  • The Trigger: Severe hardware depreciation. The moment a next-generation chip is released, older models plummet in value. [1]
  • The Result: If an AI venture fails, the underlying hardware backing the debt is worth a fraction of the loan balance. This could trigger a credit freeze, choking off capital to the broader financial system. [1, 2, 3, 4, 5]
 
Using Nvidia GPUs as loan collateral creates unique structural risks because it attempts to back long-term financial debt with a high-tech asset that depreciates rapidly. This specialized form of debt—pioneered by "neocloud" providers like CoreWeave—has quickly transformed into a multi-billion dollar asset class backed by Wall Street firms. [1, 2, 3, 4]
The recent shift by Nvidia to coordinate over $500 billion in infrastructure financing with firms like BlackRock, Blackstone, and Goldman Sachs has magnified concerns regarding market stability and asset depreciation. [1, 2, 3, 4]


⚠️ The Core Dangers of GPU Collateralization
  • Hyper-Accelerated Depreciation: Traditional physical collateral (like real estate or cargo ships) retains value over decades. In contrast, a high-end Nvidia GPU can lose 30% to 40% of its resale value in its first year, and up to 50% to 70% within three years as newer architectures debut. [1, 3, 4]
  • The "Maturity Mismatch" Treadmill: Many GPU-collateralized loans and asset-backed bonds run for five to ten years. Because Nvidia operates on an aggressive hardware release cycle, the underlying collateral could be completely obsolete and relegated to low-margin tasks long before the debt matures. [1, 2, 3]
  • "Wrong-Way" Risk and Guarantees: Under Nvidia's infrastructure financing framework, the company has agreed to guarantee up to 25% of the collateral's value to reassure Wall Street lenders. This creates "wrong-way risk"—meaning if global AI demand weakens, Nvidia's core revenues will drop at the exact same moment its legal obligations to pay out lenders grow. [1, 2]
  • Global Supply Shocks (The China Threat): The secondary market value of Nvidia chips is vulnerable to external supply gluts. If competitive domestic chip alternatives (such as Huawei's expanding Ascend processor line) flood international or regional markets, rental rates and hardware resale prices could crash overnight, vaporizing the lender's collateral buffer. [1, 2]
  • Circular Financing Vulnerability: Analysts warn that the current ecosystem carries risk of a demand loop. Debt capital is raised to buy Nvidia GPUs, which generates immediate revenue for Nvidia, which then enables further financing agreements. If the end-users (the AI startups renting the computing power) fail to generate sustainable profits, the entire debt chain faces systemic defaults. [1, 2, 3, 4]
  • High Customer and Secondary Market Concentration: The target market for massive GPU clusters is dominated by a small handful of frontier AI labs and tech giants. If a few key players cut back spending or default, the secondary market lacks the depth to absorb and liquidate thousands of repossessed specialized servers without a massive price collapse. [1, 2, 4]
 


Key difference: The dot-com bubble was isolated to tech. The AI bubble is embedded in half of U.S. GDP growth according to the Wall Street Journal.

When it pops, it doesn’t just hit tech stocks. It risks recession.
 
1786817390268.png
 
There is a better way to look at this. The worst we have seen the market crash is around 40%-50%

“Nasdaq Composite: The Dot-Com Bust (2000–2002)


The Drawdown: The Nasdaq Composite peaked at 5,048.62 on March 10, 2000, and fell to 1,114.11 by March 8, 2002 (a -77.9% drop within exactly 24 months). It eventually bottomed at 1,108.49 in October 2002 (-78.2% total).


Context: Extreme valuations and non-profitable business models collapsed as liquidity dried up and interest rates rose.


Runner-up (2007–2008): The Nasdaq dropped -55.6% during the Great Financial Crisis.


S&P 500: The Global Financial Crisis (2007–2009)


The Drawdown: The S&P 500 peaked at 1,565.15 on October 9, 2007, and bottomed at 676.53 on March 9, 2009—a total loss of -56.8% in exactly 17 months (well within the 24-month horizon).


