[Professor Jeremy Siegel says 75/25 in retirement]

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[Professor Jeremy Siegel says 75/25 in retirement]

Post by Seasonal »

[Title was "Jeremy Siegel Chasing Performance" --admin LadyGeek]

Jeremy Siegel, of Stocks for the Long Run fame, now recommends 75/25 rather than 60/40. His rationale seems to focus on low interest rates.

https://www.cnbc.com/2020/02/08/wharton ... ymore.html

Sorry for the clickbait title.
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Re: Jeremy Siegel Chasing Performance

Post by Steve Reading »

If you've read Stocks for the Long Run, this sentence from the article should read especially obtuse coming from Siegel:

“This environment of low interest rates is not going to change,” Siegel said, noting that the dividend yield on the S&P 500 is higher than the U.S. 10-year Treasury’s 1.5% yield. “How is [that] ... going to give you enough income?”
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: Jeremy Siegel Chasing Performance

Post by Triple digit golfer »

Is he recommending 75/25 for all investors or just those in retirement?

Edit: I see the thread title was changed to clarify. Thank you.
Last edited by Triple digit golfer on Sun Feb 09, 2020 12:36 pm, edited 1 time in total.
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Professor Jeremy Siegel says 75/25 in retirement

Post by FBN2014 »

[Thread merged into here, see below. --admin LadyGeek]

Does his recommendation make any sense?

https://www.cnbc.com/2020/02/08/wharton ... ymore.html
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Re: Professor Jeremy Siegel says 75/25 in retirement

Post by Broken Man 1999 »

FBN2014 wrote: Sat Feb 08, 2020 6:51 pm Does his recommendation make any sense?

https://www.cnbc.com/2020/02/08/wharton ... ymore.html
From the link:

Dividends on stocks are going to be the new bond

"....The Siegel-WisdomTree funds will try to solve for that problem by offering low-cost, high-yield investment strategies that highlight one of Siegel’s main arguments from “Stocks for the Long Run”: that stocks may be subject to volatility in the short term, but ultimately have less long-term volatility when compared with bonds...."

I don't like that strategy at all. And, the good professor should know many bond holders, including myself, do not look for income streams from bonds as being the main reason we might hold bonds. The paltry sums are appreciated, but I don't hold bonds for the income stream. Rather, I hold bonds as a safer refuge when the market goes to heck in a handbasket. And, not just any old bond, as I prefer US debt obligations.

Perhaps Siegal's increased risk ploy will play in some places, but frankly if I wanted to juice my income I could have added Vanguard's dividend focused funds long ago.

Not interested at all.

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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by LadyGeek »

I merged FBN2014's thread into the on-going discussion. I also retitled the thread,as I thought FBN2014's title was more clear.

(The OP can change the thread title further by editing the Subject: line in Post #1.)
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by watchnerd »

Seasonal wrote: Sat Feb 08, 2020 5:16 pm [Title was "Jeremy Siegel Chasing Performance" --admin LadyGeek]

Jeremy Siegel, of Stocks for the Long Run fame, now recommends 75/25 rather than 60/40. His rationale seems to focus on low interest rates.

https://www.cnbc.com/2020/02/08/wharton ... ymore.html

Sorry for the clickbait title.
[(removed) --admin LadyGeek] I'm 70/30!

I guess I'm screwed.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Random Walker »

S&P 500 dividend yield greater than yield on 10 year treasuries certainly gets my attention! That being said, I agree with above poster that I hold bonds for safety when stocks go down. With low interest rates and low expected return for stocks, it is somewhat anti-intuitive that some will actually need to increase equity allocations to achieve goals. 75/25 recommendation may reflect this. But that’s a lot of risk! Even a 60/40 portfolio has 85% of its risk wrapped up in equity market beta. 75/25 must have about 90-95% of its risk wrapped up in the market factor. The problem with high equity valuations and thus low future expected returns is not just that the mean return is low. The whole distribution of potential returns shifts left: good outcomes are less good and bad outcomes are worse.

