longer.blue

So hand up, I don't really watch a lot of Netflix or other current pop culture media, but I do really love Youtube. One my short list of exceptional channels is Benjamin Felix's (https://lnkd.in/gnUWepdk). on Sunday he released his take away from a "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice". If you're a bit of a personal finance, investing, or math geek, you may have a wonderful time watching as you question everything you've learned from reading Ray Dalio. That said, read the paper linked below, it's got me rethinking my recent shift towards bonds as I percieve exceptionally troubled waters ahead in the US market. It also made me feel a heck of a lot better about my heavy move into international markets. The Paper: https://shorturl.at/IHD0R If you're not interested in reading an 86pg paper on the optimal portfolio strategy's then fear not, I have a summary for you: The paper argues that conventional lifecycle advice (shifting to bonds over time) may be suboptimal. The Longer More Detailed Summary: Beyond the Status Quo: A Critical Assessment of Life Cycle Investment Advice challenges conventional wisdom of a retirement portfolio having a supposed reduction in risk over your lifetime moving from being heavy in stocks and slowly converting to bonds, and instead advocates for a 100% globally diversified stock portfolio throughout an investor's life, including retirement. The paper uses a block bootstrap methodology to simulate returns from historical - 1890s onwards - data across 39 developed countries to capture long-term return characteristics. 💠 Optimal Allocation: The base case suggests 33% domestic stocks and 67% international stocks, with bonds excluded due to their poor long-term performance and increased correlation with stocks over time. 💠 Critiques Addressed: The paper counters criticisms by testing scenarios like excluding the U.S. (due to its outlier returns) or Germany (due to bond losses), finding minimal impact on the optimal strategy. 💠 Leverage: Low-cost leverage can enhance returns, but the paper notes that levered 60/40 portfolios underperform unlevered 100% equity portfolios in long-term simulations. 💠 Valuations: Adjusting allocations based on stock valuations (I.e., reducing domestic stocks when price-to-dividend ratios are high like we are currently experiencing in 2025) offers marginal utility gains. 💠 Behavioral Considerations: While bonds may not optimize returns, their lower volatility may suit investors prone to panic during market downturns. https://lnkd.in/gXgnGy2A hashtag#personalfinance hashtag#investing hashtag#globaleconomics hashtag#money hashtag#retirement hashtag#economics hashtag#finance hashtag#bonds hashtag#equities hashtag#stocks