Talk me out of a 60/40 AA

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DrGoogle2017
Posts: 1778
Joined: Mon Aug 14, 2017 12:31 pm

Re: Talk me out of a 60/40 AA

Post by DrGoogle2017 » Fri Jan 11, 2019 1:00 pm

In the last 87 years, someone posted it recently on some forums, max loss for 50/50 in some years was 22.50%, I’m comfortable with that loss. While for 60/40, max loss is 33.60%, which I’m not comfortable with.

michaeljc70
Posts: 4129
Joined: Thu Oct 15, 2015 3:53 pm

Re: Talk me out of a 60/40 AA

Post by michaeljc70 » Fri Jan 11, 2019 1:07 pm

DrGoogle2017 wrote:
Fri Jan 11, 2019 1:00 pm
In the last 87 years, someone posted it recently on some forums, max loss for 50/50 in some years was 22.50%, I’m comfortable with that loss. While for 60/40, max loss is 33.60%, which I’m not comfortable with.
But most years have gains, not losses. You also have to be comfortable with lower gains for most years.

hoops777
Posts: 2384
Joined: Sun Apr 10, 2011 12:23 pm

Re: Talk me out of a 60/40 AA

Post by hoops777 » Fri Jan 11, 2019 1:44 pm

nasrullah wrote:
Tue Jan 02, 2018 9:37 pm
But why not 100% stocks then? Heck why not lever up to 110%?

This is what I'm missing - increasing the stock AA from 60/40 to 80/20 has less than a 1% increase in CAGR in every 10+ year period I've looked at. You have to shorten the window to < 5 years before I've found a meaningful increase in CAGR. But even then does a 2% increase in CAGR justify a > 20% difference in Max Drawdown?

I'm 38, have $650k in invested assets, and for the time being have a $150k/year investment target. Hopefully I'll be able to maintain that, and even more hopefully increase it as time passes. In theory I have time and resources to be more aggressive but why?

Maybe the simple answer is I've finally found *my* AA.
.You are 38 and plan on investing 150,000 per year and hopefully more.Unless the market has the worst long term crisis in history,you are fine no matter what allocation you choose.The most important thing is how much you are saving every year,and you are saving/investing about 3 times what the average American earns.If you invested every penny in CD’s paying 3 pct you would have well over 5 million in 20 years.I would go 60 stocks and 40 CDS/treasuries and have no worries.Of course this is based on your projected income.
K.I.S.S........so easy to say so difficult to do.

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