Are Stocks a Sure Thing Over the Long Term? Not Necessarily

[Nathan Drake]

They do, IF:

1. Inflation data matches personal Inflation rate
2. You are able to capture TIPS at a satisfactory real yield
3. Your personal consumption remains less than or equal to the reported national inflation rates
4. You don't have any longevity risks or generational passdowns to consider

There's always risks, no matter the path we take.

I don't particularly like success/failure rate as a measuring stick, but that's what Cederburg uses, and his study is the primary evidence being presented here to defend 100% global stocks as the optimal AA. So the right question is: does a meaningful allocation to TIPS of the right duration and quantity, in conjunction with global stocks, improve on the success rate of the 100% global stocks "optimum" that he found?

Of course they can't be studied as deeply or broadly as in the Cederburg methodology, but I think it's reasonable to assume the answer is yes. The rationale is two-fold:

1. TIPS provide the protective effect of bonds as seen during deflationary recessions, like the lost decade 2000s, that hammer all-stock portfolios under decumulation even if globally diversified (ERN's third chart); it's not like int'l stocks are particularly cheap right now -- only relatively cheaper

2. Yet TIPS *also* minimize or avoid (depending on the account type they're held in) the long-term inflationary erosion risk of nominal bonds as experienced during the 70s (first chart)

They're like magic pixie dust for retirees.

I don't want to be dismissive of the idea of TIPS, just like bonds (they make sense likely in the vast majority of cases), but like anything there's pros/cons and I'm unsure if they would definitively improve long-term outcomes given some of the drawbacks. I'm also a little skeptical of their ability to be maintained if a country is going through a debt or inflation crisis.

I don't think it's a massive flaw, most people will contribute with regularity, and there's no evidence to suggest slightly bumpy volatility in savings would change the overall result.

Slightly bumpy volatility is all the study can support. While I think many do have a stable savings rate, this is not exactly true for myself (and whole-heartedly false for a few lines of work). For these individuals, using some bonds and cash is non-negotiable in accumulation.

But the plus side of the analysis is that even if an investor invests in 20% bonds and follows the study with their stable savings rate, they only have to raise the savings rate to 12% instead of 10% for the peace of mind provided they invest considerably in international. Given that domestic only portfolios have 15%+ requirements, that is good. One could approach 40% bonds and be in line with the best domestic only portfolios; the study is not super convincing for bond-less portfolios, but it is invaluable as a defense for international stocks.

I just don't think large lump sums every year, every other year, or every few years really matters that much when the study is looking at an entire lifecycle of investing for potentially 6+ decades.

Of course, if you need to rely on paying expenses from your portfolio in between those events, there may be some adjustments obviously as you are no longer simply relying on regular cashflow from paychecks.

My apologies in advance. I've just skimmed this thread and want to be sure I'm understanding the arguments of a couple posters. Is their/your point that 'bonds are riskier than stocks' and 'one should be 100% equities?' Not arguing, just surprised by that point of view. Is the view that the capital market line is comprised solely of 100% equity portfolios?

In the short term, stocks are always riskier than bonds. And of course, the term "risk" itself comes with many different perspectives on what that actually means.

If your definition of risk is the likelihood of receiving a significant degradation of purchasing power over decades, then bonds through that vantage point are riskier than stocks despite stocks having much higher short term volatility.

This is also the conclusion of recent academic papers looking at the likelihood of failure across 100% equity portfolios versus more traditional portfolios that include bonds - the portfolios with bonds failed at twice the rate with a 4% SWR.

Now - again, the person with bonds in their portfolio may be able to sleep much better at night, and people are not robots. So the conclusion isn't necessarily to exclude bonds, only to highlight where their actual utility lies in portfolio construction.

[CloseEnough]

Now - again, the person with bonds in their portfolio may be able to sleep much better at night, and people are not robots. So the conclusion isn't necessarily to exclude bonds, only to highlight where their actual utility lies in portfolio construction.

I am a bit confused. You are saying statistically a 100% global equities portfolio will perform better than a more traditional portfolio with bonds included over a very long period of time. But the conclusion is not to exclude bonds, but emphasize what role they play (utility), which you say is primarily to manage behavioral issues (I disagree, would add diversification of asset class, your response that global equities are diversified doesn't convince me, it is all one asset class, that is, equities, and bonds are different). Anyway, I have also seen posts, data, analysis cited in this forum that suggests tinkering with AA doesn't make much difference in performance (for example, going from 60/40 to 65 or 70 for equities). Although, as an aside, my understanding has been that the AA an investor decides upon is one of the most important factors in success, and probably more important than the actual specific investments chosen, assuming that they are broad based low-cost index funds across the board.

So, what is the takeaway from all of this? Is it to consider 100% global equities for those much earlier in investment lives (not me) and for others closer to retirement (but with still a long runway, they hope) to go heavier on equities because of this study? Or is there nothing to conclude from a portfolio design standpoint other than the study adds some statistical analysis?

[Nathan Drake]

Now - again, the person with bonds in their portfolio may be able to sleep much better at night, and people are not robots. So the conclusion isn't necessarily to exclude bonds, only to highlight where their actual utility lies in portfolio construction.

I am a bit confused. You are saying statistically a 100% global equities portfolio will perform better than a more traditional portfolio with bonds included over a very long period of time. But the conclusion is not to exclude bonds, but emphasize what role they play (utility), which you say is primarily to manage behavioral issues (I disagree, would add diversification of asset class, your response that global equities are diversified doesn't convince me, it is all one asset class, that is, equities, and bonds are different). Anyway, I have also seen posts, data, analysis cited in this forum that suggests tinkering with AA doesn't make much difference in performance (for example, going from 60/40 to 65 or 70 for equities). Although, as an aside, my understanding has been that the AA an investor decides upon is one of the most important factors in success, and probably more important than the actual specific investments chosen, assuming that they are broad based low-cost index funds across the board.

So, what is the takeaway from all of this? Is it to consider 100% global equities for those much earlier in investment lives (not me) and for others closer to retirement (but with still a long runway, they hope) to go heavier on equities because of this study? Or is there nothing to conclude from a portfolio design standpoint other than the study adds some statistical analysis?

People are not robots, they are emotional and are prone to making behavioral mistakes at the wrong time.