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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by theorist »

There seems to be some sentiment among some experts that central banks “won’t let” a real crash (reducing equity values for a significant period) happen. I’ve heard this in several financial podcasts. This seems like a dangerous notion.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by vectorizer »

My reaction is that in retirement, to quote a tired but true saying, return of capital is more important to me than return on capital. I don't own bonds for income, I own them for stability. I'm satisfied that I have a good shot at keeping up with inflation with my bonds and maybe a pittance above that, and that's all I want out of them.

[Sorry CNBC, I'm not turning off my ad blocker for you. I did it before and you crushed me with ads and popups. So I'm just commenting on the posted headline.]
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by rockstar »

If the market drops during your draw down, and you don't have adequate funds in the 25% portion, then this could hurt a lot. This is a lot different than being Buffett, where you have billions in the 10% position with no debt. I don't think his significant other has anything to worry about in his 90/10 split even with the market dropping.

So I think it really boils down to how much you have versus your expenses in the 25% portion. Do you have enough to ride out the market?
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by nisiprius »

It's surprisingly difficult to find a real-world example of a time period when 60/40 would have been the tangent portfolio. 1978-2018, and assuming long-term bonds, comes close. I'm going to tweak the parameters just a bit to get a 60/40 optimum in order to illustrate my point.

We'll keep the real values for standard deviations and correlation, but retune returns to favor stock just a bit. Specifically:
We will assume returns 13% from stocks, 8.1% from bonds, and 5% from T-bills. (The actual numbers were 12.66%, 9.011%, and 4.559%).

For this set of parameters, the optimum allocation would have been 60/40.

Image

Now, suppose someone suggests that the future will be more pessimistic for all three asset classes, stocks, bonds and bills alike. To be specific, suppose that their returns will all be 2% less:

11% from stocks, 6.1% from bonds, and 3% from T-bills.

The optimum allocation for stocks doesn't change. Everything on the graph just slides down by 2%, and the optimum allocation continues to be 60/40.

Image

Now, of course, if we assume that (say) the returns from bonds decrease while the returns from stocks stay the same or increase, then, sure, the optimum stock allocation will increase. But most prognosticators seem to be expecting everything to have lower return.

Other things being equal, if all assets have lower returns, that isn't a reason to shift asset allocation toward riskier assets.

The tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.

But, what about "how is that going to give you enough income?" How does that factor in? Well, there's a very strong hidden assumption here.

If the risk-adjusted return of everything is going to be worse than before, then things are just going to suck. There isn't any easy way out (and we should be very skeptical of people who pop up saying there is). But we have a choice of ways to react. Siegel is implicitly saying that when things get worse, our risk tolerance rises and we are able to take on more risk. That is, he is saying that "enough" income is imperative, we should insist on holding return constant, and therefore we must accept more risk. That is not an objective, rational conclusion; that is a statement that is appropriate for people who like risk.

We can just as well say "I know what my risk tolerance is, I'm at it now, and I see no reason to expect it to increase. Instead of taking on more risk on order to hold "expected return" constant, I will choose to maintain the same asset allocation, hold risk constant, and accept lower income.

Siegel is assuming that a reduction in income is an intolerable pain, but an increase in risk is perfectly acceptable. That may well be true for some people, but not for everyone.

If the pain of lower income is worse than the pain of having one's life savings at high risk, then we should increase stock allocation. But if the pain of having one's life savings at high risk is worse than the pain of lower income, then we shouldn't.

The idea that one's risk tolerance increases in bad economic times doesn't resonate with me.
Last edited by nisiprius on Sat Feb 08, 2020 8:36 pm, edited 8 times in total.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by columbia »

Increasing one’s equity exposure could also lead to a(n even) worse sequence of returns for a retiree.

When did Siegel become a seer?
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by nisiprius »

theorist wrote: Sat Feb 08, 2020 7:48 pm There seems to be some sentiment among some experts that central banks “won’t let” a real crash (reducing equity values for a significant period) happen. I’ve heard this in several financial podcasts. This seems like a dangerous notion.
Really? That is uncomfortably reminiscent of December, 1929, in which rumors spread of something called "organized buying support." For example, according to an Associated Press story on December 10th, 1929,
Unconfirmed rumors that organized buying support for the stock market had been arranged at a meeting of leading bankers Saturday started a spectacular rally in prices at the opening..."
In The Day the Bubble Burst, Gordon Thomas and Max Morgan-Witts said that some remarks by one Arthur Cutten
were a positive encouragement to borrow money from brokers to invest in margin on stocks. It was also seen as "a sign" that he and other big operators were ready, by "organizing buying support," to move prices up if they went dangerously down.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Steve Reading »

nisiprius wrote: Sat Feb 08, 2020 8:10 pm The optimum allocation for stocks doesn't change. Everything on the graph just slides down by 2%, and the optimum allocation continues to be 60/40.

