mathjak107 wrote: ↑Sat Apr 27, 2019 3:49 am
nothing is ever going to be 100% guaranteed . but there are things that make sense ..
the comparison to japan is a poor one . not only are we not japan but had someone in japan bought a global fund or invested in other countries their outcome would be very different ..
The comparison to Japan is not a poor one, because if it can happen to them it is *possible* it could happen to us. And since right now, it's a global trend of deflation, international diversification likely would not work if we went down that route.
mathjak107 wrote: ↑Sat Apr 27, 2019 3:49 am
matching time frames to money has never been a problem...118 -30 year cycles show a 50/50 mix has a 96% success rate of being spent down successfully over 30 years ... my 50/50 mix if i maintain the allocation can go a long long time without selling equities ... in fact over any 10 or 20 year period a 50/50 has never been down .. so risk and volatility are very different things .
Having a 50/50 portfolio is *NOT* matching time frames to money. I repeat, having a 50/50 portfolio is *NOT* matching time frames to money. It is holding a passive 50/50 portfolio. The two things are very different. I suggest you do some research in the strategy of matching timeframe to holdings, this is generally done as a bucket approach.
mathjak107 wrote: ↑Sat Apr 27, 2019 3:49 am
but if i still had a few decades left , no way would i be trying to mitigate short term dips as a long term investor , volatility does not bother me when i have no near term use for that money ..
The false assumption is that all dips are short term. This is simply not true. Now, if someone is 20 years old, has no money invested, and has a low to average savings rate (0-15%) then even in a Japan-like situation, it's not really going to effect them that much in the grand scheme. So sure, if they want to take a gamble on 100% stocks to see if the luck of the starting point will work for them, sure. They have so little invested that it really doesn't matter what they do.
But for someone that is retiring or hitting FI in the next 10-20 years, someone that has a high savings rate, someone that has a large chunk of money invested, etc... if they have no *need* to gamble, then it seems pretty silly to gamble with their entire savings, right? Even if they have a desire to gamble, they could still do it in a way that is responsible by using both a PP and VP. Humans are known to behave badly in periods of high volatility. I think it's safer to assume that the average person will not be able to hold through a market crash, since all the current behavioral finance research shows this to be the case. The average person sells at or near the bottom and then doesn't get back in for years, after they've missed the entire recovery. So if someone has enough money that their behavior can ruin them, would it not be irresponsible and potentially very harmful to recommend that they go all in 100% in stocks? They can still chase alpha, but it's better off allocating a percentage to a VP directly for that purpose, imo.
Now if the person is a general stock bug then that VP can just be a passive stock allocation. Hell, for someone like Budd with 13M I see no reason why he couldn't go something like 20% PP 80% stock VP since he is such a stock bug. His 20% that would be safe would still be enough to last him for the rest of his life (~2.5 mill), so he could afford to gamble on the 80% if he wanted to, lose it all, and still be fine. This is why I say these things are individual and there are many inputs that need to be considered. There is no black and white generalized best case for everyone. Even trying to generalize portfolio recommendations using age as the sole input is a very poor way to go about things.
A wise man once said to first protect the "money you can't afford to lose" then you can chase return after that. I personally think this is great advice. I think that human psychology has some short comings though, where coming out of a crisis like 2008 human psychology would tend to favor being defensive and protecting money, and in 2019 human psychology would rather favor being offensive and risking money. The thing is that human psychology is usually wrong. So the line in the sand for what is "money you can't afford to lose" and what is money you can chase alpha with probably needs to be calculated in an objective manner, as using subjective feelings are probably going to lead an investor down the wrong path (i.e. being super defensive in 2009, and being super offensive today).