ilan1h wrote:In 2009 Jeff Cohen-Merriman published a seminal article in which he compared the balance of risk and return on various asset allocations. The data,compiled from 1970 to 2008 showed various mixes of SP500 and T-bills and their accompanying annualized return, standard deviation, worst month, worst 12 months, worst 5 years. The idea was to match risk tolerance with asset allocation. The numbers clearly show that their is a "sweet spot" somewhere near the center of this allocation ie: having 40-50% bonds allowed you to get a comparable return at a much lower risk profile than being 100% SP500. The numbers up to 2008 are a very clear indication of the benefits of diversication. I assume that the last 4 years of data (2008 to 2012) would only reinforce this compelling lesson.
Vanguard has been tracking different allocations of stocks, bonds and short-term reserves since 1926
. The greater the percentage of SP 500 stocks (in 10% increments) ALWAYS resulted in a greater "worst year loss." https://personal.vanguard.com/us/insigh ... llocations
Bogleheads adjust their stock/bond ratio based on their goals, time-frame, risk-tolerance and personal financial situation. This Vanguard asset-allocation tool is helpful:https://personal.vanguard.com/us/funds/ ... mmendation