Image

Now, of course, if we assume that (say) the returns from bonds decrease while the returns from stocks stay the same or increase, then, sure, the optimum stock allocation will increase. But most prognosticators seem to be expecting everything to have lower return.

Other things being equal, if all assets have lower returns, that isn't a reason to shift asset allocation toward riskier assets.

The tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.
That shouldn't be the case because what matters is the proportion of returns to risk (Sharpe) so subtracting a constant term (say 2%) to both assets should make the safer asset somewhat less desirable. Still, you made me think twice so I pulled out my MVO:

- Stocks return 10%, SD of 15%.
- Bonds return 6%, SD of 5%. I assume 0.1 correlation between each other.
My MVO tells me a 16.8%/83.2% stock/bond is the tangent portfolio.

I then try:
- Stocks return 8%, SD of 15%.
- Bonds return 4%, SD of 5%. I assume 0.1 correlation between each other again.
My MVO tells me a 25%/75% stock/bond is the tangent portfolio.

Graphically (since you appealed to that intuition), it is as though the graph slides downward. But (and it's hard to explain over words but hopefully you follow the geometry), now the risk-free asset will contact that curve somewhat more on the top right of the curve. If you did the opposite (shift the curve upwards by, say 100%), now the risk-free asset line will contact basically by the knee of the curve (right about the minimum variance portfolio). Another way to think about it is that if the curve stays as-is and you move the RF intercept upwards, it will also contact the curve somewhat closer to the stock side.

Maybe draw it out.
Last edited by Steve Reading on Sat Feb 08, 2020 8:38 pm, edited 1 time in total.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by dh »

... and make sure you invest in his Wisdom Tree Funds. I have seen his commercials and heard his tag line:
"Market cap weight indexes ... that's yesterday."

As a Boglehead, I guess I am "yesterday" too.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Turkishcoffee »

nisiprius wrote: Sat Feb 08, 2020 8:10 pm It's surprisingly difficult to find a real-world example of a time period when 60/40 would have been the tangent portfolio. 1978-2018, and assuming long-term bonds, comes close. I'm going to tweak the parameters just a bit to get a 60/40 optimum in order to illustrate my point.

We'll keep the real values for standard deviations and correlation, but retune returns to favor stock just a bit. Specifically:
We will assume returns 13% from stocks, 8.1% from bonds, and 5% from T-bills. (The actual numbers were 12.66%, 9.011%, and 4.559%).

For this set of parameters, the optimum allocation would have been 60/40.

Image

Now, suppose someone suggests that the future will be more pessimistic for all three asset classes, stocks, bonds and bills alike. To be specific, suppose that their returns will all be 2% less:

11% from stocks, 6.1% from bonds, and 3% from T-bills.

The optimum allocation for stocks doesn't change. Everything on the graph just slides down by 2%, and the optimum allocation continues to be 60/40.

Image

Now, of course, if we assume that (say) the returns from bonds decrease while the returns from stocks stay the same or increase, then, sure, the optimum stock allocation will increase. But most prognosticators seem to be expecting everything to have lower return.

Other things being equal, if all assets have lower returns, that isn't a reason to shift asset allocation toward riskier assets.

The tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.

But, what about "how is that going to give you enough income?" How does that factor in? Well, there's a very strong hidden assumption here.

If the risk-adjusted return of everything is going to be worse than before, then things are just going to suck. There isn't any easy way out (and we should be very skeptical of people who pop up saying there is). But we have a choice of ways to react. Siegel is implicitly saying that when things get worse, our risk tolerance rises and we are able to take on more risk. That is, he is saying that "enough" income is imperative, we should insist on holding return constant, and therefore we must accept more risk. That is not an objective, rational conclusion; that is a statement that is appropriate for people who like risk.

