My solution to that is being spread out in over 40 mutual funds of different asset classes. About 25% of them are in bonds/treasury/money market asset classes. The other 75% of them are in equity asset classes.
Having your equity assets spread around in 30 asset classes mitigates the risk. Having 25% in bond asset classes gives you 6 years of annual withdrawals (assuming a 4% withdrawal strategy) in case the entire stock market goes down (the few times that happens) so you won't have to withdraw from the equities mutual funds while they're down. Basically, when you do your annual (or quarterly, or monthly) withdrawal, you log into your portfolio and withdraw from whatever mutual fund has the highest balance (sell high). Even in a market downturn, there's almost always an equity mutual fund that's high if you're spread out among many asset classes.
By being in 75% equities instead of 50% equities, your portfolio grows faster (enough to keep up with inflation?, depends on which years). By being spread out among 40 asset classes (30 in equities), you always have something that's up.
With 40 mutual funds, don’t you run the risk of overlapping assets in them? I mean — does it make sense to own 40 different mutual funds if 20 of them all own the same core underlying assets (ExxonMobil, Walmart, Amazon, etc.)?
40 is too much.
I would rather recommend 4 to 6.
2 large cap or blue chip funds.
2 mid and small cap funds
2 probably sector focused or hybrid money market funds if you need.
I only have the large and mid/small cap funds. For added spice I invest at times directly in stocks, but that’s only when I think they are going to play big, I don’t always succeed but these bets are a small part of the portfolio that also includes real estate