Is 'Just Buy an Index Fund' Really Enough? 20 Years of Backtested Data — Ctrl-Trade<br>Learn for Free

All posts<br>Market14 min read<br>Is 'Just Buy an Index Fund' Really Enough? 20 Years of Backtested Data<br>Francesco Carlucci<br>June 8, 2026

If you’ve ever asked the internet how to invest for the long run, you’ve heard the same answer many times: “Just buy a well-diversified index fund and you’ll be fine.” It’s repeated so often it’s become gospel. And to be fair, it’s not bad advice — it’s certainly better than picking stocks on a hunch.

But in my opinion this advice doesn’t give the investor the full picture and a realistic expectation of the journey. It only considers the compounding power, but doesn’t emphasize enough the emotional process. Would you be ok through a 55% drawdown? Are you ready to watch three and a half years go by before your portfolio goes back to where it started? The advice is usually given without enough numbers attached to it — which, for something as important as where you park your life savings, is surprising.

So I did what any good programmer would do: I tested it against the alternatives :)

And here’s the thing — the strategies I tested aren’t random ideas I made up. Each one is the real philosophy of an investing legend. “Just buy the whole market and never sell” is John Bogle , the man who gave the world passively-managed index funds. “Keep most of it in stocks with a small bond cushion” is Warren Buffett , who famously told his own estate to sit in 90% S&P 500 and 10% bonds. And the “risk parity approach across balanced assets” resembles Ray Dalio’s all-weather portfolio. Three titans, three very different answers to the same question.

How I Tested It

Before the results, the rules of the game — because a backtest is only as honest as its methodology.

Period: 2006–2026, roughly 20 years. Crucially, this window contains three global crises: the 2008 Global Financial Crisis , the 2020 COVID crash , and the 2022 rate-hike bear market .

Assets: SPY (S&P 500), TLT (20-year Treasuries), DBC (broad commodities), and GLD (gold).

Starting capital: $10,000, dividends reinvested (using adjusted close).

Rebalancing: Annual, every January — plus immediate rebalancing on regime switches for the trend-filtered strategy.

Data & tooling: yfinance daily data, simulated in Python. No transaction costs or taxes modeled (more on why that matters in the caveats).

Five strategies, one fair fight. Here’s how they finished.

The Master Results

A few columns do all the heavy lifting in the table below, and if you’re new to investing they can be kinda intimidating. So here’s a plain English explanation of the metrics first — once these click, the whole table tells a story:

CAGR (Compound Annual Growth Rate) — the smoothed average return per year. A +10% CAGR means your money grew as if it earned a steady 10% every year, ignoring the bumps along the way. It’s the single number people usually mean by “return.”

$10K became — I probably don’t need to explain this :) It’s just CAGR made tangible.

Volatility — how much the value bounces around. High volatility is a wild ride (big swings up and down); low volatility is a smooth one. It’s a measure of stress, not return.

Sharpe ratio — return per unit of risk. It takes your return and divides it by how much volatility you stomached to earn it. This is what “risk-adjusted ” means: two strategies can post the same return, but the one that got there with less white-knuckling earns the higher Sharpe. Roughly speaking, above 0.7 is good and above 0.9 is excellent. If you only read one column, read this one.

Max DD (maximum drawdown) — the worst peak-to-trough fall along the way: how far the portfolio dropped from a high before recovering. A -55% Max DD means that at the low point, you were down more than half your money.

Recovery — how long (in days) it took to climb back to a previous high after that worst drop. 1,256d is about 3.4 years spent underwater, waiting just to break even.

StrategyAllocationCAGR$10K becameVolatilitySharpeMax DDRecovery100% SPYSPY only+11.2%$83,60019.3%0.58-55.2%1,256d80/20 + TLT80% SPY / 20% TLT+10.1%$68,50014.2%0.71-42.5%694dDiversified50% SPY / 25% TLT / 15% DBC / 10% GLD+8.6%$52,10010.5%0.82-32.0%575dEqual Weight25% SPY / 25% TLT / 25% DBC / 25% GLD+7.7%$44,10010.1%0.76-27.4%685dEMA-50 filter ★Trend-switched ★+9.9%$66,10010.7%0.93 -31.2%680d<br>★ In the trend-filtered strategy, the allocation isn’t fixed: it switches between a risk-on and a risk-off mix, following the EMA-50 indicator. More on that in The Winning Formula below.

Here’s the trap: your eye jumps straight to that top row — 100% SPY, the highest CAGR and the fattest $10K-became number — and stops. But follow the Sharpe column instead and the ranking flips on its head. The strategy with the best raw return has the worst risk-adjusted score (0.58), while the trend filter has the best (0.93) despite ending with less money in the account. That gap between “most return”...