Context: The insolvency of major financial institutions (Lehman Brothers, Bear Stearns) triggered a credit freeze and the worst recession since the 1930s.


Runner-up (2000–2002): The S&P 500 dropped -49.1% during the Dot-Com crash (over 30 months). “

We had an incredible run the last 10 years.

Ok. So my net worth drops from 7 million to 3.5 million? Is that gonna to affect my life? No

My earning potential is my biggest backstop to all this.

So if other docs networth in here are 20 million and they drop down to 10 million. Is that gonna to make them suffer? No

Many young docs networth may be 2 million. And it drops to 1 million. It’s not gonna to phase them.

I don’t live my life thinking when the market will crash anymore.

And 50% is worst case.

Sometimes we do a slap in the face things just can’t keep going up and up.
 

Why the AI Bubble Is Worse Than the Dot-Com and Subprime Crises Combined​

The MacroStrategy Partnership recently published research identifying that the AI bubble is 17 times larger than the dot-com bubble and four times bigger than the 2008 subprime meltdown. The 2008 subprime crisis required $700 billion in taxpayer bailouts. The dot-com crash took 15 years for the NASDAQ to recover.

This time, the bubble is concentrated in seven companies known as the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). Together, these seven companies control 37 percent of the S&P 500. That means, if they crash, every index fund and retirement account goes down with them.
 
https://finance.yahoo.com/calendar/



‘Big Short’ investor Michael Burry issues blunt 4-word warning on AI stocks​

Moz Farooque
4 min read


41
It seems the 'Big Short' Michael Burry isn't easing up on his criticism of the AI trade anytime soon.

The hedge fund investor who became famous for betting against the 2008 housing bubble has spent the past few weeks sharpening his attack on AI stocks, and his latest posts pushed that warning into even darker territory.


In his string of scathing social-media posts, he paired sharp language with charts showing a widening gap between chip stocks and the companies shelling out billions to build AI infrastructure.

Over the past few months, Burry has taken AI stocks to the cleaners, building his case around stretched valuations, crowded trades, and a growing divide between AI chip winners and the hyperscalers paying for the buildout.

The big concern is whether investors may have priced the winners as if the spending boom can keep compounding without disappointment.

Why Burry says the AI trade is nearing trouble​

Burry's latest AI troll was apocalyptic, warning of what could be the beginning of a grueling stock market crash.

More Michael Burry:

According to Seeking Alpha, Burry posted, "The end is nigh," then added, "Dancing with the devil in the pale moon light," a reference to Jack Nicholson's Joker line from Tim Burton's Batman.


Burry wrote that "the AI narrative is nothing more than mass addiction," and warned that "the AI narrative may die a death by a thousand cuts, and I have only seen a few dozen so far."

His charts pointed to two concerns.

AI semiconductor stocks have sharply outperformed the hyperscale cloud companies funding the infrastructure buildout, as well as broader AI beneficiaries. Another chart showed the Philadelphia Semiconductor Index trading near the top of its 15-year valuation range on forward P/E.

Burry argues that chip stocks may have raced ahead of the fundamentals supporting the AI boom.

For perspective, according to Reuters, the chip sell-off hit the tape hard.

The Philadelphia semiconductor index dropped 6.3% on July 1 and another 5.5% on July 2, while the S&P 500 tanked 0.22% and the Nasdaq dropped 0.66% and 0.80%, respectively.




  • Photo by BeInCrypto
    Photo by BeInCrypto
    Steve Eisman has pointed to what he sees as the Achilles' heel of the artificial intelligence (AI) boom, and it traces back to just two companies sitting at the center of it.

    The "Big Short" investor made the case on CNBC's Fast Money. He argues the fortunes of the largest US technology companies now hinge on two startups.

    Steve Eisman Sees the AI Boom's Achilles' Heel​

    Eisman put OpenAI and Anthropic at roughly 70% of AI-related revenue at Microsoft, Amazon, Alphabet's Google, and Oracle. He added that the two accounted for 25% to 35% of cloud revenue at those four.

