Had I invested 100% in a NASDAQ ETF 15 years ago, I would have lost >60% 2 years later and only got back up to the book value this year, not even taking inflation into account. This is what they want to protect you from, models or no models.
Exactly. Stocks are almost always better long-term investments than anything else (if mixed properly; single points of failure are stupid). The point of mixing in “slow” options like bonds or real estate is that it gives you something to take money out of when the stocks are low (and replenish it when the stocks are high). That may look suboptimal, but still beats the alternatives of borrowing money to live from or selling off stocks you expect to rise mid-term. The simulation probably does a poor job of reflecting that.
That’s no reason to tell someone with hundreds of thousands of dollars to put half of it in bonds.
As a matter of empirical observation, rich people with millions of dollars do NOT keep them all in equties and, in fact, tend to allocate a chunk of their wealth to bonds. How large a chunk is debatable.
The US stock market? No, it hasn’t. I checked a graph of it before writing that. “Time the market is down” is not the time between peaks on the graph. It’s the time between periods when stocks are a better investment than bonds. For the Great Depression, that was 3 years.
Had I invested 100% in a NASDAQ ETF 15 years ago, I would have lost >60% 2 years later and only got back up to the book value this year, not even taking inflation into account. This is what they want to protect you from, models or no models.
Exactly. Stocks are almost always better long-term investments than anything else (if mixed properly; single points of failure are stupid). The point of mixing in “slow” options like bonds or real estate is that it gives you something to take money out of when the stocks are low (and replenish it when the stocks are high). That may look suboptimal, but still beats the alternatives of borrowing money to live from or selling off stocks you expect to rise mid-term. The simulation probably does a poor job of reflecting that.
That’s no reason to tell someone with hundreds of thousands of dollars to put half of it in bonds. The market isn’t going to stay down for 10 years.
As a matter of empirical observation, rich people with millions of dollars do NOT keep them all in equties and, in fact, tend to allocate a chunk of their wealth to bonds. How large a chunk is debatable.
Tell that to the Japanese.
...Yet it has, multiple times in the last 100 years, if you invest a lump sum. Regular contributions are a different story.
The US stock market? No, it hasn’t. I checked a graph of it before writing that. “Time the market is down” is not the time between peaks on the graph. It’s the time between periods when stocks are a better investment than bonds. For the Great Depression, that was 3 years.
Both the Nasdaq composite and the SP500 reached peaks in early 2000 which they did not get back to until 2013.