We can just as well say "I know what my risk tolerance is, I'm at it now, and I see no reason to expect it to increase. Instead of taking on more risk on order to hold "expected return" constant, I will choose to maintain the same asset allocation, hold risk constant, and accept lower income.

Siegel is assuming that a reduction in income is an intolerable pain, but an increase in risk is perfectly acceptable. That may well be true for some people, but not for everyone.

If the pain of lower income is worse than the pain of having one's life savings at high risk, then we should increase stock allocation. But if the pain of having one's life savings at high risk is worse than the pain of lower income, then we shouldn't.

The idea that one's risk tolerance increases in bad economic times doesn't resonate with me.
Why would siegel be wrong when buffett suggests 90/10?

Maybe they know something.......
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by theorist »

nisiprius wrote: Sat Feb 08, 2020 8:33 pm
theorist wrote: Sat Feb 08, 2020 7:48 pm There seems to be some sentiment among some experts that central banks “won’t let” a real crash (reducing equity values for a significant period) happen. I’ve heard this in several financial podcasts. This seems like a dangerous notion.
Really? That is uncomfortably reminiscent of December, 1929, in which rumors spread of something called "organized buying support." For example, according to an Associated Press story on December 10th, 1929,
Unconfirmed rumors that organized buying support for the stock market had been arranged at a meeting of leading bankers Saturday started a spectacular rally in prices at the opening..."
In The Day the Bubble Burst, Gordon Thomas and Max Morgan-Witts said that some remarks by one Arthur Cutten
were a positive encouragement to borrow money from brokers to invest in margin on stocks. It was also seen as "a sign" that he and other big operators were ready, by "organizing buying support," to move prices up if they went dangerously down.

The most recent place I heard this discussed is here:

https://www.theinvestorspodcast.com/epi ... ke-gromen/

It isn’t the first time I heard this view. Needless to say, I don’t subscribe — c.f. Pascal’s wager.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by nisiprius »

305pelusa wrote: Sat Feb 08, 2020 8:37 pm
nisiprius wrote: Sat Feb 08, 2020 8:10 pmThe tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.
That shouldn't be the case because what matters is the proportion of returns to risk (Sharpe) so subtracting a constant term (say 2%) to both assets should make the safer asset somewhat less desirable. Still, you made me think twice so I pulled out my MVO:
What did you put in for return of the riskless asset?

If the risk-free return doesn't change--all bonds return less but Treasury bills return just as much as ever--then, just as you say, the hyperbola slides downward, the riskless asset stays put, the capital markets line pivots downward, and grazes the hyperbola farther up and closer to the riskier asset.

But if you assume that the risk-free return decreases as well, then it doesn't.

Sure, if you make various assumptions about how they all change relative to each other, then the tangent point changes in responses to the assumptions you make.

I can replicate your results closely, if I assume that you were using a riskless return of exactly 2.00%... and that you assumed that the return of bonds dropped from 6% to 4% but that the return of T-bill stayed the same at 2%. This gives me confidence that I'm doing the same calculation as you are.

Image

Image

But if I assume that the riskless return drops by the same 2% as stocks and bonds--in this case, drops to zero--then the optimum allocation at tangency doesn't change.

Image
Last edited by nisiprius on Sat Feb 08, 2020 9:38 pm, edited 4 times in total.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by nisiprius »

Turkishcoffee wrote: Sat Feb 08, 2020 8:53 pm ..Why would siegel be wrong when buffett suggests 90/10?
Siegel isn't wrong, exactly, but he is including unstated assumptions about risk tolerance, assumptions which are likely true for some investors and not for others.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by JoMoney »