    "The futures of these massive companies, in a sense, are a bet that OpenAI, Anthropic are going to succeed," he said.
    Click to expand...
    Eisman sees a key threat coming from China. Chinese open-source models cost far less and appear to be winning customers. Sustained share gains by those models could set off a price war across the sector, he said.

    "The Achilles' heel of this whole story ... is if something bad happens to Anthropic and OpenAI ... the Chinese open-end models, are much cheaper. And if they start really taking a lot of market share and it sounds like, from what I'm hearing, that they're starting to, you could have a big price war. And then we have a problem," Eisman explained.
    Click to expand...
    Last month, he sold his Google stake and moved to cash. The executive noted that he wanted to reduce his "exposure to AI."

    Follow us on X to get the latest news as it happens

    Burry Bets Against the AI Trade​

    Eisman is not the only one. Michael Burry, the investor who shorted subprime mortgages before the 2008 crash, ranks among Wall Street's loudest AI skeptics.

    He is short on iShares Semiconductor ETF (SOXX), Micron, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials. Burry also forecasted that US stocks could suffer a 1987-type crash.
 
Gern Blansten said:
The typo on the AI generated infographic really brings it full circle.
Click to expand...
I am hoping my posts about the Ai bubble are wrong. The evidence points to the opposite in that this circular borrowing and funding of Ai companies will lead to a market crash or at least a significant drop. Every Bull market has an ending and the reasons for this one are outlined in my posts with the help of Ai. The irony of my using Ai to disclose the hype of Ai and its costs is not lost on me. Anyone looking to retire in the next 5 years should consider taking profits and make sure their allocation can weather a 3-5 year storm.
 
BLADEMDA said:
I am hoping my posts about the Ai bubble are wrong. The evidence points to the opposite in that this circular borrowing and funding of Ai companies will lead to a market crash or at least a significant drop. Every Bull market has an ending and the reasons for this one are outlined in my posts with the help of Ai. The irony of my using Ai to disclose the hype of Ai and its costs is not lost on me. Anyone looking to retire in the next 5 years should consider taking profits and make sure their allocation can weather a 3-5 year storm.
Click to expand...
Have you acted upon your hunch, Blade? What is your current asset allocation and how has it changed from 3 years ago?

IMG_3661.jpeg
 
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98% of AI is garbage, and we all know it.

I don't know which 2% isn't garbage, and neither does anyone else. Even if they're naive enough to think they do.

I admit some difficulty separating my visceral disgust and hatred for most everything "AI" with more objective concerns about it.


What are you actually going to do (if anything), @BLADEMDA?


Earlier this year I altered the asset allocation in my brokerage accounts (Roth & taxable), shifting the equity portion away from total market and toward value, in order to reduce my exposure to AI. Still 90% equity overall; 30% international, 30% US total market, 30% US large value.

I haven't made any changes to my 401(k) which has been about 40% US equity, 20% value, 20% int'l, and 20% bonds for the last ~4-5 years. I'm waffling a bit, if I want to shift it to make that 30/30 total market / value.

I balance that aggressive allocation with physical gold and a .mil pension+healthcare. And a very low cost of living on some rural property that is increasingly self-sufficient.

I still expect I'll go part time around 2030, but don't anticipate withdrawing from any of these accounts for much longer, so my investment horizon is still longer than a Japan-style lost decade or prolonged down market.


I do expect an enormous, expensive reckoning from the massively wasteful AI spending, but I have no earthly idea if that will happen weeks or years from now.
 
pgg said:
98% of AI is garbage, and we all know it.

I don't know which 2% isn't garbage, and neither does anyone else. Even if they're naive enough to think they do.

I admit some difficulty separating my visceral disgust and hatred for most everything "AI" with more objective concerns about it.


What are you actually going to do (if anything), @BLADEMDA?


Earlier this year I altered the asset allocation in my brokerage accounts (Roth & taxable), shifting the equity portion away from total market and toward value, in order to reduce my exposure to AI. Still 90% equity overall; 30% international, 30% US total market, 30% US large value.