Many people, when faced with a Covid scenario or the great financial crisis, will make drastic portfolio shifts which ends up hurting their chance of success long term. Tinkering may be fine, but that’s not what I’m talking about. Some will be prone to selling everything and parking it in cash and may stay out of the market for years, missing out on significant gains from the recoveries.

100% equities has a chance of 50+% drawdowns, while a portfolio that includes bonds will have much less potential short term downside and volatility.

Global equities are not the same asset class as domestic equities, they have different market betas, and can diverge significantly on longer horizons and provide much stronger diversification over such horizons versus bonds.

If one is not prone to such behavioral mistakes, the all equity portfolio is optimal over the entire lifespan, but easier said than done unless you’ve lived through a few acute crisis level events.

If one is currently in retirement and has allocated to bonds, the takeaway isn’t that you need to change course, that allocation is perfectly fine even if on paper it’s statistically likely to be suboptimal.

[exodusing]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

We do not have 2,600 years of data. We might have 100 years of data for 26 countries, but that's far from the same thing.

[Nathan Drake]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

We do not have 2,600 years of data. We might have 100 years of data for 26 countries, but that's far from the same thing.

That’s a substantially better sample than a single country over the last 40 years

[brian2013]

I've been wanting to post something like this for a long time.

We Bogleheads rely on market history to trust that, over time, the principals of diversification, asset allocation between equities/fixed, and "stay the course" give us the best chances for growth over time.

But I can't shake the nagging feeling that this "market history" is an extremely short period of time and an extremely small data set in the grand scheme of human history.

I'm not a professional historian, but I like to watch documentaries . It seems to me that for most of human history, the "average investor" did not get a "fair shake." The general rule in history seems to be that the powerful use their power to hoard more wealth and power, at the expense of everyone else.

That being said, I'm not sure what alternative we have. I'm still betting on the BH philosophy, at least for my lifetime. Fingers crossed.

[Valuethinker]

I've been wanting to post something like this for a long time.

We Bogleheads rely on market history to trust that, over time, the principals of diversification, asset allocation between equities/fixed, and "stay the course" give us the best chances for growth over time.

But I can't shake the nagging feeling that this "market history" is an extremely short period of time and an extremely small data set in the grand scheme of human history.

I'm not a professional historian, but I like to watch documentaries . It seems to me that for most of human history, the "average investor" did not get a "fair shake." The general rule in history seems to be that the powerful use their power to hoard more wealth and power, at the expense of everyone else.

That being said, I'm not sure what alternative we have. I'm still betting on the BH philosophy, at least for my lifetime. Fingers crossed.

There's a recent bit of research (maybe more than 1) and poster McQ has some very good posts on this:

- the authors of the research believe that real estate has had similar returns to equities over the past 4 centuries or so

- in the 1900s, stocks far outperformed bonds. In the 1800s, bonds outperformed stocks

So, yes. The number of truly independent 20 year periods of stock market performance (ie non-overlapping) that we have is sort of 7-8. Go back to the Dutch East India Co (the VOC) and the London Stock Exchange in the 1700s and you get maybe another 10-12 or so periods.

[seajay]

In the 1800s, bonds outperformed stocks

Is that not a reflection that the stock market was more for a means to share/spread the risk of high risk ventures, whilst bonds were issued by steady/stable companies that could pay out reliable/consistent coupons. Even today you can select stocks that are more bond-like, or bonds that are more stock-like. When (finite) gold was money the state had to pay real rates of return in order to attract lenders, under fiat money = debt, created out of thin air to give to borrowers, destroyed once the debt + interest is repaid.

[CloseEnough]

I've been wanting to post something like this for a long time.

We Bogleheads rely on market history to trust that, over time, the principals of diversification, asset allocation between equities/fixed, and "stay the course" give us the best chances for growth over time.

But I can't shake the nagging feeling that this "market history" is an extremely short period of time and an extremely small data set in the grand scheme of human history.

I'm not a professional historian, but I like to watch documentaries . It seems to me that for most of human history, the "average investor" did not get a "fair shake." The general rule in history seems to be that the powerful use their power to hoard more wealth and power, at the expense of everyone else.

That being said, I'm not sure what alternative we have. I'm still betting on the BH philosophy, at least for my lifetime. Fingers crossed.

There's a recent bit of research (maybe more than 1) and poster McQ has some very good posts on this:

- the authors of the research believe that real estate has had similar returns to equities over the past 4 centuries or so

- in the 1900s, stocks far outperformed bonds. In the 1800s, bonds outperformed stocks

So, yes. The number of truly independent 20 year periods of stock market performance (ie non-overlapping) that we have is sort of 7-8. Go back to the Dutch East India Co (the VOC) and the London Stock Exchange in the 1700s and you get maybe another 10-12 or so periods.

In my opinion, the periods prior to the 1930s are largely irrelevant to this question. Yes, you can get more 20 year periods if you look back beyond that, but the markets, conditions, regulations (none, in some periods), and the world in general was so different that it is not telling you anything about whether in the world we live in today stocks are a sure thing over the long run. They are not, btw.

[watchnerd]

Amongst this cohort, do you think even most Bogleheads are sufficiently flush that their AA doesn't matter?

Yes, sufficiently flush that they could make it through the long haul of an extended period of stock performance malaise (not necessarily your Japan 30 year example which we know is unusual and an outlier, but through 10-15 years). Perhaps not "most" but certainly a strong "many", although of course we don't have actual data, just anecdotal guess. Especially if you are looking at Bogleheads that are at or near retirement. If that was not the case, then that would throw the whole BH philosophy on its head.

How would it throw BH philosophy on its head?

Believing in the value of low cost indexing doesn't say anything about what AA to have or stock vs bond future returns.

[CloseEnough]

Yes, sufficiently flush that they could make it through the long haul of an extended period of stock performance malaise (not necessarily your Japan 30 year example which we know is unusual and an outlier, but through 10-15 years). Perhaps not "most" but certainly a strong "many", although of course we don't have actual data, just anecdotal guess. Especially if you are looking at Bogleheads that are at or near retirement. If that was not the case, then that would throw the whole BH philosophy on its head.

How would it throw BH philosophy on its head?

Believing in the value of low cost indexing doesn't say anything about what AA to have or stock vs bond future returns.

