Age in Bonds - Still Recommended?

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michaeljc70
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Joined: Thu Oct 15, 2015 3:53 pm

Re: Age in Bonds - Still Recommended?

Post by michaeljc70 » Sat Oct 06, 2018 5:51 pm

willthrill81 wrote:
Sat Oct 06, 2018 3:32 pm
michaeljc70 wrote:
Sat Oct 06, 2018 1:00 pm
So, if I am 80, I should be 20/80? Even if it is quite clear I will never run out of money?
Since 1972, a 20/80 portfolio (20% TSM/ 80% ITT) has been superior in nearly every measurable way to a 0/100 portfolio. Higher return, lower std. dev., better worst year, lower maximum drawdown, and higher Sharpe ratio.

Some would say this goes back to Benjamin Graham's advice to never have less than a 25% allocation to stocks.
Why start in 1972??? Certainly there is more data than that. I have data going back to the 20s for stocks and bonds. I am not advocating going 0/100, so I wouldn't make that comparison. How does it compare to 30/70 or 40/60 or 60/40? I think I know the answer to that.

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willthrill81
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Re: Age in Bonds - Still Recommended?

Post by willthrill81 » Sat Oct 06, 2018 5:54 pm

michaeljc70 wrote:
Sat Oct 06, 2018 5:51 pm
willthrill81 wrote:
Sat Oct 06, 2018 3:32 pm
michaeljc70 wrote:
Sat Oct 06, 2018 1:00 pm
So, if I am 80, I should be 20/80? Even if it is quite clear I will never run out of money?
Since 1972, a 20/80 portfolio (20% TSM/ 80% ITT) has been superior in nearly every measurable way to a 0/100 portfolio. Higher return, lower std. dev., better worst year, lower maximum drawdown, and higher Sharpe ratio.

Some would say this goes back to Benjamin Graham's advice to never have less than a 25% allocation to stocks.
Why start in 1972??? Certainly there is more data than that. I have data going back to the 20s for stocks and bonds.
Because that's how far back Portfolio Visualizer goes. I doubt that you'll get a dramatically different result with more data, though I'd love to see it.
michaeljc70 wrote:
Sat Oct 06, 2018 5:51 pm
I am not advocating going 0/100, so I wouldn't make that comparison.
It sounded like you were. My apologies for misunderstanding.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

michaeljc70
Posts: 5200
Joined: Thu Oct 15, 2015 3:53 pm

Re: Age in Bonds - Still Recommended?

Post by michaeljc70 » Sat Oct 06, 2018 6:03 pm

willthrill81 wrote:
Sat Oct 06, 2018 5:54 pm
michaeljc70 wrote:
Sat Oct 06, 2018 5:51 pm
willthrill81 wrote:
Sat Oct 06, 2018 3:32 pm
michaeljc70 wrote:
Sat Oct 06, 2018 1:00 pm
So, if I am 80, I should be 20/80? Even if it is quite clear I will never run out of money?
Since 1972, a 20/80 portfolio (20% TSM/ 80% ITT) has been superior in nearly every measurable way to a 0/100 portfolio. Higher return, lower std. dev., better worst year, lower maximum drawdown, and higher Sharpe ratio.

Some would say this goes back to Benjamin Graham's advice to never have less than a 25% allocation to stocks.
Why start in 1972??? Certainly there is more data than that. I have data going back to the 20s for stocks and bonds.
Because that's how far back Portfolio Visualizer goes. I doubt that you'll get a dramatically different result with more data, though I'd love to see it.
michaeljc70 wrote:
Sat Oct 06, 2018 5:51 pm
I am not advocating going 0/100, so I wouldn't make that comparison.
It sounded like you were. My apologies for misunderstanding.
No problem. Personally, and I know I am more risk averse than most, but I plan on being 75/25 (or close to it) for the rest of my life. I figure if I have 25x expenses (at least) and 25% of that is fixed income, I have 6.25 years of expenses in FI. Stocks obviously return more over the long run and the bonds are just a cushion to get me through very rough patches.

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