I wanted to go back and review how we got here.
Post #4: You say Kiyosaki gives terrible advice.
Post #43: I agree with you
Post #86: RayHammer incorrectly asserts, unqualified, "Any amount over 0% allocated to bonds is way, way too much" regardless of any other factor, period.
Post #115: I tell RayHammer A zero-bond portfolio, just like its cousin a 100% equity portfolio, is rarely (if ever) on the Efficient Frontier. That is, I can construct an alternative portfolio with the same amount of risk that generates higher expected returns than a 100% equity portfolio, and I also can construct an alternative portfolio with the same expected returns of a 100% equity portfolio that has lower risk.
Post #116: WVNomad asks a detailed question about my post #115: "If you just use two asset classes, I would think a 100% equities position would be on one end of the efficient frontier, and 100% bonds on the other.
Can you create a lower-volatility equivalent return portfolio with a mix of equities and bonds than with just 100% equities?”
Post #117: You appear to be attempting to answer WVNomad, but your reply is orthogonal.
Oh. Someone pointed out to me you might not understand my use of the word orthogonal in this context. Sorry. “Irrelevant” to the discussion - it doesn’t bear on the central question of 100% equities being - or not being - on the efficient frontier.
Post #142: talking to @WVNomad, in response to his specific question “Can you create a lower-volatility equivalent return portfolio with a mix of equities and bonds than with just 100% equities?” I give him an example satisfying the conditions:
Yes, it is empirically possible to create a portfolio that has the same expected returns of a 100% equity portfolio but with lower variance (risk).
Post # 145: You reply to me with a bunch of irrelevant stuff regarding investor behaviour. Investor behavior is irrelevant to the question of portfolio construction to be on the efficient frontier. Investors can be irrational, perfectly rational, or somewhere in between, and
it has no bearing whatsoever on the question “is a 100% equity portfolio on the efficient frontier.”
Post #150: I say as much: Investors can be irrational, perfectly rational, or somewhere in between, and it has no bearing on the question “is a 100% equity portfolio on the efficient frontier.”
Post #153: You erroneously say "the actual facts and how things have played out say 100% equities has beaten balanced portfolios over every typical accumulation period forever .”
Post #156: I show your assertion in #153 is
flat out wrong. In 153 you say 100% equites has beaten a balanced portfolio over every typical accumulation period, and
I show you how a levered 60/40 balanced portfolio indeed beats 100% equities.
Post #157: You appear to acquiesce, saying “who cares” but that somehow that my example of a levered 60/40 portfolio is cheating (my interpretation of your point) and shouldn’t be used for comparison purposes.
Post #158: I counter your assertion that rationality is a part of efficient frontiers. It isn’t, of course, because the mathematics doesn’t care about bout rationality.
Post #159: You erroneously asset investor behaviour is somehow factored in to the efficient frontier.
Post #160: I take apart your assertion there is no reason to have bonds in a portfolio, line by line.
Post #161: You erroneously assert I’m posting a bunch of nonsense with no bearing on the question of “Is a 100% Equity Portfolio on the Efficient Frontier.” (The irony is thick.)
Post #167: You erroneously asset, once again - but subtly changing your argument, "maximum growth in a 401k is going to be based on 100% equity funds available”. <== Notice your assertion is NOT the topic that @WVNomad asks me about in Post #116.
Post #169: You completely misinterpret the discussion.
It occurs to me that your assertion that Investor Behaviour has a bearing on the Efficient Frontier is because you are conflating two separate concepts in modern finance that both use the word “efficient”.
1) The first is the Efficient Frontier, where investor behavior & rationality are not part of the equation, as I’ve demonstrated.
2) The second is The Efficient Markets Hypothesis - but we are not talking about the EMH here at all.
The mathematics are incontrovertible.
***
Look, Mathjak, you're a good guy, and you've made a lot of money investing, and I tip my hat to you. I've never run across someone like you who never went to college, never took any math, never studied academic finance (which requires math) who nevertheless takes such a strong interest in investing. Good for you.
My interchange with WVNomad was on a specific item in academic finance about the Efficient Frontier. Don't get hung up on it.. Don't worry about it. Believe it (because it is true) or don't believe it (because you can't follow the logic) - it doesn't change what you personally will do.
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