BH philosophy is much more than belief in low cost indexing, you probably know them better than me. If an investor follows all the tenets, meaning frugality, not timing the market, rebalancing (maybe), in the market for their entire work life, savings rates that are high, running all the numbers before retirement with conservative assumptions, reasonable expense in retirement relative to social security and other income including extremely safe withdrawal rates, deciding upon an appropriate AA for various stages of investment life including entering retirement, stay the course (with it's many meanings), etc. etc. etc., then by the time they are at or near retirement they should have more than enough to survive an extended period of stock malaise. Isn't that the whole point.

[watchnerd]

How would it throw BH philosophy on its head?

Believing in the value of low cost indexing doesn't say anything about what AA to have or stock vs bond future returns.

BH philosophy is much more than belief in low cost indexing, you probably know them better than me. If an investor follows all the tenets, meaning frugality, not timing the market, rebalancing (maybe), in the mark
et for their entire work life, savings rates that are high, running all the numbers before retirement with conservative assumptions, reasonable expense in retirement relative to social security and other income including extremely safe withdrawal rates, deciding upon an appropriate AA for various stages of investment life including entering retirement, etc. etc. etc., then by the time they are at or near retirement they should have more than enough to survive an extended period of stock malaise. Isn't that the whole point.

None of those things (savings, investing for life, etc, etc) are specific to Bogle / Vanguard.

They're just good investing practices.

Plenty of people who were never part of Vanguard have agreed on those being prudent practices.

What Vanguard, specifically, championed was the importance of costs and indexing as a way to do it.

Everything else is just generic financial management prudence.

[White Coat Investor]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

To be clear - the study shows that the time at which a bond portfolio fails is different than that of which a stock portfolio fails, but the all stock portfolio fails at a much smaller rate than the portfolio with bonds.

But the data is what it is. If you're a robot that can put up with equities through thick and thin, it reduces your risk of failure.

I hope you turn out to be right. I've certainly bet in that direction although apparently not as heavily as you have. When I feel bad that I don't have all my money in equities, I try to console myself with the fact that I almost surely have more money in equities than whoever is giving me a hard time about not having it all in there. Then I feel a little better.

[HanSolo]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes. I'm not saying that this is going to happen, just that the chances of that have never been exactly zero. If you're saying they're zero now, while they've never been zero before, then that would be saying "this time is different" in that regard.

Looking at just the US, 100% equity wouldn't have been a good idea in 1929. Again, I'm not saying that's where we are now, just that these things happen sometimes.

To be clear - the study shows that the time at which a bond portfolio fails is different than that of which a stock portfolio fails, but the all stock portfolio fails at a much smaller rate than the portfolio with bonds.

The Permanent Portfolio has a pretty good track record, and it includes bonds. There's nothing objective in saying they shouldn't do that, only the subjectivity of what kinds of risk management one prefers to undertake. You obviously have your own preferences around that.

I have stocks, bonds and other stuff. I'm fairly certain I'll be able to put food on the table in whatever market conditions come my way. So I don't find that your warnings about "failure" are all that useful for my purposes.

[cldrunner]

How do bogleheads reconcile a chart like this? 3 standard deviations above the mean. Nearing retirement in the next 3-5 years I am very comfortable with an ultra low conservative stock allocation.

https://www.advisorperspectives.com/ima ... 9bad82.png

https://www.advisorperspectives.com/dsh ... overvalued

[Morse Code]

...It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes...

I believe this data does indeed include those situations.

[watchnerd]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes.

It sure does.

Russian stock market, 1917.

[Valuethinker]

It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes.

It sure does.

Russian stock market, 1917.

I just have this vision of being a German Jew in 1935 and thinking ... no worries, my stock portfolio will have totally recovered by 1953...

There have also been countries which endured many thousand per cent hyperinflation (millions in fact). For example the Nationalist Government of China did so in 1948/49. The Shanghai stock market would have essentially dropped to zero, then, until the mid 1990s. The share certificates were for companies that no longer existed - and probably got used for more prosaic purposes.

I can see the re-education Committee during the 1960s Chinese Cultural Revolution "You Mr Bogle have engaged in incorrect thought that subverts the work of the Great Helmsman - index funds!"

The situation where the USA, in the interests of strengthening its postwar system of allies and alliances, allowed German companies -- that had collaborated with the Nazi Regime, and Japanese companies that had worked for General Tojo's dreams of Imperial Japan -- to reconstitute themselves as listed companies (IG Farben, the maker of the zyklon gas crystals, is buried somewhere in the German postwar chemicals complex)*. That was pretty unique in history, I think. Victors in wars are seldom so magnanimous. Warfare in the modern world is often fought to societal extinction -- which has implications for your Safe Withdrawal Rate, to be sure.**

Or as Robert Heinlein put it in Starship Troopers : "War never solves anything. Ask the Carthaginians or the Confederate States".

* Dr Rachel Lance of Duke University, author of 2 gripping books of historical military-medical detection, comments in The Chamber Divers about German medical research records of experiments on "volunteers" - that were obviously "scrubbed" when it became clear that Nazi Germany would not win the war. Relevant to her book because most of our diving tables (US and British) are based on experiments a group of scientists at University College London conducted, during the German aerial bombardment (aka "the Blitz"), with themselves as the test subjects. Bravery which had been lost to history in a maze of the British Official Secrets Act (a fearsome thing, indeed, signed by all civil servants).

https://www.amazon.com/Chamber-Divers-S ... B0CC1BQJ3M

** Hilarious tale from CPA in Baghdad. A young American MBA type insisted on the creation of an electronic stock market trading system. The Baghdad Stock Exchange had conducted itself, through all of Saddam's 40 year rule, using blackboards and chalk. It worked. So, there was no way in 6 months, that could be changed. When it was time for aforesaid 26-year old to head home, they ceremoniously took him down to the floor to see all the traders trading electronically. Which was a complete fake - screens and all - the software never worked. When he was headed to the airport, they brought out the chalkboards and resumed trading, as they always had.

If you've ever been in a Developing Country, where you suddenly realise the people are far more intelligent and subtle than you are, all that you have is that you are rich, your n-th generations of ancestors made your country wealthy and you have benefited -- that's that sudden feeling.

[Nathan Drake]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

To be clear - the study shows that the time at which a bond portfolio fails is different than that of which a stock portfolio fails, but the all stock portfolio fails at a much smaller rate than the portfolio with bonds.

But the data is what it is. If you're a robot that can put up with equities through thick and thin, it reduces your risk of failure.

