Low cost trackers vs bonds

[AshleyW]

This episode of the Rational Reminder podcast which interviews Prof. Scott Cederburg is interesting as his research shows that a 100% equity portfolio is the optimum both during accumulation and de-accumulation and that the best asset allocation is 50% domestic and 50% international. He argues that bonds tend to be correlated with stocks medium to long term so don’t provide the diversification value attributed to them - they just reduce the growth of the portfolio.

https://rationalreminder.libsyn.com/epi ... allocation


All very thought provoking as his research overturns conventional wisdom.

[GeoffF100]

This episode of the Rational Reminder podcast which interviews Prof. Scott Cederburg is interesting as his research shows that a 100% equity portfolio is the optimum both during accumulation and de-accumulation and that the best asset allocation is 50% domestic and 50% international. He argues that bonds tend to be correlated with stocks medium to long term so don’t provide the diversification value attributed to them - they just reduce the growth of the portfolio.

https://rationalreminder.libsyn.com/epi ... allocation

All very thought provoking as his research overturns conventional wisdom.

I have not listened to it, but no it does not overturn anything. Governments and companies will still borrow, at a price fixed by the market. The price will be such that equities and bonds are equally desirable in the market's eyes. Sometimes equities will have a better run than bonds, and their prices will be high relative to bonds. There will then be lots of talk like this. Equities will hit bad times. The prices will normalise, or more likely overshoot, and another cycle begins.

[GeoffF100]

Here are Vanguard's latest expectations for returns over the next ten years:

https://www.vanguardinvestor.co.uk/arti ... s-positive

Notably, Vanguard expects 60% and 100% equities to return about 6.2% (with 80% equities returning 6.3%). The second significant figure is not significant here. 60% equities should give a smoother ride than 100%, and Vanguard's expected return is much the same. Nobody knows what will actually happen, of course. (Vanguard's expected returns are nominal returns, i.e. they are not adjusted for inflation.)