Is the 60/40 portfolio allocation strategy being killed?

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willthrill81
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

heyyou wrote: Mon Sep 16, 2019 2:24 pm I will be glad when common fear-mongering is more recognized for what it is, a tool for persuasion, which should be ignored by all who are exposed to it.

P.T. Barnum was correct about how often a potential customer was born (every minute). Perhaps he has inspired an editor who suggests attention-getting topics for published articles.
Here here! :beer
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by tennisplyr »

willthrill81 wrote: Mon Sep 16, 2019 1:55 pm
FIREchief wrote: Mon Sep 16, 2019 1:35 pm So "GMO" predicts US bond real returns of -1.7% over the next seven years as of 7/31/19. On that day, the TIPS yield curve showed 7 year TIPS at 0.27% real returns. That's almost a 2% deviation from known facts on arguably the safest US bond investment out there. Do these clowns think we're all just plain stupid?? :oops:
In a word, yes.

I really don't get all of the doom and gloom we've been hearing for a while now. Bonds will have negative returns over the next X years, stocks will 3% returns, 'the 4% rule is dead, but 3% is safe', 'index investing will go down a black hole', etc. Maybe I'm too optimistic, but I just don't believe that the numbers warrant it.
Isn't all of this BS simply a way to try to get attention and encourage people to turn to "professional" advice.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by jmk »

KlangFool wrote: Mon Sep 16, 2019 2:11 pm
jmk wrote: Mon Sep 16, 2019 2:06 pm The fallacy in all these types of analyses is that while it is true that expected returns are historically low on a 60/40 portfolio going forward, what exactly is the alternative? Yes, you can do smart beta and global, and alts to replace some bonds, but in the end lower returns on the two major asset classes means you have to save more to get the same final result. Low expected returns don't mean 60/40 no longer makes sense as a simple 2 fund portfolio.
The alternative proposed by all those articles is you are supposed to pay the author a lot of money to manage your money and hope that he/she could beat the market.They are totally self-serving.
We are making the same point I believe! The real alternatives are 60-40 (making much less than historically so needing to save more); or adding in alts (smart beta, re-investment etc); or hoping an active manager can do that for you. I choose the first option; but there are certainly some smart people like Larry Swedroe who also incorporate the second option. No one around here does the third. ;-)
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Ferdinand2014 »

CULater wrote: Mon Sep 16, 2019 8:02 am This commentary from John Mauldin discusses the increasing likelihood that the portfolio strategy that we've followed in the past may be "broken" and won't meet our expectations going forward. And he's not the only voice. Bogleheads philosophy under attack. I must admit that I hear the choir warming up and wonder if it's time to start thinking out of the box or at least taking a peek.
Many long-term investors assume stocks will give them 6–8% real annual returns if they simply buy and hold long enough. Pension fund trustees hire consultants to reassure them of this “fact,” along with similar interest rate and bond forecasts, and then make investment and benefit decisions.

Those reassurances are increasingly hollow, thanks to both low rates and inflated stock valuations, yet people running massive piles of money behave as if they are unquestionably correct.
The “logic” of 60/40 is that it gives you diversification. The bonds should perform well when the stocks run into difficulty, and vice versa. You might even get lucky and have both components rise together. But you can also be unlucky and see them both fall, an outcome I think increasingly likely. Louis Gave wrote about this last week.

Historically, the optimized portfolio of choice, and the one beloved of quant analysts everywhere, has been a balanced portfolio comprising 60% growth stocks and 40% long-dated bonds. Yet recently, this has come to look less and less like an optimized portfolio, and more and more like a “dumbbell portfolio,” in which investors hedge overvalued growth stocks with overvalued bonds.

At current valuations, such a portfolio no longer offers diversification. Instead, it is a portfolio betting outright on continued central bank intervention and ever-lower interest rates. Given some of the rhetoric coming from central bankers recently, this is a bet which could now be getting increasingly dangerous.
https://www.advisorperspectives.com/com ... -investing
This is terrible advice and would never, ever consider doing this.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by JoeRetire »

CULater wrote: Mon Sep 16, 2019 8:02 amI must admit that I hear the choir warming up and wonder if it's time to start thinking out of the box or at least taking a peek.
Oh noes! One random writer says "we all need to become black hole investors."