I hope you turn out to be right. I've certainly bet in that direction although apparently not as heavily as you have. When I feel bad that I don't have all my money in equities, I try to console myself with the fact that I almost surely have more money in equities than whoever is giving me a hard time about not having it all in there. Then I feel a little better.

I am not giving anyone a hard time for allocating to bonds and nobody should feel bad if they are not 100% equities, I’m just pointing out the strongest available evidence in my view, you can feel free to disagree. No need to flaunt wealth comparisons as some “consolation”. Your net worth as a result of being early to internet blogging doesn’t disprove the facts presented. I can assure you the world has plenty of people richer than you or I and only carry single stocks, that doesn’t them right or wrong.

You can (and should) be better than this.

[HanSolo]

...It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes...

I believe this data does indeed include those situations.

The conclusions reached didn't seem to recognize that.

You can (and should) be better than this.

My preference is to consider how I can be better myself, as a private matter, rather than advising others on that. But then again, what do I know.

[Carol88888]

This is key. I have studied many markets, and the reality is that one must diversify beyond a single country stock market. The risks are very much real, and I think most individuals really do not have the ability to truly take the full risk of even 100% global stocks.

I might be disappointed slightly that I missed significant returns as I got merely reasonable returns, but my job paid well for the same reasons US stocks did well; I was able to save far more than expected. At the end of the day, leftover income after expenses is still the largest contributor to wealth. I do not regret being conservative about my portfolio; it is not the “optimal” choice according to studies, but I cannot afford to lose as I am not the hypothetical investor.

The problem is globalization. Everything is connected today than when one tumbles the rest go with it. We're seeing some separation this year. But I fear that if the US goes down, it will pull it's global peers with it.

+1

[Nathan Drake]

You're essentially saying that "this time is different" and to ignore 2600 years of data in the study.

It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes. I'm not saying that this is going to happen, just that the chances of that have never been exactly zero. If you're saying they're zero now, while they've never been zero before, then that would be saying "this time is different" in that regard.

Looking at just the US, 100% equity wouldn't have been a good idea in 1929. Again, I'm not saying that's where we are now, just that these things happen sometimes.

To be clear - the study shows that the time at which a bond portfolio fails is different than that of which a stock portfolio fails, but the all stock portfolio fails at a much smaller rate than the portfolio with bonds.

The Permanent Portfolio has a pretty good track record, and it includes bonds. There's nothing objective in saying they shouldn't do that, only the subjectivity of what kinds of risk management one prefers to undertake. You obviously have your own preferences around that.

I have stocks, bonds and other stuff. I'm fairly certain I'll be able to put food on the table in whatever market conditions come my way. So I don't find that your warnings about "failure" are all that useful for my purposes.

The data includes catastrophic failures of single countries, that’s a major reason why globally diversifying is less risky over long horizons

There are plenty of portfolios with good track records - but that’s not really the question. The question is which portfolio is the most robust using a bog standard 4% SWR, and the data in the research study suggests it’s not one with bonds or gold. That doesn’t mean allocating to them is inherently a bad idea; it’s a personal choice. You’re still likely to achieve your goals, but it comes with higher risk that it won’t.

[HanSolo]

The data includes catastrophic failures of single countries, that’s a major reason why globally diversifying is less risky over long horizons

But that doesn't adequately support your main thesis that "adding bonds will increase your risk of failure".

It's like saying "adding fire insurance will increase your risk of failure" because 99% of the time you come out behind.

Note that your quote ("adding bonds will increase your risk of failure") was posted before anyone mentioned 4% SWR. The more honest statement would be that you don't know what would increase my risk of failure, because you don't know what SWR I'll have, what other income streams I'll have, or even what any of my objectives are to begin with.

Since your quote said "your", I'll comment on my own case (since I'm one of those "yous"). If I had only 60% of my current assets, and I put all of it in stocks, the data you cite says I should be able to put food on the table at some SWR that I'm comfortable with, except if something catastrophic happened to global equity markets. Since I actually have the other 40%, putting that into bonds reduces my risk of not being able to put food on the table in that catastrophic stock market scenario.

There's a point here you're not getting, and I think we've beaten it to death already.

There's such a thing as having too much in equities for one's own financial situation and objectives (e.g., as we saw in the famous Sheepdog thread). One is free to make other conclusions for oneself, but that's because your situation and objectives may be different from someone else's.

[d270]

It's interesting that 2600 years of data doesn't include any situations where some countries' stock markets lost 80%, 90% or 100%, and stayed that way longer than some investors' remaining lifetimes. I'm not saying that this is going to happen, just that the chances of that have never been exactly zero. If you're saying they're zero now, while they've never been zero before, then that would be saying "this time is different" in that regard.

Looking at just the US, 100% equity wouldn't have been a good idea in 1929. Again, I'm not saying that's where we are now, just that these things happen sometimes.



The Permanent Portfolio has a pretty good track record, and it includes bonds. There's nothing objective in saying they shouldn't do that, only the subjectivity of what kinds of risk management one prefers to undertake. You obviously have your own preferences around that.

I have stocks, bonds and other stuff. I'm fairly certain I'll be able to put food on the table in whatever market conditions come my way. So I don't find that your warnings about "failure" are all that useful for my purposes.

The data includes catastrophic failures of single countries, that’s a major reason why globally diversifying is less risky over long horizons

There are plenty of portfolios with good track records - but that’s not really the question. The question is which portfolio is the most robust using a bog standard 4% SWR, and the data in the research study suggests it’s not one with bonds or gold. That doesn’t mean allocating to them is inherently a bad idea; it’s a personal choice. You’re still likely to achieve your goals, but it comes with higher risk that it won’t.

The paper suggests eschewing bonds to maximize success when having a 10% savings rate. I wonder if it holds true at other savings rates?

Going 100% equities also brings suspicion -- are equities more risky than bonds? It is interesting to consider this with articles discussing how volatility and risk with stocks does not decrease over time.

Perhaps the Cederberg article is similar to this idea?
https://www.sciencedirect.com/science/a ... 6679900232

[Nathan Drake]

The data includes catastrophic failures of single countries, that’s a major reason why globally diversifying is less risky over long horizons

But that doesn't adequately support your main thesis that "adding bonds will increase your risk of failure".

It's like saying "adding fire insurance will increase your risk of failure" because 99% of the time you come out behind.