It makes as much sense as zero stock, 50/50, or even all stocks.
Nobody knows what the future returns will be, or what allocation will show as being "optimal" over some particular future time period, but you can look at the risks and find something that suits you.
John Bogle in Risk and Risk Control in an Era of Confidence wrote:... While I cannot give any investor a neat formula for risk control, I am comforted to share that inadequacy with the likes of Paul Samuelson, who tells us, “there is no way any professor of economics or any minister of the church can tell you what your risk tolerance must be.”
No, nor can any Wall Street seer, nor any money manager, nor any indexing advocate, nor even any grizzled veteran of 50 years in this wonderful business. ...
http://johncbogle.com/speeches/JCB_NE_Pension_4-00.pdf
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Steve Reading »

nisiprius wrote: Sat Feb 08, 2020 9:16 pm
305pelusa wrote: Sat Feb 08, 2020 8:37 pm
nisiprius wrote: Sat Feb 08, 2020 8:10 pmThe tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.
That shouldn't be the case because what matters is the proportion of returns to risk (Sharpe) so subtracting a constant term (say 2%) to both assets should make the safer asset somewhat less desirable. Still, you made me think twice so I pulled out my MVO:
What did you put in for return of the riskless asset?

If the risk-free return doesn't change--all bonds return less but Treasury bills return just as much as ever--then, just as you say, the hyperbola slides downward, the riskless asset stays put, the capital markets line pivots downward, and grazes the hyperbola farther up and closer to the riskier asset.

But if you assume that the risk-free return decreases as well, then it doesn't.

Sure, if you make various assumptions about how they all change relative to each other, then the tangent point changes in responses to the assumptions you make.
Ah yes if the risk free return changes then it makes no difference. I hadn't noticed you changed the RFR also. If you literally move everything down, it makes no difference, but that's a rather trivial finding. I didn't think you'd actually generate graphs to show something like that haha.

In my head, moving everything but the RFR was a much more interesting exercise so it seems I just projected into you :oops:
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Random Musings »

Siegel is pushing product. If he makes enough money, perhaps he can go the Buffett 90/10 allocation during his retirement. Since most of us, like me, don't have infinite funds like Buffett, those fat tail black swans that occur preclude me from that approach.

RM
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Steve Reading »

Random Musings wrote: Sat Feb 08, 2020 9:36 pm Siegel is pushing product. If he makes enough money, perhaps he can go the Buffett 90/10 allocation during his retirement. Since most of us, like me, don't have infinite funds like Buffett, those fat tail black swans that occur preclude me from that approach.

RM
I seem to recall an interview where he said he was completely in stocks right now. That fella is the ultimate perma Bull.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by nisiprius »

305pelusa wrote: Sat Feb 08, 2020 9:32 pm
nisiprius wrote: Sat Feb 08, 2020 9:16 pm
305pelusa wrote: Sat Feb 08, 2020 8:37 pm
nisiprius wrote: Sat Feb 08, 2020 8:10 pmThe tangent portfolio doesn't move unless you predict that asset class returns will change in relation to each other.
That shouldn't be the case because what matters is the proportion of returns to risk (Sharpe) so subtracting a constant term (say 2%) to both assets should make the safer asset somewhat less desirable. Still, you made me think twice so I pulled out my MVO:
What did you put in for return of the riskless asset? If the risk-free return doesn't change--all bonds return less but Treasury bills return just as much as ever--then, just as you say, the hyperbola slides downward, the riskless asset stays put, the capital markets line pivots downward, and grazes the hyperbola farther up and closer to the riskier asset. But if you assume that the risk-free return decreases as well, then it doesn't.
Ah yes if the risk free return changes then it makes no difference. I hadn't noticed you changed the RFR also. If you literally move everything down, it makes no difference, but that's a rather trivial finding. I didn't think you'd actually generate graphs to show something like that haha.

In my head, moving everything but the RFR was a much more interesting exercise so it seems I just projected into you :oops:
Thank you for taking the time to check.

While you were posting that, I found that I could replicate your numbers if I assumed a risk-free rate of exactly 2.00% that doesn't change. I find that reassuring as evidence that we are calculating the same thing. I added some pictures to my earlier post.

It is trivial. If all assets decrease in return by X%, then the optimum allocation remains the same, and the return at the optimum decreases by X%. But I wonder how many people would accept it if I just stated that in words? If all assets decrease in return by X%, then there is no escape. Increasing stock allocation is not an escape, it's an assertion that the investor's risk tolerance has increased--and that the investor personally finds lower return more painful than higher risk.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Random Musings »

305pelusa wrote: Sat Feb 08, 2020 9:45 pm
Random Musings wrote: Sat Feb 08, 2020 9:36 pm Siegel is pushing product. If he makes enough money, perhaps he can go the Buffett 90/10 allocation during his retirement. Since most of us, like me, don't have infinite funds like Buffett, those fat tail black swans that occur preclude me from that approach.