Everything has changed!
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

JoeRetire wrote: Mon Sep 16, 2019 8:21 pm
CULater wrote: Mon Sep 16, 2019 8:02 amI must admit that I hear the choir warming up and wonder if it's time to start thinking out of the box or at least taking a peek.
Oh noes! One random writer says "we all need to become black hole investors."

Everything has changed!
Part of the challenge of successful investing is tuning out all of the noise.

Another part of the challenge is recognizing that while it's true that the world is constantly changing, staying the course is your best bet.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by JBTX »

jrbdmb wrote: Mon Sep 16, 2019 8:31 am I think these lines from the article are key:
If you want capital gains, the opportunities will be there… but not in a passive index strategy. You will need active management and expert managers.

If your investment advisor simply has you in a 60/40 portfolio and tells you that “we are invested for the long term and the market will come back,” pick up your capital and walk away.
This article recommends avoiding index funds and advocates both stock picking and market timing. Good luck with that.
How many times have I read "this will be the year of the stock picker" as if we will enter an alternate reality where index funds track some different less superior stock market than the one the stock pickers live in.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by BogleBoogie »

I don't think it's being killed. That is my strategy and it's worked well.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by bltn »

HomerJ wrote: Mon Sep 16, 2019 1:11 pm
CULater wrote: Mon Sep 16, 2019 8:02 am This commentary from John Mauldin
And stop reading John Mauldin. That guy's track record is horrendous.

How many failed predictions does a person have to make before people stop taking him seriously?
A neighbor of mine subscribes to an investment letter continually predicting doom and gloom and reminding its readers that it correctly called the last two market corrections. And I keep telling him a stopped clock is right twice a day.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by ThereAreNoGurus »

HomerJ wrote: Mon Sep 16, 2019 1:11 pm
CULater wrote: Mon Sep 16, 2019 8:02 am This commentary from John Mauldin
And stop reading John Mauldin. That guy's track record is horrendous.

How many failed predictions does a person have to make before people stop taking him seriously?
Haha... John Mauldin is noise. I tuned him out years ago. Clicked this thread not knowing he was the source of this thread title (and more noise).
Trade the news and you will lose.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Forester »

60/40 portfolio in 2019: hedging expensive stocks with even more expensive bonds.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Forester wrote: Tue Sep 17, 2019 3:03 pm 60/40 portfolio in 2019: hedging expensive stocks with even more expensive bonds.
What do you suggest as an alternative?
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Dudley »

willthrill81 wrote: Tue Sep 17, 2019 3:05 pm
Forester wrote: Tue Sep 17, 2019 3:03 pm 60/40 portfolio in 2019: hedging expensive stocks with even more expensive bonds.
What do you suggest as an alternative?
Hide in short duration bonds in the hope that eventually one day either stocks or bonds (or both) may become cheaper ..... ?
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by pdavi21 »

"The bonds should perform well when the stocks run into difficulty, and vice versa."

No. That strategy was never alive. There have been numerous times when stocks and bonds have risen and fallen together.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

pdavi21 wrote: Tue Sep 17, 2019 3:15 pm "The bonds should perform well when the stocks run into difficulty, and vice versa."

No. That strategy was never alive. There have been numerous times when stocks and bonds have risen and fallen together.
Correct. The historic correlation between stocks and bonds has been essentially zero. This means that sometimes they've both gone up together, and sometimes they've gone down together, and sometimes one is down while the other is up.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by GAAP »

wolf359 wrote: Mon Sep 16, 2019 8:35 am This opinion article sort of meanders all over the place. He talks about Trump economic policy, iPhones, growth stocks, interest rates, index investing, and "black hole investing" (he's being slangy-- it makes sense in context.) However, his primary point isn't about the 60/40 portfolio allocation. It's about the need to stop buy-and-hold investing, leave passive strategies behind, and get back into active investment management. His conclusion:
[At the event horizon, as the Jefferson Airplane song of my youth says, logic and proportion are fallen sloppy dead. You better feed your head with much more forward-looking strategies.
Trying to decide if he's the white knight or the red queen...
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by unclescrooge »

Dave55 wrote: Mon Sep 16, 2019 8:43 am I have 2 friends who read John Mauldin and they tell me he is a perma bear. He also used and may still plug Altegris Mutual Funds, most of them alt's with very high expense ratios.