I haven't made any changes to my 401(k) which has been about 40% US equity, 20% value, 20% int'l, and 20% bonds for the last ~4-5 years. I'm waffling a bit, if I want to shift it to make that 30/30 total market / value.

I balance that aggressive allocation with physical gold and a .mil pension+healthcare. And a very low cost of living on some rural property that is increasingly self-sufficient.

I still expect I'll go part time around 2030, but don't anticipate withdrawing from any of these accounts for much longer, so my investment horizon is still longer than a Japan-style lost decade or prolonged down market.


I do expect an enormous, expensive reckoning from the massively wasteful AI spending, but I have no earthly idea if that will happen weeks or years from now.
Click to expand...
Just point out a fact: Japan did not lose a decade, it lost 32 years (1989- 2021). If you account for inflation and asset appreciation in other market (eg USA), at least 50 years?
 
narcotics999 said:
Just point out a fact: Japan did not lose a decade, it lost 32 years (1989- 2021). If you account for inflation and asset appreciation in other market (eg USA), at least 50 years?
Click to expand...
The risk is nonzero but despite the current issues I would not bet against the USA remaining top global dog for (at least) several decades to come, with all of the advantages that entails. There's no plausible heir to US hegemony. Europe can't do it, China is a paper tiger, Russia is increasingly isolated and irrelevant, it sure won't be India or anyone in Africa or South America.

I'm expecting and planning for a boringly prosperous retirement.

If the economy melts down and stays down for multiple decades, if the dollar hyperinflates, the annual return on my 401(k) becomes a whole lot less interesting than the questions of security, whether or not food and fuel are available to purchase, collapse of infrastructure ranging from public utilities to healthcare, etc. I'm not sure there's much point in discussing how to financially plan for that - might as well stay the course.
 
pgg said:
The risk is nonzero but despite the current issues I would not bet against the USA remaining top global dog for (at least) several decades to come, with all of the advantages that entails. There's no plausible heir to US hegemony. Europe can't do it, China is a paper tiger, Russia is increasingly isolated and irrelevant, it sure won't be India or anyone in Africa or South America.

I'm expecting and planning for a boringly prosperous retirement.

If the economy melts down and stays down for multiple decades, if the dollar hyperinflates, the annual return on my 401(k) becomes a whole lot less interesting than the questions of security, whether or not food and fuel are available to purchase, collapse of infrastructure ranging from public utilities to healthcare, etc. I'm not sure there's much point in discussing how to financially plan for that - might as well stay the course.
Click to expand...
This thread is about re-examining one's investments and allocation. PGG's allocation seems sound but perhaps others will read these posts and change from 100% stocks to 80/20 or finally sell over-valued tech stocks and purchase large value or international ETFs. My plan is to maintain my allocation of 70/30 but sell some highly appreciated tech stocks this year and early 2027. I have enough exposure with VTI and the S and P 500 along with several other ETFs that holding too much tech is simply risk I don't need at this time. I like the valuations in International ETFs over domestic large cap growth.

I still expect my overall portfolio to take a 20-25% haircut when the next bear market hits but that is better than a 40-50% decline. The current "Ai boom" looks exactly like December of 1999 to me. At that time nobody thought the raging bull market in tech was going to end either. I believe these Ai companies are spending too much money, taking on too much debt and over-building the data centers. This means that there will be a "reset" in valuations and typically those are dramatic resets. I hope that the overall hit to the market will be more modest in the 20% range but history has taught me the market over-reacts on the way down just as much as on the way up.

Once the first domino falls I expect many others will begin to fall as well. The overall economy will suffer, layoffs will increase and corporate debt may default.
 
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A focus on rebalancing, reducing risk after big stock gains​

The run-up in equities means that many investors’ target asset allocations are off-kilter, Amini said, and he added that makes it a good time to be prudent about rebalancing to reduce portfolio risk. This could mean putting more into short-duration fixed income and money markets, with the idea that as long as the investments earn slightly above inflation, it’s a win, Amini said. He’s been spending more time with clients talking about locking in gains — incrementally taking some of the equity gains off the table and putting them in money market funds or ultra-short bond funds. “I would rather be more prudent ahead of time than worry about things once a potential drawdown has occurred,” he said.
 
