Some posts have been lost from the forum. Happen to have this one still, pasting it back:
All of what I've read about asset allocation and why a mix of equities and bonds, say 90/10 or 80/20, is more efficient than 100/0 use numbers from the most successful economy in the world, that has a bond market at the end of a bull market that we're very unlikely to experience again during our lives.
Dimson & Marsh in Triumpth of the Optimists, and perhaps in your second link in OP, have done a global study. There were nearly complete equity losses in some places. I don’t recall if they studied the global benefit of balanced portfolios over time.
Also theoretical reasons for many to own fixed income. These are covered in the books. They behave differently than equity, sometimes moving in the oppositte direction, or at least providing relative stability.
I don’t like bonds myself today, and instead use among other instruments, “CD’s” Certificates of Deposit from banks and credit unions, insured by the full faith and credit of the US government. These have a limit of $250,000 per account, so they aren’t practical for institutions, and therefore often carry better terms and/or rates than bonds. For example, many can be redeemed early with low penalty.
I don’t know if similiar are available to you, such as from an EEA country, or from the US.
It seems as though Americans have become accustomed to the idea that salaries won't increase (in real terms) over time. Here in Norway it's taken as a given that the world will progress, continually becoming more modern and salaries and the standard of living will improve.
Some call this Recency Bias. I think wage disinflation, abnormally high profit margins, and the global recession/depression are temporary, and although many things are possible, we will likely have great global wealth in the future. Yet I see a great deal of pessimism in the media.
, there's a good chance the returns won't keep up with the increase in standard of living. I might be mistaken here, perhaps expecting this is naive.
(Edit: Note the missing post from Hallman was here talking about bond returns--though if expected returns from other asset classes are low enough, it could apply there too.)
You’re right, this is a legitimate concern.
W Bernstein has written about the standard of living issue, perhaps on his website
Wage inflation has over the long term grown faster than (monetary) inflation. If we might wish to purchase services or goods available in the future, then it is not enough to keep up with inflation. I think this could be especially important in health care and leisure.
He has been interviewed in media warning about poor expected returns from bonds.
I'll have a pension that will afford me a nice lifestyle, my investments will be gravy on top.
How secure is your pension? Is it insured by your government? If it is insured, do you trust the insurance? If there is a big financial crisis, could the insurance (or pension) only cover a modest payment of your pension, instead of the expected amount?
Ignoring that, some people estimate the current value of their pension, converting future payments into a present lump sum. This helps their asset allocation decision.