RM
I seem to recall an interview where he said he was completely in stocks right now. That fella is the ultimate perma Bull.
All of us don't have that luxury, let alone that risk tolerance. I don't need to take that amount of risk, and taking it could lead to a higher percentage of unfavorable outcomes.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Pierre Delecto »

Seasonal wrote: Sat Feb 08, 2020 5:16 pm [Title was "Jeremy Siegel Chasing Performance" --admin LadyGeek]

Jeremy Siegel, of Stocks for the Long Run fame, now recommends 75/25 rather than 60/40. His rationale seems to focus on low interest rates.

https://www.cnbc.com/2020/02/08/wharton ... ymore.html

Sorry for the clickbait title.
I prefer 100 percent equities (broadly diversified indexes) and have done it for years. And I’m old enough to have experienced the Great Recession and .Com busts first hand. I’ve educated myself on market history and am ready to take a 50 percent loss in any given year. I want no part of bonds at historically low interest rates. Pass. I realize my plan is not for most. Works for me though.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by TJSI »

There is really nothing new or even surprising about Prof Siegel's recommendation. It is the well recommended idea that as one approaches retirement, they should pivot to a "safe income" investment portfolio. And with interest rates so low this means using safe dividend paying stocks to provide some needed income. John Bogle said the same. It does not mean chasing high yield.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Call_Me_Op »

Seasonal wrote: Sat Feb 08, 2020 5:16 pm [Title was "Jeremy Siegel Chasing Performance" --admin LadyGeek]

Jeremy Siegel, of Stocks for the Long Run fame, now recommends 75/25 rather than 60/40. His rationale seems to focus on low interest rates.

https://www.cnbc.com/2020/02/08/wharton ... ymore.html

Sorry for the clickbait title.
Good for him. That's not right for me.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by financeperchance »

If you game this out, let's suppose interest rates start to rise again. Those things do still fluctuate, right? Stock prices start to go down, down, down -- because as Buffett puts it, interest rates are to stock prices as gravity is to physics:
Image

Meanwhile, the only thing that's doing well is the shorter-term bonds and the total bond market index that everyone hates right now. The balanced portfolio is where you want to be in this scenario.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Leesbro63 »

I kinda lost respect and believability for/with Siegel when he, recently, started huckstering WisdomTree ETFs.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Riprap »

Yay! A stealth dividend thread. :D

“It cannot maintain spending streams at all. Dividends on stocks are going to be the new bond in terms of thinking about retirement.”
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by watchnerd »

Riprap wrote: Sun Feb 09, 2020 9:54 am Yay! A stealth dividend thread. :D

“It cannot maintain spending streams at all. Dividends on stocks are going to be the new bond in terms of thinking about retirement.”
I'll agree with Siegel that people need more stocks to compensate for low nominal yields.

I disagree with Siegel that the stock return must come from dividends.

All that matters is total return.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by quantAndHold »

Siegel has always been a stock cheerleader. I would expect him to advocate holding more stocks than the mainstream recommendations. Anything else would be out of character for him. I would take his advice in that context.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by DB2 »

It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Pierre Delecto »

DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by visualguy »

Pierre Delecto wrote: Sun Feb 09, 2020 11:43 am
DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
Correct. Even here, many are essentially all equities, and that's fine, and a good strategy for people who can handle the volatility.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by abuss368 »

The correct asset allocation is the one that works for you and allows you to sleep at night. I would be hesitant to enter retirement with a 75 stock and 25 bond allocation.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by unclescrooge »

nisiprius wrote: Sat Feb 08, 2020 9:56 pm Increasing stock allocation is not an escape, it's an assertion that the investor's risk tolerance has increased--and that the investor personally finds lower return more painful than higher risk.
Needs to bolded!