As long as the MASSIVE spending continues Ai stocks will continue to benefit from it. Trillions of Dollars being spent on unproven LLM and Ai intelligence when Chinese companies can accomplish similar Ai tasks for 1/10 the costs. However, the party is not ending this week or next so Morningstar has a "buy" on several Ai related stocks:

The AI stocks on this list were among the index’s top constituents and earned

Morningstar Ratings
of 4 or 5 stars, meaning they were undervalued as of Aug. 7, 2026.


  1. Nvidia NVDA
  2. Microsoft MSFT
  3. Alphabet GOOGL
  4. Broadcom AVGO
  5. Taiwan Semiconductor Manufacturing TSM
  6. Meta Platforms META
  7. Tencent Holdings TCEHY
  8. Alibaba Group BABA
  9. Arista Networks ANET

I own several of these stocks and it's time for me to take some gains on them. I will still be highly exposed to these stocks in my ETFs like VTI, VOO, VGT, etc so lowering my risk by paying 23.8% Capital Gains hurts but seems prudent. SEVO likely has 600% or more gains on AMD for example.
 


I believe in the USA; I believe in tech for the long run. But take a look what happens to your investments in tech when things turn ugly. Most recently was 2022 but today is closer to 2000 in the build-out of data centers. My hope is the reset in tech is like 2022 with "just" a negative 32% return.
 
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“I absolutely believe the technology is transformative. But that doesn’t mean you won’t go through irrational exuberance at some point,” Max Gokhman, head of AI and digital asset solutions at investment firm Franklin Templeton, told CNN.

Timing is critical in deciding whether the AI boom endures – or if it ends in tears like past asset bubbles.

Will the gobs of money being spent to build out AI bring real returns before Wall Street’s patience runs out?

 
BLADEMDA said:
However, the party is not ending this week or next so Morningstar has a "buy" on several Ai related stocks:
Click to expand...

Morningstar was handing out buy advice for several tech stocks right before the dotcom crash too. They don't know anything and there are no consequences for them being wrong.

It's like that Cramer guy. No matter now wrong he consistently is, he still has a TV show. You kind of have to admire how these market analysts have figured out a way to make money off the market with actually bearing any market risk. 🙂
 
okayplayer said:
if you were in my shoes (age 42, 100% VTSAX, planning to work until 60), Blade, what would you change? The problem with guessing a market top correctly is you also have to guess a re-entry point correctly.
Click to expand...
I would diversify from VTSAX to include Small Cap or Small Cap Value and International ETF. VT for example combined with VB or VBR. 90% VT or AVGE with 10% VB or VBR or AVUV. I fully agree that you should stay 100% invested in equities just not in 100% VTSAX.

The technology sector allocation in VTSAX varies by source and reporting date, ranging from 23.78% as of August 12, 2026, to 36.07% or 38.57% as of June 30, 2026, and up to 41.04% in Vanguard's advisor data. The fund's top holdings are highly concentrated in major tech companies, including NVIDIA at 6.32%, Apple at 5.84%, and Microsoft at 3.81%.
 
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BLADEMDA said:
I would diversify from VTSAX to include Small Cap or Small Cap Value and International ETF. VT for example combined with VB or VBR. 90% VT or AVGE with 10% VB or VBR or AVUV. I fully agree that you should stay 100% invested in equities just not in 100% VTSAX.

The technology sector allocation in VTSAX varies by source and reporting date, ranging from 23.78% as of August 12, 2026, to 36.07% or 38.57% as of June 30, 2026, and up to 41.04% in Vanguard's advisor data. The fund's top holdings are highly concentrated in major tech companies, including NVIDIA at 6.32%, Apple at 5.84%, and Microsoft at 3.81%.
Click to expand...
Agree with above. Being mindful of taxes (assuming some funds are in non-qualified account). Maybe also go 90-10 or 80-20 so you have some dry powder.
 