Note that your quote ("adding bonds will increase your risk of failure") was posted before anyone mentioned 4% SWR. The more honest statement would be that you don't know what would increase my risk of failure, because you don't know what SWR I'll have, what other income streams I'll have, or even what any of my objectives are to begin with.

Since your quote said "your", I'll comment on my own case (since I'm one of those "yous"). If I had only 60% of my current assets, and I put all of it in stocks, the data you cite says I should be able to put food on the table at some SWR that I'm comfortable with, except if something catastrophic happened to global equity markets. Since I actually have the other 40%, putting that into bonds reduces my risk of not being able to put food on the table in that catastrophic stock market scenario.

There's a point here you're not getting, and I think we've beaten it to death already.

There's such a thing as having too much in equities for one's own financial situation and objectives (e.g., as we saw in the famous Sheepdog thread). One is free to make other conclusions for oneself, but that's because your situation and objectives may be different from someone else's.

Bonds are not insurance. They are not a contract that says you will be benefited if equities decline. There’s not a negative correlation, and in fact there’s evidence that they are more highly correlated with domestic equities over the long term

We all make decisions based on what’s happened in the past. I do not know whether bonds will help more than equities for your specific sequence. I do know equities have a higher expected return than bonds. We also know that in the largest data set we have, adding bonds in a typical target date fund type exposure doubled the chance of failure than an all global equity portfolio in the past.

If you have over-saved and no longer have a need for a 4% SWR, you can practically do whatever you want within reason and have a very low risk of failure, that’s not what I was discussing.

[HanSolo]

Bonds are not insurance. They are not a contract that says you will be benefited if equities decline.

The benefit specified in the contact is, in fact, applicable if equities decline (or don't decline). That's why people buy them. If they weren't useful for some legitimate financial purpose, nobody would buy them.

There’s not a negative correlation

I never said there was one.

I do not know whether bonds will help more than equities for your specific sequence.

That's the first time in this discussion you acknowledged that there might be a benefit in some scenarios.

If you have over-saved and no longer have a need for a 4% SWR, you can practically do whatever you want within reason and have a very low risk of failure, that’s not what I was discussing.

It's not that I've over-saved (I'd be in for some significant belt-tightening if markets went savagely south), it's just that I'm trying to adequately address risks. You haven't addressed the need for someone to risk-manage the situation where global equity markets have a massive and sustained downturn, which I'm not predicting, but is possible. Nobody wants to be caught homeless in that situation. You can roll the dice and pretend it's not possible, but all that means is that it's your personal preference to not take care of that risk.

[Nathan Drake]

Bonds are not insurance. They are not a contract that says you will be benefited if equities decline.

The benefit specified in the contact is, in fact, applicable if equities decline (or don't decline). That's why people buy them. If they weren't useful for some legitimate financial purpose, nobody would buy them.

There’s not a negative correlation

I never said there was one.

I do not know whether bonds will help more than equities for your specific sequence.

That's the first time in this discussion you acknowledged that there might be a benefit in some scenarios.

If you have over-saved and no longer have a need for a 4% SWR, you can practically do whatever you want within reason and have a very low risk of failure, that’s not what I was discussing.

It's not that I've over-saved (I'd be in for some significant belt-tightening if markets went savagely south), it's just that I'm trying to adequately address risks. You haven't addressed the need for someone to risk-manage the situation where global equity markets have a massive and sustained downturn, which I'm not predicting, but is possible. Nobody wants to be caught homeless in that situation. You can roll the dice and pretend it's not possible, but all that means is that it's your personal preference to not take care of that risk.

No, I have always maintained that bonds can help in certain scenarios.

The problem is, the scenarios where it actually fails is higher in frequency, and it’s not predictable when bonds will help.

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

[HanSolo]

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

I'll lean toward what works well most of the time, while also addressing risks that are unusual but possible (i.e., have happened before).

[AlwaysLearningMore]

"Bodie sagely points out that stocks do indeed become more risky with time, the proof of the pudding being that equity puts become more expensive with maturity, and not the other way around." Dr. Wm. Bernstein


http://www.efficientfrontier.com/ef/903/bodie.htm

[secondopinion]

Bonds are not insurance. They are not a contract that says you will be benefited if equities decline.

The benefit specified in the contact is, in fact, applicable if equities decline (or don't decline). That's why people buy them. If they weren't useful for some legitimate financial purpose, nobody would buy them.

There’s not a negative correlation

I never said there was one.

I do not know whether bonds will help more than equities for your specific sequence.

That's the first time in this discussion you acknowledged that there might be a benefit in some scenarios.

If you have over-saved and no longer have a need for a 4% SWR, you can practically do whatever you want within reason and have a very low risk of failure, that’s not what I was discussing.

It's not that I've over-saved (I'd be in for some significant belt-tightening if markets went savagely south), it's just that I'm trying to adequately address risks. You haven't addressed the need for someone to risk-manage the situation where global equity markets have a massive and sustained downturn, which I'm not predicting, but is possible. Nobody wants to be caught homeless in that situation. You can roll the dice and pretend it's not possible, but all that means is that it's your personal preference to not take care of that risk.

Agreed. Under the magnifying lens of leverage, the study admits that including bonds is optimal for returns. Without leverage, it is still the case that a small amount of bonds does not do much to hurt portfolio growth. I take the study to be a defender of international stocks; one can include a good amount of bonds in accumulation and still have reasonable results against a domestic only portfolio, which can greatly disappoint investors.

At the end of the day, the stability of my portfolio matters. I chose to not have a major emergency fund and instead dialed down the risk of my portfolio. It is easier to make sense of my true allocation when this is done.

[secondopinion]

The benefit specified in the contact is, in fact, applicable if equities decline (or don't decline). That's why people buy them. If they weren't useful for some legitimate financial purpose, nobody would buy them.



I never said there was one.



That's the first time in this discussion you acknowledged that there might be a benefit in some scenarios.



It's not that I've over-saved (I'd be in for some significant belt-tightening if markets went savagely south), it's just that I'm trying to adequately address risks. You haven't addressed the need for someone to risk-manage the situation where global equity markets have a massive and sustained downturn, which I'm not predicting, but is possible. Nobody wants to be caught homeless in that situation. You can roll the dice and pretend it's not possible, but all that means is that it's your personal preference to not take care of that risk.

No, I have always maintained that bonds can help in certain scenarios.

The problem is, the scenarios where it actually fails is higher in frequency, and it’s not predictable when bonds will help.

