5 ms·

You probably thought this was obvious, but I just want to clarify for others what "works" means. It doesn't "work" in the sense of performing as well as, e.g.,

You probably thought this was obvious, but I just want to clarify for others what "works" means. It doesn't "work" in the sense of performing as well as, e.g., 100% stocks. It's actually not even close, for most start and endpoints. But if you buy at the top and want to sell at the bottom, this portfolio will not lose nearly as much value as stocks would.

H8crilA 7y ago
All Weather works just as good as 60/40 (in the sense of returns) with way way less volatility. See my backtest link. It's also known as the risk parity portfolio. 100% stocks, while usually performing better, is not suitable for most investors. And yes that probably means you reading this comment. They will not be able to hold in times like 2008, they will sell instead of buying more. As "The Intelligent Investor" puts it: "Look into the mirror. That is the biggest risk you have - yourself.". I know I can't stomach 100% stocks (even 75% is very very scary) so I will probably never do that.
- ijpoijpoihpiuoh 7y ago
  I'm not sure whether I can or I can't. I guess I'll see. I'm in the fortunate position of having more than twice as much as I need for a very comfortable retirement already, and also of working for a company that hired and gave raises through the last recession. Knowing that even with a 50% decline I'll still have more than enough might make it easier for me to ride out the bad times than most people. The thing that's tough for me to stomach with the all weather portfolio is how much worse its results are in good times. If I had been invested in that since 2012 rather than my current asset mix, I'd have had only 33% as much growth as I have done during that period. Even backtesting against the peak in 2008, the all weather gives only about 80% as much growth to today.
  - H8crilA 7y ago
    It is a personal choice. But IMHO too many people went 100% on stocks. Not everyone has Warren Buffett's incredible mentality to buy in downfalls. About returns FOMO: in 1999 risk meant to bump into someone who makes more money day trading stocks. In 2003 it was owning stocks :)

H8crilA 7y ago

All Weather works just as good as 60/40 (in the sense of returns) with way way less volatility. See my backtest link. It's also known as the risk parity portfolio. 100% stocks, while usually performing better, is not suitable for most investors. And yes that probably means you reading this comment. They will not be able to hold in times like 2008, they will sell instead of buying more. As "The Intelligent Investor" puts it: "Look into the mirror. That is the biggest risk you have - yourself.". I know I can't stomach 100% stocks (even 75% is very very scary) so I will probably never do that.

ijpoijpoihpiuoh 7y ago
I'm not sure whether I can or I can't. I guess I'll see. I'm in the fortunate position of having more than twice as much as I need for a very comfortable retirement already, and also of working for a company that hired and gave raises through the last recession. Knowing that even with a 50% decline I'll still have more than enough might make it easier for me to ride out the bad times than most people. The thing that's tough for me to stomach with the all weather portfolio is how much worse its results are in good times. If I had been invested in that since 2012 rather than my current asset mix, I'd have had only 33% as much growth as I have done during that period. Even backtesting against the peak in 2008, the all weather gives only about 80% as much growth to today.
- H8crilA 7y ago
  It is a personal choice. But IMHO too many people went 100% on stocks. Not everyone has Warren Buffett's incredible mentality to buy in downfalls. About returns FOMO: in 1999 risk meant to bump into someone who makes more money day trading stocks. In 2003 it was owning stocks :)