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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by unclescrooge »

watchnerd wrote: Sat Feb 08, 2020 7:32 pm
Seasonal wrote: Sat Feb 08, 2020 5:16 pm [Title was "Jeremy Siegel Chasing Performance" --admin LadyGeek]

Jeremy Siegel, of Stocks for the Long Run fame, now recommends 75/25 rather than 60/40. His rationale seems to focus on low interest rates.

https://www.cnbc.com/2020/02/08/wharton ... ymore.html

Sorry for the clickbait title.
[(removed) --admin LadyGeek] I'm 70/30!

I guess I'm screwed.
You and my wife are both going to end up living in penury!

Meanwhile, with my 80/20 allocation, I will be basking in the sun sipping G&Ts. :mrgreen:
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by watchnerd »

unclescrooge wrote: Sun Feb 09, 2020 12:24 pm
You and my wife are both going to end up living in penury!

Meanwhile, with my 80/20 allocation, I will be basking in the sun sipping G&Ts. :mrgreen:
Yes, while slaving away in the fire pits on Mordor in my dotage, I will be thinking:

"If only I had been 5% more equities...."
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by visualguy »

abuss368 wrote: Sun Feb 09, 2020 12:10 pm The correct asset allocation is the one that works for you and allows you to sleep at night. I would be hesitant to enter retirement with a 75 stock and 25 bond allocation.
For me, it's the opposite problem - I wouldn't be able to fund retirement without a very aggressive stock allocation (or working for way too long). I would lose sleep over having a significant amount "invested" in something that has no real return, and keep thinking about better things to with that money, such as buying real estate (or putting it all in the stock market).
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by garlandwhizzer »

JoMoney wrote:

It makes as much sense as zero stock, 50/50, or even all stocks.
Nobody knows what the future returns will be, or what allocation will show as being "optimal" over some particular future time period, but you can look at the risks and find something that suits you.
1+

Siegel's point is valid that expected returns of bonds going forward are low, no better than inflation, perhaps below inflation for the foreseeable future. In financial planning for the future it's reasonable to take expectations into account. Likewise since we're talking future return expectations, stocks are also expected by most to have lower than historical returns going forward. The problem with future expected returns in general is that they are just guesses no matter who makes them. There is with a wide range of outcomes both above and below what is expected, although bonds have a much narrower range than stocks. The foreseeable future often turns out to be a much shorter time frame than we foresee when we make these future projections. I think Siegel is saying that he expects our current market/macro-economic parameters--ultra low interest rates, slow but steady economic growth, low unemployment, persistent low inflation in spite of maximal central bank efforts to stimulate inflation--will last indefinitely, a permanent state of affairs going forward in which case 75/25 would work out better than 60/40 as long as you could hold on to the 75 when things get tough which is not a given for all investors. I think that there is no one formula for all investors as to the the stock/bond mix and that it's up to each of use to set the balance between equity and bonds according to our own financial circumstances, long term goals, and risk tolerance. I was 100% equity for most of my investing career but I've gradually increased bond holdings over the decades and now at 72 I'm somewhere between 60/40 and 65/35 depending on circumstances. I think it's quite natural to make gradual, modest, and hopefully appropriate changes to the portfolio in response to circumstances in the macro-economy, the markets, or in ourselves. I do not believe it's a good idea to automatically follow an "expert's" advice. The best expert on what's right for an individual in theory is that individual. I believe it's very important listen to experts and weight their advice but not blindly follow it, and to constantly learn more about markets, about yourself, and about macro-economics throughout your long investing career which will enable you to make the best investing decisions suited to you. The Forum is a great tool to help achieve his IMO.

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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by abuss368 »

visualguy wrote: Sun Feb 09, 2020 12:33 pm
abuss368 wrote: Sun Feb 09, 2020 12:10 pm The correct asset allocation is the one that works for you and allows you to sleep at night. I would be hesitant to enter retirement with a 75 stock and 25 bond allocation.
For me, it's the opposite problem - I wouldn't be able to fund retirement without a very aggressive stock allocation (or working for way too long). I would lose sleep over having a significant amount "invested" in something that has no real return, and keep thinking about better things to with that money, such as buying real estate (or putting it all in the stock market).
I am curious if the calendar showed 2008 - 2009 would some of the responses be different.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by DB2 »