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

Does option B include international stocks? If no, then it is a red herring.

[CloseEnough]

The benefit specified in the contact is, in fact, applicable if equities decline (or don't decline). That's why people buy them. If they weren't useful for some legitimate financial purpose, nobody would buy them.



I never said there was one.



That's the first time in this discussion you acknowledged that there might be a benefit in some scenarios.



It's not that I've over-saved (I'd be in for some significant belt-tightening if markets went savagely south), it's just that I'm trying to adequately address risks. You haven't addressed the need for someone to risk-manage the situation where global equity markets have a massive and sustained downturn, which I'm not predicting, but is possible. Nobody wants to be caught homeless in that situation. You can roll the dice and pretend it's not possible, but all that means is that it's your personal preference to not take care of that risk.

No, I have always maintained that bonds can help in certain scenarios.

The problem is, the scenarios where it actually fails is higher in frequency, and it’s not predictable when bonds will help.

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

Curious, would the study you are relying on come to the same conclusion just looking at data since 1930? I don't think it helps the analysis or argument to be looking at 2600 years of data. In my opinion, the periods prior to the 1930s are largely irrelevant to this question. Yes, you can get more 20 year periods if you look back beyond that, but the markets, conditions, regulations (none, in some periods), and the world in general was so different that it is not telling you anything about whether in the world we live in today stocks are a sure thing over the long run.

[Nathan Drake]

No, I have always maintained that bonds can help in certain scenarios.

The problem is, the scenarios where it actually fails is higher in frequency, and it’s not predictable when bonds will help.

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

Does option B include international stocks? If no, then it is a red herring.

Option A is 100% globally diversified equities

Option B is a target date fund approach (global equities and bonds)

[Nathan Drake]

No, I have always maintained that bonds can help in certain scenarios.

The problem is, the scenarios where it actually fails is higher in frequency, and it’s not predictable when bonds will help.

That’s entirely my point, do you go with Option A that has shown a 7% failure rate, or Option B with a 17% failure rate, knowing that the failures happen at different times?

Curious, would the study you are relying on come to the same conclusion just looking at data since 1930? I don't think it helps the analysis or argument to be looking at 2600 years of data. In my opinion, the periods prior to the 1930s are largely irrelevant to this question. Yes, you can get more 20 year periods if you look back beyond that, but the markets, conditions, regulations (none, in some periods), and the world in general was so different that it is not telling you anything about whether in the world we live in today stocks are a sure thing over the long run.

The data I believe is mostly from 1930 and beyond, so I would think the conclusions would still hold

[Kevin M]

If you have over-saved and no longer have a need for a 4% SWR, you can practically do whatever you want within reason and have a very low risk of failure, that’s not what I was discussing.

Or if you have prudently saved and invested in your earlier years, and have a need for a 4.6% withdrawal rate or less for a 30-year retirement, as of today, you can buy a 30-year TIPS ladder and have a very low risk of failure.



(Withdrawal rate shown in the sixth column in the table at the bottom of the screen shot).

I expect that many forum participants will have saved enough to use a TIPS ladder to cover their expected residual living expenses (RLE = expenses beyond what is covered by social security, pensions, etc.), and still have enough to hold a healthy allocation to stocks.

And yes, of course there is uncertainty in one's estimate of their RLE, just as their is uncertainty in every other estimate one makes about the future, including the returns on stocks.

There have been many, many, many threads over the years about the certainty or uncertainty about the long-term return of stocks, so there is really nothing new being discussed in most of the replies. The way I characterize this is that there are two main camps: one camp trusts the relatively short-term history of US stocks as statistically relevant to estimate future expected returns and return distributions, the other camp does not. I'm in the latter camp. Reliable stock history for non-US markets is even shorter.

As with many others in the second camp, I still think there are good fundamental arguments that the expected return of stocks is higher than that of bonds in the long term, but once one reaches the point where one doesn't have the need (or perhaps ability or willingness) to take excessive stock risk, it's prudent to use something like a TIPS ladder to cover one's expected RLE.

[Morse Code]

...The way I characterize this is that there are two main camps: one camp trusts the relatively short-term history of US stocks as statistically relevant to estimate future expected returns and return distributions...

This does not describe any "camp" in this thread that I'm aware of.

[Kevin M]

...The way I characterize this is that there are two main camps: one camp trusts the relatively short-term history of US stocks as statistically relevant to estimate future expected returns and return distributions...

This does not describe any "camp" in this thread that I'm aware of.

Really? It may not be state explicitly this way, but how else would you describe the reliance on historical stock return data as a basis for one's allocation to stocks?

[secondopinion]

Does option B include international stocks? If no, then it is a red herring.

Option A is 100% globally diversified equities

Option B is a target date fund approach (global equities and bonds)

Option B is 45%-17% stocks during retirement; this is highly conservative. I find it rather odd that the analysis is not checking against 80% global stocks and 20% bonds in retirement; I wonder if that was intentional because all of the comparisons selected are very high bond or no international.

[CloseEnough]

Or if you have prudently saved and invested in your earlier years, and have a need for a 4.6% withdrawal rate or less for a 30-year retirement, as of today, you can buy a 30-year TIPS ladder and have a very low risk of failure.

You have probably answered this somewhere else, so, apologies if this is a repeat, but, if you buy this ladder in your IRA how does the RMD work, is there potentially any complication related to RMDs? Wondering if the withdrawals/maturities/annual income has to somehow get aligned with RMDs? Or do you just make sure you are not doing the whole IRA account so there are other investments/funds to draw on if the RMDs exceed what the ladder annual income is?

Thanks.

[Kevin M]

Or if you have prudently saved and invested in your earlier years, and have a need for a 4.6% withdrawal rate or less for a 30-year retirement, as of today, you can buy a 30-year TIPS ladder and have a very low risk of failure.

You have probably answered this somewhere else, so, apologies if this is a repeat, but, if you buy this ladder in your IRA how does the RMD work, is there potentially any complication related to RMDs? Wondering if the withdrawals/maturities/annual income has to somehow get aligned with RMDs? Or do you just make sure you are not doing the whole IRA account so there are other investments/funds to draw on if the RMDs exceed what the ladder annual income is?

Thanks.

