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Originally Posted by macker
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You are ignoring standard deviation and beta and the consequences of risk on investments along with proper asset allocation. If you look at the returns of the 90 day Canada tresury bill rate of return since 1950 it has been 5.7% with a risk factor of 4. 5 year GIC rate of return since 1950 6.9% with a risk factor of 3.4 and DEX Long bond index over the same period of time 7.5% with a risk factor of 9.8.
What you are suggesting is that people should suck it up and give up on modern portfolio theory and managing risk in retirement time zone etc. and move up the ladder as the FED knows best and most people are better suited chasing the long term return of the S&P TSX Composite of 10.3% and just ignore the fact that the risk factor is 17.1. After the lost decade I am sure a lot of retirees will be happy to hear this strategy and won't worry about asset classes that have been removed from the pie. What about people that don't want to take on as much risk in their investments. Where should they park their money?
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I really wish I had more time for this, but MPT is something that I disagree with entirely. I basically think its junk. The entire notion of putting a number on risk is a bad idea and I wouldn't put any faith in peoples ability to do so. Risk is one thing and one thing only, losing money.
Secondly, Standard Deviation is almost as useless. No one is worried about the upside volatility, but its measured in just the same as downside.
Anyway, I don't have time to run through all of this at this point...as much as I would love to!