Pierre Delecto wrote: Sun Feb 09, 2020 11:43 am
DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
Agreed, it depends on individual preferences and factors. However, it was pushed as general advice which most would not recommend. A truly balanced portfolio depending on age is a more sound approach I think many sounder heads would agree with. But, these CNBC people are the same ones stock picking all day long (although I sometimes wonder what they really do hold - mostly index funds?).
Last edited by DB2 on Sun Feb 09, 2020 12:42 pm, edited 1 time in total.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Pierre Delecto »

DB2 wrote: Sun Feb 09, 2020 12:40 pm
Pierre Delecto wrote: Sun Feb 09, 2020 11:43 am
DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
Agreed, it depends on individual preferences and factors. However, it was pushed as general advice which most would not recommend.
Nope. Not for me. You have to be a bit of a market historian and optimist. I got excited about Great Recession and deployed all my cash reserves that I had at the time. I also experienced the .com bust and was all equities then. Zero regrets. I’m ready for a 50 percent drop in equities at any time.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Pierre Delecto »

Pierre Delecto wrote: Sun Feb 09, 2020 12:41 pm
DB2 wrote: Sun Feb 09, 2020 12:40 pm
Pierre Delecto wrote: Sun Feb 09, 2020 11:43 am
DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
Agreed, it depends on individual preferences and factors. However, it was pushed as general advice which most would not recommend.
Nope. Not for me. You have to be a bit of a market historian and optimist. I got excited about Great Recession and deployed all my cash reserves that I had at the time. I also experienced the .com bust and was all equities then. Zero regrets. I’m ready for a 50 percent drop in equities at any time.
Excited from an investigating perspective that is. I wouldn’t wish for a recession ever due to the lives it can devastate.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by visualguy »

abuss368 wrote: Sun Feb 09, 2020 12:38 pm
visualguy wrote: Sun Feb 09, 2020 12:33 pm
abuss368 wrote: Sun Feb 09, 2020 12:10 pm The correct asset allocation is the one that works for you and allows you to sleep at night. I would be hesitant to enter retirement with a 75 stock and 25 bond allocation.
For me, it's the opposite problem - I wouldn't be able to fund retirement without a very aggressive stock allocation (or working for way too long). I would lose sleep over having a significant amount "invested" in something that has no real return, and keep thinking about better things to with that money, such as buying real estate (or putting it all in the stock market).
I am curious if the calendar showed 2008 - 2009 would some of the responses be different.
Not mine - never had an interest in bonds, and I went through 2000 and 2008. I did diversify to real estate, though.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by Pierre Delecto »

Pierre Delecto wrote: Sun Feb 09, 2020 12:42 pm
Pierre Delecto wrote: Sun Feb 09, 2020 12:41 pm
DB2 wrote: Sun Feb 09, 2020 12:40 pm
Pierre Delecto wrote: Sun Feb 09, 2020 11:43 am
DB2 wrote: Sun Feb 09, 2020 11:38 am It's difficult to find anything of value on CNBC. At the end of the day, it's practically owned by financial institutions who are always going to push "stocks". I do turn it on occasionally for sheer entertainment purposes. But, just the other day, a couple of guests were saying they were 100% equities.
Nothing wrong with 100 percent equities — for a slice of investor population. Richest people I know (Ultra net worth) didn’t get there owning bonds or treasuries.
Agreed, it depends on individual preferences and factors. However, it was pushed as general advice which most would not recommend.
Nope. Not for me. You have to be a bit of a market historian and optimist. I got excited about Great Recession and deployed all my cash reserves that I had at the time. I also experienced the .com bust and was all equities then. Zero regrets. I’m ready for a 50 percent drop in equities at any time.
Excited from an investigating perspective that is. I wouldn’t wish for a recession ever due to the lives it can devastate.
Sorry replied to wrong post. Meant to reply to abuss368.
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Re: [Professor Jeremy Siegel says 75/25 in retirement]

Post by abuss368 »

Bonds provided a pool of assets (i.e. dry powder) during the financial crisis to rebalance into stocks along with new money.

In hindsight this was important.
John C. Bogle: “Simplicity is the master key to financial success."
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