Probably a bit off topic for this thread, so I'll answer briefly, and mention that there are a number of threads on this, which you can find with a search in the search box at the upper right, including one I started: Building a TIPS ladder for IRA RMDs - Bogleheads.org; if you want to continue the discussion, we might want to do so in that thread or one of the others on the topic.

My entire traditional IRA now is in TIPS. I plan for there to be enough in coupons and proceeds from maturing TIPS to cover the RMD for each year. Of course one could also sell some TIPS before maturity, but that would be contrary to the certainty of the real annual amount available for each year covered by the ladder. One could also take a partial distribution in kind, eliminating the need to sell any TIPS before maturity. There are many ways to skin this cat.

[White Coat Investor]

I hope you turn out to be right. I've certainly bet in that direction although apparently not as heavily as you have. When I feel bad that I don't have all my money in equities, I try to console myself with the fact that I almost surely have more money in equities than whoever is giving me a hard time about not having it all in there. Then I feel a little better.

I am not giving anyone a hard time for allocating to bonds and nobody should feel bad if they are not 100% equities, I’m just pointing out the strongest available evidence in my view, you can feel free to disagree. No need to flaunt wealth comparisons as some “consolation”. Your net worth as a result of being early to internet blogging doesn’t disprove the facts presented. I can assure you the world has plenty of people richer than you or I and only carry single stocks, that doesn’t them right or wrong.

You can (and should) be better than this.

What if you're wrong? What if US stocks go to zero? How much of your wealth do you still want to have in case of that unlikely event? I decided 20%.

Maybe I need that 20% to stay the course too. I certainly didn't mind it in 2008.

[cldrunner]

As with many others in the second camp, I still think there are good fundamental arguments that the expected return of stocks is higher than that of bonds in the long term, but once one reaches the point where one doesn't have the need (or perhaps ability or willingness) to take excessive stock risk, it's prudent to use something like a TIPS ladder to cover one's expected RLE.

I agree completely. If one does not need to or cannot afford to take stock market risk then why even play the game. A large part of the US stock market is at obscene valuations.

[Nathan Drake]

I am not giving anyone a hard time for allocating to bonds and nobody should feel bad if they are not 100% equities, I’m just pointing out the strongest available evidence in my view, you can feel free to disagree. No need to flaunt wealth comparisons as some “consolation”. Your net worth as a result of being early to internet blogging doesn’t disprove the facts presented. I can assure you the world has plenty of people richer than you or I and only carry single stocks, that doesn’t them right or wrong.

You can (and should) be better than this.

What if you're wrong? What if US stocks go to zero? How much of your wealth do you still want to have in case of that unlikely event? I decided 20%.

Maybe I need that 20% to stay the course too. I certainly didn't mind it in 2008.

To clarify my position - I am only in favor of a 100% equity portfolio if it comprises of a global mix of stocks, not US only. That's what the evidence indicates, that a global equity portfolio is the one with the least risk over long horizons when it comes to retaining purchasing power. By only investing in a single country's equities, bonds may be a slightly better alternative from a risk standpoint.

If global equity all goes to zero, I think I would have more concerns than whether I allocated some to bonds. That would be an apocalyptic scenario.

But to each their own - I don't fault people for owning bonds. I don't fault people for choosing a single country's equities, either. It's all a personal choice. After viewing the evidence, my comfort lies with a globally diversified portfolio of only stocks that's heavily tilted to small cap value. For others, the volatility and tracking error / benchmark anchoring would be completely untenable for their emotions.

My portfolio in 2008 would have declined by 60% or more. Many people would not be comfortable with that possibility, but I've lived through some really bad crisis and it's par for the course of why over longer horizons the risk is so much less. I'm foregoing short term safety for long term compounding.

[cdc]

This is why I personally, and am a fan of, contributing to a 50/50 stocks/bonds portfolio at any age. I know that this is an unpopular opinion, but isn't this only an unpopular opinion because of the American exceptionalism that has dominated the market in the last century? One of the biggest investing philosophies, especially amongst bogleheads, is that past performance is not indicative of future returns.

My thoughts on the 50/50 portfolio for any age is that fact that if stocks knock bonds out of the water as they have, and you do not rebalance, stocks will overtake the portfolio anyway and compound overtime. If bonds outperform stocks, you will then have a great cushion of fixed income to build up over time.

I know I'm in the minority with this one. But, as a young(ish) person, I do not want to plan my financial futures on something just because it worked in the passing century. Look at Japan, for example, and how it took their equities market nearly 30 years to restore after its crash.

I'm 50-50, but it took a long time to get there. I'm in my early 60s. I still think it's appropriate for young people to be heavy in equities, and that's what I tell my kids.

[White Coat Investor]

What if you're wrong? What if US stocks go to zero? How much of your wealth do you still want to have in case of that unlikely event? I decided 20%.

Maybe I need that 20% to stay the course too. I certainly didn't mind it in 2008.

To clarify my position - I am only in favor of a 100% equity portfolio if it comprises of a global mix of stocks, not US only. That's what the evidence indicates, that a global equity portfolio is the one with the least risk over long horizons when it comes to retaining purchasing power. By only investing in a single country's equities, bonds may be a slightly better alternative from a risk standpoint.

If global equity all goes to zero, I think I would have more concerns than whether I allocated some to bonds. That would be an apocalyptic scenario.

But to each their own - I don't fault people for owning bonds. I don't fault people for choosing a single country's equities, either. It's all a personal choice. After viewing the evidence, my comfort lies with a globally diversified portfolio of only stocks that's heavily tilted to small cap value. For others, the volatility and tracking error / benchmark anchoring would be completely untenable for their emotions.

My portfolio in 2008 would have declined by 60% or more. Many people would not be comfortable with that possibility, but I've lived through some really bad crisis and it's par for the course of why over longer horizons the risk is so much less. I'm foregoing short term safety for long term compounding.

You're making your bets like everyone else is. Maybe your particular AA will win out over mine, maybe it won't. But the wisdom I've gleaned over the last few decades is that AA really doesn't matter all that much compared to income and savings rate. Just pick something reasonable and stick with it. 100% equity will probably work out great. A SV tilt will probably pay off, as long as you don't tilt more than you believe. International stocks will have their day in the sun. If you fund your plan adequately, it'll likely get you where you're going.

[HanSolo]

If global equity all goes to zero, I think I would have more concerns than whether I allocated some to bonds. That would be an apocalyptic scenario.

You claim to be data driven, but have presented no data supporting the above assertion.

