Alan Moreira and Tyler Muir at Yale University point out that investment strategies that reduce equity risk when expected volatility is high would have beaten the US market for years. Investors can therefore better make money by cutting risk than by increasing it. This corroborates research by Andrew Lo at MIT. He's shown that reducing equity exposure at times of high volatility would have beaten a buy-and-hold investment in the S&P 500 over the long term.
The same is true for the UK. To establish this, I compared two simple strategies. One is simply a portfolio split 50:50 between the All-Share index and gilts, rebalanced monthly. The other is a strategy that has a 50:50 split when the VIX index - a measure of expected volatility on US and hence global stocks - is at its post-1990 average of 19.7 per cent, but which has higher equity exposure at lower levels of volatility and lower equity exposure at higher. This portfolio uses the Merton equation at the end of each month, holding risk aversion and expected equity returns constant and so varying equity weights only as expected volatility changes.