💡 The Ultimate Risk/Reward Verdict

  • Choose VTSAX if you prefer a simplified, single-fund architecture and believe American corporate dominance, corporate governance, and technological innovation will continue to beat foreign markets over your investment horizon.
  • Choose 90% VT + 10% VB if you value strict geometric diversification across global currencies and economies, but still want a tactical 10% tilt to ensure you are not missing out on the explosive growth potential of U.S. small-caps. [1, 2, 3, 4, 5]


VTSAX has notably outperformed the 90% VT / 10% VB blended portfolio since 2020, primarily driven by the massive growth surge of U.S. mega-cap technology corporations over this period. [1, 2]
A initial $10,000 investment made at the start of 2020 would be worth $25,741 in VTSAX today, compared to $22,524 in the globally diversified blend.

📊 Annual Performance Comparison (2020–2026)
The following historical returns reflect total annual performance with all dividends fully reinvested: [1, 2, 3, 4, 5]

YearVTSAX (100% U.S. Total Market)90% VT + 10% VB (Global + Small-Cap)Primary Market Catalyst
2020+20.99%+16.87%Tech-led pandemic recovery favored U.S. over global markets.
2021+25.71%+18.20%Massive U.S. large-cap expansion outpaced international stocks.
2022-19.53%-17.96%High inflation hit U.S. large growth hard; global diversification buffered losses.
2023+26.01%+21.64%The "Magnificent Seven" tech stocks propelled VTSAX back upward.
2024+23.74%+16.26%AI boom continued to keep momentum heavily concentrated in the U.S. market.
2025+17.12%+21.07%International markets and global large-caps outperformed the U.S. sector.
2026 (YTD)+15.17%+16.09%Broad-based global rally with an upward trend in U.S. small-caps.
 
My hunch is that international ETFs will perform decently in the current Bull Market and lose less money in an Ai caused Bear market. This is also likely a longer term trend where International ETFs/Funds will do just fine in terms of returns because P/E ratios are much lower.

My favorites include AVDE, DFAI and AVDV. I hold those for the long term.

Annual Total Return Comparison

YearAVDE Total ReturnAVDV Total Return
2020+8.25%+5.01%
2021+13.61%+15.80%
2022−13.68%−11.46%
2023+17.20%+16.93%
2024+4.87%+8.67%
2025+38.03%+49.37%
2026 (YTD)+15.88%+19.68%
Cumulative Total Return+108.70%+144.57%

I get very good returns (IMHO) plus diversification away from the MAG 7/ VTI. If I was just starting out today all my investments would be ETFs from Vanguard, Dimensional Funds or Avantis.


www.avantisinvestors.com

Avantis Investors® | Powered by Financial Science

Our strategies combine a philosophy based on financial science with expert implementation aimed at managing risks and increasing return potential.
www.avantisinvestors.com www.avantisinvestors.com

www.dimensional.com

Dimensional ETFs | Dimensional

Dimensional's active transparent ETFs offer the potential benefits of indexing paired with the flexibility of systematic investing.
www.dimensional.com www.dimensional.com
 
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BLADEMDA said:
I would diversify from VTSAX to include Small Cap or Small Cap Value and International ETF. VT for example combined with VB or VBR. 90% VT or AVGE with 10% VB or VBR or AVUV. I fully agree that you should stay 100% invested in equities just not in 100% VTSAX.

The technology sector allocation in VTSAX varies by source and reporting date, ranging from 23.78% as of August 12, 2026, to 36.07% or 38.57% as of June 30, 2026, and up to 41.04% in Vanguard's advisor data. The fund's top holdings are highly concentrated in major tech companies, including NVIDIA at 6.32%, Apple at 5.84%, and Microsoft at 3.81%.
Click to expand...

41 yo at a 2-2.5% liquid nw swr largely bc of invested heavy in qqq, voo, and mag 7 near covid march 2020 lows. I have no experience of a true bear market. For this reason I have built up 5-6 years of living expenses via money market/HYSA givng 4-5% over last few years for deployment if major corrections occur going from 100% stocks to now 85/15.

