Wm. Bernstein's Latest Portfolio?

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diyinvestor
Posts: 30
Joined: Sat Jan 21, 2012 3:36 am

Wm. Bernstein's Latest Portfolio?

Post by diyinvestor » Wed Sep 27, 2017 9:39 am

Does anyone know Dr. Bernestein's latest recommendation for a retiree's portfolio? Specifically, I would like to know what asset classes/allocations he recommends for stocks (S&P Index?, Small Cap Value?, REITS?, commodities?) and bonds (treasuries?, TIPS?)? I bought his excellent "Ages of the Investor. He included a suggested new investor portfolio in that book/pamphlet, but, sadly, he did not include a sample portfolio for retired folks.

He has changed his recommendations over the years. For example, in his early books, for bonds he was suggesting the total bond market index, while later he was recommending short term corporates. Just now, I've finished a 2015 article in the WSJ where he's saying go all treasuries for the bond allocation, for safety reasons.

Does anyone know what his recomended portfolio is for those of us in the distribution/retired phase of life?

Thanks.

dbr
Posts: 23770
Joined: Sun Mar 04, 2007 9:50 am

Re: Wm. Bernstein's Latest Portfolio?

Post by dbr » Wed Sep 27, 2017 10:04 am

diyinvestor wrote:
Wed Sep 27, 2017 9:39 am
Does anyone know Dr. Bernestein's latest recommendation for a retiree's portfolio? Specifically, I would like to know what asset classes/allocations he recommends for stocks (S&P Index?, Small Cap Value?, REITS?, commodities?) and bonds (treasuries?, TIPS?)? I bought his excellent "Ages of the Investor. He included a suggested new investor portfolio in that book/pamphlet, but, sadly, he did not include a sample portfolio for retired folks.

He has changed his recommendations over the years. For example, in his early books, for bonds he was suggesting the total bond market index, while later he was recommending short term corporates. Just now, I've finished a 2015 article in the WSJ where he's saying go all treasuries for the bond allocation, for safety reasons.

Does anyone know what his recomended portfolio is for those of us in the distribution/retired phase of life?

Thanks.
I don't know his current recommendation, but do you really want your investment process to be one where every couple of years you sell what you have and buy something else?

Dandy
Posts: 4776
Joined: Sun Apr 25, 2010 7:42 pm

Re: Wm. Bernstein's Latest Portfolio?

Post by Dandy » Wed Sep 27, 2017 10:07 am

Others may be able to tell you the latest recommendation for retirees. I am almost 70 and a few years ago read something Dr. Bernstein recommended for people who had "enough". I consider that I have "enough" but truly you never really know. Anyhow his recommendation was to have 20-25 years of residual expenses (dollars needed to supplement pensions, Social Security, etc.) in "safe" products, e.g. individual TIPS (ladder?), short term bonds, CDs, etc. and the rest invest anyway you want. I believe recently he did suggest that short term Treasuries might be better but "hold your nose" on yield/appreciation prospects.

That 'bottom" up process of making sure x years of retirement funding was "safe" made a lot of sense to me. So, I implemented it and am very satisfied with the performance and sleep well. My "safe" portfolio is funded until I reach age 90. My "risk" portfolio has a 66/34 allocation and my overall allocation is 43/57. So my overall allocation is not a guess at what level of risk might be ok, it is derived by securing, as much as is reasonable, funding for my retirement first.

I will have to make sure that my "safe" portfolio is "topped off" periodically to make sure it keeps up with inflation/growth in expenses. Also, I suggest withdrawing some or all from the "risk" portfolio when it does well as opposed to just automatically decreasing my "safe" portfolio.

asif408
Posts: 1083
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Wm. Bernstein's Latest Portfolio?

Post by asif408 » Wed Sep 27, 2017 10:53 am

Dandy described his fixed income views very well above. I'll add comments on the stock portion. I don't think his recommendations have changed much over time, other than over the last few years he had suggested tilting your equity portion to foreign developed and emerging market stocks because of more favorable valuations. He still believes small cap value will still have a premium in the long run, though probably less than in the past because of its ease of implementation now. As far as REIT, commodities, etc., he wasn't high on REITs last time he posted here about them (in 2013) based on their valuations, and as far as I know his view has not changed since then. He does suggest you could have a small portion of your equities in the stocks of commodities producers if you desire protection from near term unexpected inflation. He mentioned a year or two ago that precious metals equities (PME) looked interesting because of their terrible performance between 2011 and 2015; since January 2016, they are up over 100%.

So overall, not much change. Own a diversified portfolio of global stocks with a tilt towards foreign and SCV for a possibly higher expected return. Optionally, you could own a smattering of REITs and commodity producing stocks (if you so desire as protection from near term inflation). The rest should be in safe assets.

BigJohn
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Joined: Wed Apr 02, 2014 11:27 pm

Re: Wm. Bernstein's Latest Portfolio?

Post by BigJohn » Wed Sep 27, 2017 8:14 pm

I'm with Dandy in implementing what Dr Bernstein calls a Liability Matching Portfolio (LMP). I retired three years ago and am currently age 61. My plan going into retirement was to hold 60/40 forever but.... after reading Dr Bernstein's "The Ages of the Investor" and "Deep Risk" I decided to make a change using his LMP approach. I reset my bond allocation to represent 30 years of minimal living expenses which moved my stock allocation from 60% to a bit over 35% stock. I know I may be giving up some potential higher return but like Dandy, I sleep well at night with this approach

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