I'm almost positive one of FundAlarm members linked to a chart that listed various historical returns based upon most Aggressive (100/0) to most Conservative (0/100) Asset Allocations. I'm pretty sure the chart included up through 2010. It listed variables in-between above like 80/20, 60/40, etc.
I've just spent lots of time trying different search strings in Google, without much luck. If somewhere here remembers where this chart is, I would be very grateful.
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Hi Cathy, IMHO - Investor gave a very good resourceful site. One of my highly recommend read is from this site
http://www.merriman.com/PDFs/UltimateBuyAndHold.pdf
However, I couldn't find the chart I was looking for. There is similar information in the UltimateBuyandHold article that JohnN linked to, which will definitely help. But the chart I remember seeing previously had headings of at least 6+ various equity tobond allocations, with the bottom line showing the average return over at least a decade (I think) for each allocation. At the time, I remember commenting that on Fundalarm that I was surprised and pleased that one of the more conservative allocations performed much better, on average, than I expected. I was sure I printed it out, but I have hundreds of pages I've printed over the last 2 years and haven't been able to find that one.
Fine tuning your asset allocation.
http://www.merriman.com/bestofmerriman/finetuning/
The bond/stock case is about asset allocation.
You also need to understand that the portfolios constructed are similar to their Ultimate Buy and Hold portfolio construction only varying the amount of bonds in the portfolio. These portfolios are well diversified and consists of passive funds (using Dimensional Funds funds) but can be fairly implemented using available index funds.
I suggest you read the other Buy and Hold article to understand the portfolio behind. If you have a substantial different mix (for example you do not have 50% foreign allocation in equities, or 50% allocation to small caps) your returns might be different.
As you have found that you can get pretty reasonable returns with 30% equity but as you try to go higher on return scale, you will have to have guts to endure the volatility and short term declines. Obviously, high equity portfolios are probably not suitable for a retiree but they might be suitable for someone that has many decades of investing future. I believe a good range for equity allocation is between 30% (conservative) to 70% (aggressive).
I believe, It's particularly good for you to study these 2 articles well.
I've been very happy with the returns in Portfolios I've set up over these last 12 months. So my greatest fear is another real depression as I continually hear about even more dismal U.S., Europe and World economic conditions that show no signs of any real attempts to solve the underlying problems - and how that will affect Mom's Trusts. I hate not knowing how bad it will get so my biggest concern is trying to protect Mom's capital and income from what seems like, at best, a very slow growth and, more likely portfolio returns like they have been in last 3 months. I just hope I'm wrong, for Mom's sake.
While I have been a long time "into meditation"; I have not yet found the "golden globe of knowledge and wisdom"; and have not had any amazing thoughts after staying at a "Holiday Inn Express"; I find only 3 investment worlds that are not correlated; being equity, commodities and bonds, which includes cash.
Equities and commodities are also closely related to growth or lack of growth, eh?
Now, this is surely not a new or bold statement or concept. We all have the investment doors from which to choose, based upon one's monetary position or well being.
I/we at this house have a completely different set of circumstances to view with retirement; versus many we know in Michigan. Michigan's retirement community still has a very large portion of those who have, what I will name as; "very decent" retirement plans that include health care plans. Neither of us are public sector (gov't, teachers, etc), nor union contracted employees. Our retirement plans will be nominal defined pension programs w/o health benefits, and SS, + plus our own monies we have socked away over the years. We will have to come up with the monies for a period of time for a health plan.
I note this above paragraph as related to our somewhat cautious portfolio and the need for capital preservation, and attempting to stay ahead of the inflation creep.
This retirement circumstance is related to what we attempt to define as the 3 above investment areas and their relationships. Those who have followed our portfolio may know that we have not been shooting the lights out since the market melt; but have maintained a slow and steady move forward. At this stage of the global market place, we are no longer in the "90%" equity holdings stage. The prior 30 years in equites were interesting, fun and profitable; but our house will likely never visit that "door" again.
So, diversification is of value. Diversification into what, is the big question for this house. We find ourselves diversified into the income sector, with a pinch of equities and a side "insurance policy" of a precious metals fund.
I have noted in agreement, back in the FA days; with several others here, that I continue to find difficulties with any ability of monetary actions by whomever to smooth the current problem areas of the economy. A fix would be my most profound hope; but any fixes are going to take a great deal of time and soft handling, as the government is so intertwined in so many aspects of our daily lives, local and state government actions and programs. This involvement is not necessarily a bad thing, in its most pure concept; but has become misused and much perverted over many years. Too many entities are "hooked" on government programs and could not stand alone on their own merit.
I sure took the long path around the correlationship road of investments; but perhaps some of the "out loud" thinking is of benefit. I suppose my statement is more about how one's own outlook/viewpoint coorelates to investment sectors; versus how we know many sectors coorelate to one another.
The machines, hedge funds, pension funds and other big money may provide for a "show" of movements in equities; but I find this may only cause the equity boat at the dock to be rocking about too much (market swings) to cause the boarding ramp from the dock onto the boat to be unstable and eventually cause too many retail investors to not take the chance of walking upon the swinging boarding ramp to board the equity boat.
NOTE: my hold harmless with this write; as the coffee brewer this morning is inoperative, and thus; my thinking may be considered as impaired.
Take care,
Catch
But still correlation is not perfect. Some do go up and down more than others. Your portfolio still benefits from this Intl. diversification. When we come of this episode of market panic, it is highly likely that different markets will follow somewhat different paths. There will be markets that will make surprise moves that you would not expect now.