Dave
Someone from his office called me in 2007. They were recommending a heavy tilt towards alternatives...and we all know how that turned out.

But this sort of bearish outlook will definitely appeal to naive investors...to their detriment.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by GRP »

Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CULater »

GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by catalina355 »

CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
Let's presume that is true. So what can a retiree do about that?
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by GRP »

catalina355 wrote: Tue Sep 17, 2019 4:10 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
Let's presume that is true. So what can a retiree do about that?
Right. No easy answers for sure.

Work longer, save more, spend less. Pretty much the obvious stuff from my point of view.

Factor tilting and alternative investments might assist.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by HomerJ »

CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
:thumbsup

A 60/40 AA returning ~3% real over the next decade, for instance, should not warrant real concern for most BHs.

Who should be concerned are the Dave Ramsey acolytes who believe that their all stock portfolios will return 12% (despite using funds with 5.25% front loads and high expense ratios) and who have based their savings and withdrawal strategies on such bunk.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by All Seasons »

HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Sounding a little harsh, my man. :|
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CULater »

HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Maybe it would help to drink that beer you're holding in your hand and chill. :beer
Cheers!
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by catalina355 »

All Seasons wrote: Tue Sep 17, 2019 5:31 pm
HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Sounding a little harsh, my man. :|
Not really. I’m not sure whether to worry about future 60/40 returns or Honda oil dilution. 🙁
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by HomerJ »

CULater wrote: Tue Sep 17, 2019 6:03 pm
HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Maybe it would help to drink that beer you're holding in your hand and chill. :beer
Cheers!
Cheers to you as well...

But, seriously.

We are ALREADY conservative here... You post like we're all crazy 100% stock 10% a year guaranteed nut-jobs. We're not. You should know this by now.
Last edited by HomerJ on Tue Sep 17, 2019 9:17 pm, edited 1 time in total.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by KlangFool »

HomerJ wrote: Tue Sep 17, 2019 8:41 pm
CULater wrote: Tue Sep 17, 2019 6:03 pm
HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Maybe it would help to drink that beer you're holding in your hand and chill. :beer
Cheers!
Cheers to you as well...

But, seriously, please stop starting the same thread over and over.

We are ALREADY conservative here... You post like we're all crazy 100% stock 10% a year guaranteed nut-jobs. We're not. You should know this by now.
+1,000.

My plan is based on 5% nominal return of my 60/40 portfolio.

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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Sandtrap »

Retired, and other, Bogleheads carefully select an allocation and a withdrawal strategy that enables them (specifically) to sleep well through retirement and beyond.
Generalizations outside of this approach should be ignored.

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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Sandtrap wrote: Tue Sep 17, 2019 9:08 pm Retired, and other, Bogleheads carefully select an allocation and a withdrawal strategy that enables them (specifically) to sleep well through retirement and beyond.
Generalizations outside of this approach should be ignored.

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Unfortunately, I'm afraid that at least some around here wouldn't sleep well with any investment and/or withdrawal strategy.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CurlyDave »

Sandtrap wrote: Tue Sep 17, 2019 9:08 pm Retired, and other, Bogleheads carefully select an allocation and a withdrawal strategy that enables them (specifically) to sleep well through retirement and beyond...
I am anticipating sleeping particularly well beyond retirement. :D
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CULater »

CurlyDave wrote: Tue Sep 17, 2019 9:36 pm
Sandtrap wrote: Tue Sep 17, 2019 9:08 pm Retired, and other, Bogleheads carefully select an allocation and a withdrawal strategy that enables them (specifically) to sleep well through retirement and beyond...
I am anticipating sleeping particularly well beyond retirement. :D
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Tyler Aspect »

No. The 60% stock / 40% bond strategy will live on until the end of the earth.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Tyler Aspect wrote: Tue Sep 17, 2019 10:56 pm No. The 60% stock / 40% bond strategy will live on until the end of the earth.
You're probably right, although I still don't see why 60/40 is such a seemingly popular AA. It's arguably not the best at anything, and I don't really believe that there's an 'all purpose' AA as some (e.g. Ferri) have suggested.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Forester »

willthrill81 wrote: Tue Sep 17, 2019 3:05 pm
Forester wrote: Tue Sep 17, 2019 3:03 pm 60/40 portfolio in 2019: hedging expensive stocks with even more expensive bonds.
What do you suggest as an alternative?
Global diversification of stocks & bonds, tilt away from market cap megacap indexing, consider agriculture, gold, REITs etc, mix buy & hold with mechanical market timing.

