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I was under the impression that a heavy stock allocation--90-100% would put me in the best position as far as % of success on Firecalc and cfiresim. However, after changing asset allocation to 70/30 stock or even 60/40 it looks like the success ratio is the same as 90/10. Interesting. Is the benefit of the heavier stock just the likelihood of a much higher ending balance?
bonds are still doing fine . all my bond funds have not only a higher yield than cash but all have capital gains too .
if i switched to cash last year when the fed raised rates i would have gotten 24k less in interest on cash . my bond funds can even fall and i would be way ahead .
that difference increases every month we don't have bonds plunge .
as peter lynch said " more money is given up in preparation or anticipation for a fall than actually is lost in the fall "
I'm inclined to do less "tinkering" of my portfolio than most people. In general when people move to bonds though do intermediate bonds make the most sense?
i prefer 50% short term and 50% long term or even a much more diversified bunch of bond funds without the long term bonds .
a plain ole total bond fund alone lacks to many segments for my taste ..
the duration is about the same as 100% intermediate , but when markets spook , those long term bonds trade more on fear ,greed and perception and tend to soar .
they are actually less interest rate sensitive and more the perception of future inflation sensitive .
mj--
I wonder if you can expand on your experience with the Bond Side of your allocation.
My experience went like this -- I was using Fido's FSITX Fund for my Bond Allocation. Last July, with the Fed talking about rising Interest Rates and the campaigners making their views known, I moved a large portion of the Bond Fund into the FSTVX, my existing Total Market Fund.
I left a small fraction behind in FSITX, just to track the performance. Over the past 10 months, the portion left in Bonds has declined, not by a lot.....but enough to show up on the chart. It appears that they have added a few shares to my Total Shares (I'm guessing that's the 2% Yield payout). But going by the Total Current Value, I'm down about 2% from last July.
The move to FSTVX has more than made up for that decline. But what if I had left 30% or 40% in FSITX ??
Without getting into too much financial theory, there exists for financial portfolios what is called a Pareto optimum. Market theory shows, and it has been confirmed in practice, that, while you can trade off risk for performance ( higher returns mean higher risk. Risk is defined as volatility.), there is a mix of assets that will optimize performance versus risk. Hence the recommendations of 60% stock 40% bonds. (and not govt. bonds like mathjaks table shows).
It was interesting to watch this in practice, since my bond holdings outperformed my stock holding through most of the 2000s.
Financial markets are complex and full of traps aimed at non-professionals, the biggest of which is that you can beat the market as an amateur. You would make your broker happy, though, since each trade generates fees (which is part of the reason passive always beats active for us non-professionals.)
Without getting into too much financial theory, there exists for financial portfolios what is called a Pareto optimum. Market theory shows, and it has been confirmed in practice, that, while you can trade off risk for performance ( higher returns mean higher risk. Risk is defined as volatility.), there is a mix of assets that will optimize performance versus risk. Hence the recommendations of 60% stock 40% bonds. (and not govt. bonds like mathjaks table shows).
It was interesting to watch this in practice, since my bond holdings outperformed my stock holding through most of the 2000s.
Financial markets are complex and full of traps aimed at non-professionals, the biggest of which is that you can beat the market as an amateur. You would make your broker happy, though, since each trade generates fees (which is part of the reason passive always beats active for us non-professionals.)
Most cases us non-professionals are better to research and do your own investing at low cost broker companies like Fidelity then paying outrages fees to brokers that mostly sell their own products. There are a few good ones but they work for high end clients or move to fund management and away from retail clients.
Without getting into too much financial theory, there exists for financial portfolios what is called a Pareto optimum. Market theory shows, and it has been confirmed in practice, that, while you can trade off risk for performance ( higher returns mean higher risk. Risk is defined as volatility.), there is a mix of assets that will optimize performance versus risk. Hence the recommendations of 60% stock 40% bonds. (and not govt. bonds like mathjaks table shows).
It was interesting to watch this in practice, since my bond holdings outperformed my stock holding through most of the 2000s.
Yes, but that was during one of the great Bond Bull Markets of our generation. And there were some very nice Stock Market run-ups interspersed within, such as 2003 - 2007, and post 2010.
Mr Bogle wrote his books during the timeframe when Bonds really did provide a stabilizing force to a portfolio. In the current environment, they don't appear to offer the same stability.
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