If markets give even 7% average cagr next 3-4 years then i will be work optional and cut to 2-3 days a week for 5 years which would cover all expenses but minimal further savings/invesetments. if there is a 50% dot com/financial crisis before 2030 then i will just work FT to 50 yo then a 3-5 year part time thereafter. Any advice or suggestions appreciated.
 
finalpsychyear said:
41 yo at a 2-2.5% liquid nw swr largely bc of invested heavy in qqq, voo, and mag 7 near covid march 2020 lows. I have no experience of a true bear market. For this reason I have built up 5-6 years of living expenses via money market/HYSA givng 4-5% over last few years for deployment if major corrections occur going from 100% stocks to now 85/15.

If markets give even 7% average cagr next 3-4 years then i will be work optional and cut to 2-3 days a week for 5 years which would cover all expenses but minimal further savings/invesetments. if there is a 50% dot com/financial crisis before 2030 then i will just work FT to 50 yo then a 3-5 year part time thereafter. Any advice or suggestions appreciated.
Click to expand...
Why not diversify a bit? Adding international and small cap value like AVUV ETF into the mix will likely still deliver 7-8% returns.

QQQ 20%
VOO or VTI 30%
AVDE 20%
AVDV 10%
AVUV 10%

HYSA/CDs/Cash 10%
 
The active managers of Avantis originally broke away from Dimensional, making their investment frameworks highly correlated (0.98 correlation). However, AVUV’s slightly deeper factor exposure toward high profitability and lower price-to-book ratios has allowed it to edge out DFSVX in most calendar years since its launch: [1, 2]
  • 2020: AVUV +6.39% | DFSVX +4.02%
  • 2021: AVUV +42.23% | DFSVX +39.20%
  • 2022: AVUV -4.90% | DFSVX -6.10%
  • 2023: AVUV +22.83% | DFSVX +21.40%
  • 2024: AVUV +9.28% | DFSVX +8.75%
  • 2025: AVUV +7.44% | DFSVX +6.90%
  • 2026 (YTD): AVUV +27.02% | DFSVX +23.70% [1, 2, 3]

Dimensional now offers an ETF version of that same small cap value fund but it is fairly new so I posted the mutual fund version.
 
Annual Total Return History
The calendar year performance breakdown below highlights how the fund's strategy performs across different market cycles: [1]
YearAVDV Total ReturnMorningstar Category Average
2025+49.37%+37.20%
2024+8.67%+5.21%
2023+16.87%+16.82%
2022-11.46%-11.03%
2021+15.79%+14.87%
2020+4.99%+8.61%
 
Compare the funds I want you to add into your mix vs QQQ for the year 2022. You will likely lose a lot less by diversifying and since you only "need" a 7-8% return that diversified portfolio is highly likely to accomplish that goal.
 
The table below breaks down the nominal total returns (including reinvested dividends) for all five funds in 2022, ordered from best to worst performance:

ETF TickerAsset Class Focus2022 Total Return
AVUVU.S. Small-Cap Value-4.90%
AVDVInternational Small-Cap Value-11.46%
AVDEInternational Large-Cap Blend-13.68%
VOOU.S. Large-Cap (S&P 500)-18.19%
QQQU.S. Large-Cap Tech (Nasdaq-100)-32.58%

IMHO, the portfolio I showed you is superior for the long term vs QQQ/VOO for those only needing an 8% return. If however you returns MUST be in the 10-12% range per year in order to retire then perhaps a higher weighting to QQQ/VOO for 20+ years may be the way to go.
 
What if I told you Small Cap Value from Dimensional Funds (and likely Avantis, AVUV) has outperformed the S and P 500 since the year 2000? Would you reconsider adding it to your portfolio?

Performance Summary (2000 – 2026)
The table below reflects the long-term total returns (with dividends reinvested) from mid-2000 through August 2026: [1, 2, 3]

Fund / TickerStyle / Index TrackedApprox. Total Return (2000-2026)Approx. Annualized Return (CAGR)
DFSVXU.S. Small-Cap Value~900% — 1,000%~9.5% — 10.0%
IVV / VOO (S&P 500 proxy)Large-Cap Blend (S&P 500)~720%~8.4%


I recommend DFSV ETF or AVUV ETF for Small Cap Value. I own AVUV and highly recommend it. That ETF has outperformed the Vanguard ETF by a wide margin.
 