Meb Faber Trinity Portfolio is best summation.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Forester »

* and Paul Merriman too (not very popular voices on this forum).
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Sandtrap »

Tyler Aspect wrote: Tue Sep 17, 2019 10:56 pm No. The 60% stock / 40% bond strategy will live on until the end of the earth.
Likely true because there's such a strong foundation of studies and written material, etc, out there.
What was that old saying,. . . . . reputation preceeds itself. It, and similar allocations, do "work".

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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CULater »

HomerJ wrote: Tue Sep 17, 2019 8:41 pm
CULater wrote: Tue Sep 17, 2019 6:03 pm
HomerJ wrote: Tue Sep 17, 2019 5:14 pm
CULater wrote: Tue Sep 17, 2019 4:08 pm
GRP wrote: Tue Sep 17, 2019 3:56 pm Asness has alluded to something along the lines of a traditional 60/40 strategy likely running into trouble in the future. Not "killed", but certainly hobbled.

Stocks sometimes get high valuations. Bonds sometimes get high valuations. Seldom do they happen together (I think he said the current conditions are in the 99th percentile), which is definitely not good news for expected return.
There does seem to be the possibility that 60/40 or any other stock/bond allocation won't produce historical returns -- lots of respected names have predicted that, including JB. Might be a good idea to play out a "what if" scenario in your head -- Plan B. Is your Plan B to discount this view and/or assume that all these voices are wrong? What about Pascal's Wager?
No one here is planning around historical returns.

So you coming on here and saying "Oh my gosh, you guys, this guy says returns may be lower than historical in the short-term" gets a YAWN from most of us...

We just say "Oh, good thing we were already planning around low returns then".

But you keep making the same post, "No, really guys... returns might be low!".

And we keep saying "Yeah we know, we're already ready for that... thanks"

Seriously, this is important... Bogleheads Plan A should already be a plan that can handle low short-term returns.
Maybe it would help to drink that beer you're holding in your hand and chill. :beer
Cheers!
Cheers to you as well...

But, seriously.

We are ALREADY conservative here... You post like we're all crazy 100% stock 10% a year guaranteed nut-jobs. We're not. You should know this by now.
Sorry. I wasn't aware you were the spokesman for the "We." That said, I can't say that I disagree with your criticism -- I do tend to perseverate on things. We can all do better...
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by KlangFool »

CULater wrote: Wed Sep 18, 2019 8:40 am
Sorry. I wasn't aware you were the spokesman for the "We." That said, I can't say that I disagree with your criticism -- I do tend to perseverate on things. We can all do better...
CULater,

I disagreed. I am not an optimizer in term of personal finance. I have a working strategy. So, I do not waste more time on it.

I prefer to spend more time on improving my coffee and teas.

Money is just a tool to live my life. It is not an end goal by itself.

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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by HomerJ »

CULater wrote: Wed Sep 18, 2019 8:40 amWe can all do better...
Agreed... my apologies if I was too churlish with my criticism.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by CULater »

HomerJ wrote: Wed Sep 18, 2019 8:52 am
CULater wrote: Wed Sep 18, 2019 8:40 amWe can all do better...
Agreed... my apologies if I was too churlish with my criticism.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Forester wrote: Wed Sep 18, 2019 6:45 am
willthrill81 wrote: Tue Sep 17, 2019 3:05 pm
Forester wrote: Tue Sep 17, 2019 3:03 pm 60/40 portfolio in 2019: hedging expensive stocks with even more expensive bonds.
What do you suggest as an alternative?
Global diversification of stocks & bonds, tilt away from market cap megacap indexing, consider agriculture, gold, REITs etc, mix buy & hold with mechanical market timing.
Generally speaking, I think that that could be very wise. It certainly would have worked well over the last ~50 years.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Valuethinker »

willthrill81 wrote: Tue Sep 17, 2019 5:20 pm

A 60/40 AA returning ~3% real over the next decade, for instance, should not warrant real concern for most BHs.