Owning bonds might make the difference between being able to put food on the table or not in a severe and prolonged global stock decline (even if not going to exactly zero). Check the Depression for more info. And if you don't consider food to be a concern, then I don't know what to tell you.

Basically, you're advocating an all-in bet that something like that won't happen. That's fine for you, but I like food.

[gavinsiu]

To clarify my position - I am only in favor of a 100% equity portfolio if it comprises of a global mix of stocks, not US only. That's what the evidence indicates, that a global equity portfolio is the one with the least risk over long horizons when it comes to retaining purchasing power. By only investing in a single country's equities, bonds may be a slightly better alternative from a risk standpoint.

If global equity all goes to zero, I think I would have more concerns than whether I allocated some to bonds. That would be an apocalyptic scenario.

But to each their own - I don't fault people for owning bonds. I don't fault people for choosing a single country's equities, either. It's all a personal choice. After viewing the evidence, my comfort lies with a globally diversified portfolio of only stocks that's heavily tilted to small cap value. For others, the volatility and tracking error / benchmark anchoring would be completely untenable for their emotions.

My portfolio in 2008 would have declined by 60% or more. Many people would not be comfortable with that possibility, but I've lived through some really bad crisis and it's par for the course of why over longer horizons the risk is so much less. I'm foregoing short term safety for long term compounding.

You're making your bets like everyone else is. Maybe your particular AA will win out over mine, maybe it won't. But the wisdom I've gleaned over the last few decades is that AA really doesn't matter all that much compared to income and savings rate. Just pick something reasonable and stick with it. 100% equity will probably work out great. A SV tilt will probably pay off, as long as you don't tilt more than you believe. International stocks will have their day in the sun. If you fund your plan adequately, it'll likely get you where you're going.

I agree with you, if you started younger and saved about 20% consistently, you will probably make it. If you use a SV tilt and things didn't work out, you still got better return than bonds.

I am not entirely sure if the allocation had too low of an equity though. Let's say you do 100% cash or 70% bond, would you need to increase saving rate to say 30-40%?

However, I am wondering if the AA doesn't work out over time. I was thinking that US enters a decline similar to the Japanese stock markt, that would be an extreme example, but are there other developed country that the economy basically had decline or go sideways for decades.

[WalkingBackToHouston]

What if you're wrong? What if US stocks go to zero? How much of your wealth do you still want to have in case of that unlikely event? I decided 20%.

Maybe I need that 20% to stay the course too. I certainly didn't mind it in 2008.

To clarify my position - I am only in favor of a 100% equity portfolio if it comprises of a global mix of stocks, not US only. That's what the evidence indicates, that a global equity portfolio is the one with the least risk over long horizons when it comes to retaining purchasing power. By only investing in a single country's equities, bonds may be a slightly better alternative from a risk standpoint.

If global equity all goes to zero, I think I would have more concerns than whether I allocated some to bonds. That would be an apocalyptic scenario.

But to each their own - I don't fault people for owning bonds. I don't fault people for choosing a single country's equities, either. It's all a personal choice. After viewing the evidence, my comfort lies with a globally diversified portfolio of only stocks that's heavily tilted to small cap value. For others, the volatility and tracking error / benchmark anchoring would be completely untenable for their emotions.

My portfolio in 2008 would have declined by 60% or more. Many people would not be comfortable with that possibility, but I've lived through some really bad crisis and it's par for the course of why over longer horizons the risk is so much less. I'm foregoing short term safety for long term compounding.

I don't believe you are trying to say one size fits all, but it's worth noting that these kinds of decisions are very much situation dependent
distance to retirement
current income
confidence in employment
safety nets (emergency funds, future inheritance, other assets, etc)
emotional tolerance to volatility
insurance (health, disability, accident, liability, etc)
risk tolerance
etc, etc, etc,

in other words, I think that when allocating there's a lot more risk to consider than where an untapped portfolio of stocks and bonds may or may not be 20 or 30 years from now.

[White Coat Investor]

You're making your bets like everyone else is. Maybe your particular AA will win out over mine, maybe it won't. But the wisdom I've gleaned over the last few decades is that AA really doesn't matter all that much compared to income and savings rate. Just pick something reasonable and stick with it. 100% equity will probably work out great. A SV tilt will probably pay off, as long as you don't tilt more than you believe. International stocks will have their day in the sun. If you fund your plan adequately, it'll likely get you where you're going.

I agree with you, if you started younger and saved about 20% consistently, you will probably make it. If you use a SV tilt and things didn't work out, you still got better return than bonds.

I am not entirely sure if the allocation had too low of an equity though. Let's say you do 100% cash or 70% bond, would you need to increase saving rate to say 30-40%?

However, I am wondering if the AA doesn't work out over time. I was thinking that US enters a decline similar to the Japanese stock markt, that would be an extreme example, but are there other developed country that the economy basically had decline or go sideways for decades.

"pick something reasonable"

100% cash or 70% bonds isn't reasonable for a young accumulator. If you only invest in cash, CDs, whole life insurance, and gold, yes, you probably need a 50% savings rate and a full career to get to FI.

80% in Japanese stocks isn't reasonable for an American. It probably isn't even reasonable for a Japanese person.

[imaqt314]

No problem, I find humor is often missed in this forum. Not part of the core BH philosophy. Yes, I am closer to 65/35.

Remember. Tone doesn't carry well in text across the Internets.

For example, I just made an ironic remark involving your 43rd president and his malapropisms - did you notice?

If you've ever spent much time talking to a "Gen Z" they don't speak the language "we" (Baby Boomers) do. Very ironic. Lots of inside jokes. No doubt our parents and grandparents (for sure the latter) found us equally impenetrable. Consider the lasting appeal of Taylor Swift (I actually quite like Tay Tay, but I am a sad case, to be sure ).

My particular, and quite British-influenced, sense of humour doesn't always go down well here. But I have spent enough time a nation whose whole raison d'etre is to sound ironic and detached.

May 1940. German officer to British soldiers being marched off as POWs (for the next 5 years of war).
"And now Italy has joined the war against you".

Answer: "We had them last time [ie in WW1]. Now it's your turn".

Conclusion? Don't assume your interlocutor is humourless. Just that they have missed the joke.

If it makes you feel any better, I'm a Zoomer/Zennial(? I'm in the cusp years) and I sometimes have trouble keeping up with all the memes.