Quote:
Originally Posted by RichieRich
Am trying to understand why such a large reliance upon the bond market? 50% is huge for something that according to many pundits (and FIRE blogs) probably doesn’t have a lot of upside. Instead it’s considered way less risky but also return averse.
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Because:
I don’t want the higher volatility that comes with more equities;
I care more about preserving my portfolio than trying to maximize its return;
A 60/40 portfolio is often used for endowments—I don’t have that long of a timeline, and so slightly less equities doesn’t really affect my long-range projection returns that much;
With a 50/50 split, if bonds do great I’ll do okay and if stocks go great I’ll do okay, if that makes sense; and
I’m projecting a 2.5% withdrawal rate from my portfolio (essentially, dividends and interest), and with a withdrawal rate that low, it really probably doesn’t matter what the asset allocation is (give or take 30% with either asset class), and since I really value a sleep-well-at-night portfolio, 50/50 it is.