Focus
Full time employment: Posting here.
- Joined
- Oct 10, 2009
- Messages
- 640
Latest (and very interesting) SWR research by Michael Kitces and Wade Pfau.
They compare:
*Kitces and Pfau define this as "where the portfolio starts out at a 'neutral' 45% in equity exposure, increasing to 60% in equities when markets are 'cheap' and undervalued, decreasing to only 30% when markets are 'expensive' and overvalued, and remaining at the neutral 45% in equities when markets are fairly valued in the middle."
Their conclusion? Kitces says:
My personal takeaway is that the fixed 60% stocks / 40% bills strategy appears to do nearly as well and the simplicity of this approach tilts the scales in its favor. But then I'm not a financial advisor...
They compare:
- Valuation-based approach*
- Fixed 60% stocks / 40% bonds
- Fixed 60% stocks / 40% bills
- Rising glide path for stocks/bonds and stocks/bills
*Kitces and Pfau define this as "where the portfolio starts out at a 'neutral' 45% in equity exposure, increasing to 60% in equities when markets are 'cheap' and undervalued, decreasing to only 30% when markets are 'expensive' and overvalued, and remaining at the neutral 45% in equities when markets are fairly valued in the middle."
Their conclusion? Kitces says:
"Whether based on safe withdrawal rates as a measure of minimizing risk, or median wealth as a measure of maximizing wealth accumulation, the valuation-based tactical portfolios ... appear to do slightly better than either a fixed 60% equity exposure or a rising equity glidepath."
My personal takeaway is that the fixed 60% stocks / 40% bills strategy appears to do nearly as well and the simplicity of this approach tilts the scales in its favor. But then I'm not a financial advisor...