Re: Long/ short PP
Posted: Sun Jun 05, 2011 8:23 pm
I know that Kevin. I read read the book long ago. My post was primarily about VWINX and VWELX, read it again.
Does this adjust for inflation?Clive wrote:If you have Excel or OpenOffice download Simba's backtest spreadsheet http://www.bogleheads.org/forum/viewtopic.php?t=2520 and plug in 25% total stock market (TSM), 75% 5 Year treasury (which is a proxy for a 5 year treasury ladder rewards (but a ladder gets to those rewards via a lower risk route)).SanMiguel wrote: I'm also still wondering if it isn;t better to use the 25% allocation for a VP as 50% allocation to bonds seems pretty high.
You might be surprised at how well a mostly bond, a little stock blend actually has performed. Even more so if you swap out TSM and hold large cap value instead for the 25% stock part.
1972 to 2010 100% TSM 9.92% annualised, compared to a 25% LCV, 75% 5 Year T blend = 9.1% annualised. The 25-75 blend however endured a worse year decline of less than -3.5% (100% stocks was a much wilder ride such as -37% down in 2008).
Most bonds when adjusted for inflation don;t earn any money. Edit: maybe that's an over generalization but is true of the current market.