I’ve posted Entry #308 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Worth Examining How Numerous Allocation Options Are Likely to Perform Over Numerous Time-Periods.
Juicy Excerpt: I started writing about safe withdrawal rates in May 2002. At that time, it was common practice among Buy-and-Holders to assume that smart retirees would employ a portfolio allocation of 80 percent or so. The conventional wisdom of the day was that stocks had been proven to be the far superior investment choice and so retirees would be leaving lots of money on the table by going with stock allocations too much less than that.
To be fair, not all Buy-and-Holders took this position. But the voices of the ones who did often drowned out the voices of those who did not. Those of us who held reservations about the idea of going with high stock allocations at times of insanely dangerous valuation levels often censored ourselves. We shared our thinking in limited, tentative ways. But we knew that stating our views in too clear a manner would make us unpopular and so we walked on eggshells when making this painfully basic and important and accurate and responsible point.
It’s a different story today. Stocks have been performing poorly for nearly 17 years now. Today, the Buy-and-Holders know that saying that stocks are always the far superior asset class does not go over nearly as well as it did in 2002. So they state things differently. They suggest that perhaps 50 percent stocks is a better allocation fort most retirees or even for most investors. Occasionally you will see a Buy-and-Holder advocate a stock allocation even lower than that, something I can never recall seeing in the days of wildly inflated prices.