Who should be concerned are the Dave Ramsey acolytes who believe that their all stock portfolios will return 12% (despite using funds with 5.25% front loads and high expense ratios) and who have based their savings and withdrawal strategies on such bunk.
Really?

Stocks do say 3-5% real.

Bonds do 0-1% real (US bonds). That's high given where we are, as of this moment.

So then that gives one roughly 1.2%-3.4% real. It's only the upper end of that that fits into your range?

You need a lot higher returns in stocks, given where bonds are.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Valuethinker wrote: Wed Sep 18, 2019 9:55 am
willthrill81 wrote: Tue Sep 17, 2019 5:20 pm

A 60/40 AA returning ~3% real over the next decade, for instance, should not warrant real concern for most BHs.

Who should be concerned are the Dave Ramsey acolytes who believe that their all stock portfolios will return 12% (despite using funds with 5.25% front loads and high expense ratios) and who have based their savings and withdrawal strategies on such bunk.
Really?

Stocks do say 3-5% real.

Bonds do 0-1% real (US bonds). That's high given where we are, as of this moment.

So then that gives one roughly 1.2%-3.4% real. It's only the upper end of that that fits into your range?

You need a lot higher returns in stocks, given where bonds are.
You're forgetting ex-U.S. stock, which has lower valuations. The forward PE on ex-U.S. is currently 13.2 vs. 17.4 for the U.S.

And at any rate, the tilde I used above means 'approximately'.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Tyler Aspect »

willthrill81 wrote: Tue Sep 17, 2019 11:42 pm
Tyler Aspect wrote: Tue Sep 17, 2019 10:56 pm No. The 60% stock / 40% bond strategy will live on until the end of the earth.
You're probably right, although I still don't see why 60/40 is such a seemingly popular AA. It's arguably not the best at anything, and I don't really believe that there's an 'all purpose' AA as some (e.g. Ferri) have suggested.
60% stock / 40% bond is popular because this allocation covers two demographics. It includes investors transitioning to retirement, and aggressive retired investors.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

Tyler Aspect wrote: Wed Sep 18, 2019 10:15 am
willthrill81 wrote: Tue Sep 17, 2019 11:42 pm
Tyler Aspect wrote: Tue Sep 17, 2019 10:56 pm No. The 60% stock / 40% bond strategy will live on until the end of the earth.
You're probably right, although I still don't see why 60/40 is such a seemingly popular AA. It's arguably not the best at anything, and I don't really believe that there's an 'all purpose' AA as some (e.g. Ferri) have suggested.
60% stock / 40% bond is popular because this allocation covers two demographics. It includes investors transitioning to retirement, and aggressive retired investors.
Even if that is true, those combined groups are a relatively small portion of all investors.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by Muffin Master »

I am more inclined to a dynamic
Last edited by Muffin Master on Wed Sep 18, 2019 3:27 pm, edited 2 times in total.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by goblue100 »

Based on the scare articles I see, if we have fewer and fewer stocks available to buy, and more and more index money chasing the ones that are available. Wouldn't it make sense that valuations are higher?
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by nisiprius »

Muffin Master wrote: Wed Sep 18, 2019 10:49 am I am more inclined to a dynamic AA.

A range of min and max equity % as a result of some fix harvesting method with repositioning at certain draw down levels 30-40-50% for example is something I am pondering.

A fixed AA like 60/40 is not poured in concrete for me and I feel it is itself based on historical patterns and norms.
You're in good company with dozens of "asset allocation" funds which did just that in the 1980s and 1990s. They didn't do very well and they're mostly gone.

Vanguard's LifeStrategy funds did that for a long time; the allocations of the funds were merely "neutral points" and they would adjust stock allocation up and down according to a "proprietary quantitative model." Eventually, they gave up, pinned the Asset Allocation Fund itself at 100% stocks for a few years, then killed it and froze all the LifeStrategy funds at fixed allocations. Of course just because Vanguard did it doesn't mean it's right, but it does go to show that it is not all that easy to beat a fixed allocation.
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Re: Is the 60/40 portfolio allocation strategy being killed?

Post by willthrill81 »

goblue100 wrote: Wed Sep 18, 2019 10:53 am Based on the scare articles I see, if we have fewer and fewer stocks available to buy, and more and more index money chasing the ones that are available. Wouldn't it make sense that valuations are higher?
What publicly available stocks are not available to buy? :confused
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