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Cumulative Total Returns (Jan 2020 – Aug 2026)
Between January 2, 2020, and August 14, 2026, the cumulative performance for each fund is as follows: [1]

ETF TickerFund NameCumulative Return
🚀 AVUVAvantis U.S. Small Cap Value ETF+138.65%
📋 VBVanguard Small-Cap Index ETF+86.40%
📋 VBRVanguard Small-Cap Value Index ETF+83.85%

I own VB in my brokerage account for the past 20 years but last year I added AVUV ETF since I wanted more exposure to small cap value.
 
Appreciate Blades post and to be truthful a recession IS going to happen. It’s normal.
Nobody knows when.
For someone like @finalpsychyear who is 41 a recession is a fantastic opportunity to work hard and buy on the way down and on the way up. You actually want this.

For someone like @BLADEMDA or myself, we need to be a bit more conservative. 35% drop with a 7 year recovery period hurts especially if you are a part timer.
Zero chance we go back to full time (well maybe blade would- he’s that generation. My 80 y/o dad can’t hang it up).

Diversification outside of the market is key here.

Take some profits and put that equity to work in other ways. Don’t be too greedy.
Unless you cash out, it’s not real money.

I’ve owned Adobe for a while. Missed selling at it’s peak and now I’m negative.

Started rebalancing this past week and it felt good.

Offset losses with gains and rebalance to where you are in life.
 
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BLADEMDA said:
What if I told you Small Cap Value from Dimensional Funds (and likely Avantis, AVUV) has outperformed the S and P 500 since the year 2000? Would you reconsider adding it to your portfolio?

Performance Summary (2000 – 2026)
The table below reflects the long-term total returns (with dividends reinvested) from mid-2000 through August 2026: [1, 2, 3]

Fund / TickerStyle / Index TrackedApprox. Total Return (2000-2026)Approx. Annualized Return (CAGR)
DFSVXU.S. Small-Cap Value~900% — 1,000%~9.5% — 10.0%
IVV / VOO (S&P 500 proxy)Large-Cap Blend (S&P 500)~720%~8.4%


I recommend DFSV ETF or AVUV ETF for Small Cap Value. I own AVUV and highly recommend it. That ETF has outperformed the Vanguard ETF by a wide margin.
Click to expand...
TQQQ has out performed both, would you consider buying it? No, its too much risk. The beauty of and S and P 500 index is that once a company becomes a loser it gets kicked out of the index so not to drag it down. Not sure your small cap fund does that
 
sevoflurane said:
Not a bad idea to rebalance at all time highs.
I'm cashing out of some of my positions in my brokerage accounts- taking profits and rolling them into hard assets/RE investment.
This will trigger a taxable event, but also decreases market risks.
Click to expand...
As a FI 50yo still working I struggle to find a non equities non bond investment that checks all the boxes for me. While I have tremendous respect for those that own real estate, it just isn’t for me. REITS are too strongly correlated to financial markets. Probably syndications are the closest best answer for me but then I think about all the state K-1s and tax implications or the hoops to jump through to invest through my 401k and I zone out. I’ve done amazing with S&P for 30 years so I’ll just keep tweaking the allocation and hope for the best. Kids gonna probably get 8 figures regardless, prob should just focus on more ski trips.
 
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caligas said:
As a FI 50yo still working I struggle to find a non equities non bond investment that checks all the boxes for me. While I have tremendous respect for those that own real estate, it just isn’t for me. REITS are too strongly correlated to financial markets. Probably syndications are the closest best answer for me but then I think about all the state K-1s and tax implications or the hoops to jump through to invest through my 401k and I zone out. I’ve done amazing with S&P for 30 years so I’ll just keep tweaking the allocation and hope for the best. Kids gonna probably get 10 figures regardless, prob should just focus on more ski trips.
Click to expand...
10 figures? That’s a billion.
 
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