Dr. Burton Malkiel - (A Random Walk Down Wall Street) - Stock/Bond Allocation

[Kanto]

I was just listening to Dr. Burton Malkiel on the Bogglehead on Investing Podcast.

https://rickferri.com/podcast/episode-2 ... ick-ferri/

He mentions near the end of the podcast that he has in subsequent editions increased the stock allocation and decreased bond allocation recommendations across all age groups. He further said that if he were to write the 13th edition he would allocate even more to stocks.

It seems many index gurus have become more bullish on bonds recently. No doubt due to the long period of historically low interest.

Thoughts? What is your age bracket, and what is your Stock/Bond ratio?

I am 32. My wife and I are 85% Stock Indexes / 15% Bond Indexes

[RetireJapan]

I'm 42, and 0% bonds.

But that is an edge case and not a recommendation.

[TokyoWart]

I also noted that podcast with interest. I'm hearing more advisors question whether the more traditional bond allocations (which are at least 25-50% in the portfolios that did best in the sustainable withdrawal rate studies by Bengen or the Trinity study; famous value investor Ben Graham and the father of modern portfolio theory Harry Markowitz both reportedly had 50% in bonds in their own portfolios) are appropriate because it seems like the currently low bond coupon rates can't pull their weight in contributing to a 4% sustainable withdrawal rate and we are in such an unusual period where central bankers have suppressed bond yields through their balance sheet operations. That doesn't rule out a role for bonds to prop up the value of your portfolio just because they don't fall as much as stocks during market downturns.

I'm 57 and I'm 100% in equities but I have a large emergency fund and a high risk tolerance.

[Kanto]

I also noted that podcast with interest. I'm hearing more advisors question whether the more traditional bond allocations (which are at least 25-50% in the portfolios that did best in the sustainable withdrawal rate studies by Bengen or the Trinity study; famous value investor Ben Graham and the father of modern portfolio theory Harry Markowitz both reportedly had 50% in bonds in their own portfolios) are appropriate because it seems like the currently low bond coupon rates can't pull their weight in contributing to a 4% sustainable withdrawal rate and we are in such an unusual period where central bankers have suppressed bond yields through their balance sheet operations. That doesn't rule out a role for bonds to prop up the value of your portfolio just because they don't fall as much as stocks during market downturns.

I'm 57 and I'm 100% in equities but I have a large emergency fund and a high risk tolerance.

In the previous podcast, there was a lot of discussion about buffer assets that can act like bonds.

1. Whole life insurance

2. Income Annuities

I am not sure how feasible these are in Japan. However, I need to get life insurance. I wonder if I should be looking at a whole life policy?

[Bushiman]

39 and 100% equities...
I plan on keeping it that way till I turn 50...
Then, I'll up my bond allocation yearly till I retire around 65 I'm guessing/hoping...

[adamu]

To the 100% equity people: what happens if we have a stock market crash that takes more than 20 years to recover? It's happened before...

I'm also 100% equity, but definitely worth keeping in mind.

[RetireJapan]

To the 100% equity people: what happens if we have a stock market crash that takes more than 20 years to recover? It's happened before...

I'm also 100% equity, but definitely worth keeping in mind.

I keep buying every month, and make a fortune

Most of the horror stories involve buying at the top of the bubble in Japan, *and never touching it again*. Also single markets like Germany or Argentina that went bust. I like to think regular purchases of global stocks are unlikely to face the same, or if they do then your portfolio's performance is likely to be the least of your worries...

[TokyoWart]

To the 100% equity people: what happens if we have a stock market crash that takes more than 20 years to recover? It's happened before...

I'm also 100% equity, but definitely worth keeping in mind.

That's a real risk, although for the US market if you account for dividends and the effect of deflation there's never been a 20 year period before you are back to baseline. For the Great Depression because of the very high dividend yields (which were up to 9% or so) and deflation the real recovery to baseline in purchasing power is estimated at only 6-7 years by some analysts. However, this time I think there is also real risk is for bond holders. Rates have never been this low and the only reason we don't already have very substantial inflation from the expansion of money supply is that velocity in the MV = PQ equation of exchange has also gone to historic lows.

[taneandy]

We're currently at around 75% stocks, 15% bonds, 10% REIT at 36.
Our current savings rate is quite high relative to our total savings so I quite happy to be almost completely invested in stocks.
Most of the bonds and REIT are in つみたてＮＩＳＡ, which is probably not ideal in terms of taxes, but means that we can just keep buying the same thing in those accounts for the next 20 years.

[Kanto]

To the 100% equity people: what happens if we have a stock market crash that takes more than 20 years to recover? It's happened before...

I'm also 100% equity, but definitely worth keeping in mind.

That's a real risk, although for the US market if you account for dividends and the effect of deflation there's never been a 20 year period before you are back to baseline. For the Great Depression because of the very high dividend yields (which were up to 9% or so) and deflation the real recovery to baseline in purchasing power is estimated at only 6-7 years by some analysts. However, this time I think there is also real risk is for bond holders. Rates have never been this low and the only reason we don't already have very substantial inflation from the expansion of money supply is that velocity in the MV = PQ equation of exchange has also gone to historic lows.

This risk can be somewhat mitigated by investing in the "whole market", (VT/All Country), or a developed country bond index.

Surely many here cannot continue to be 100% equities for the long term though! What is the plan? What are you going to transition to?

Is the classic Boglehead approach outdated?