Sunday, April 24, 2011

Change in fashion

I find an interesting discussion on the Vanguard forum about changes in suggested asset allocation (link).

From that discussion:
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... evidence of faddishness and trendiness in investment advice. In 1989, we were being told that retirees should have 0-20% in stocks, 50% bonds, and 30%-50% cash. Today, Vanguard Target Retirement 2010 would put someone at retirement in 47.53% stocks, 51.94% bonds, and a whopping 0.53% short-term reserves ...
>>

This is normal human behavior. Every age will have investment cliches that may or may not be sound. Way back in the 19th century, the advice was to "never sell consuls [British bonds with no expiration date]," then World War I and II happened and the sun set on the Empire and the bonds weren't so good to have any more. Things change.

More recently there has been a lot more recommendations towards international investments, mostly stocks, but now international bonds are coming into fashion. Even more in the news is the current run for silver and gold. Will the Bogle-heads ever acknowledge metals? Probably not any time soon, however, the permanent portfolio folks have, and do, and it is similar approach though with a 25% weighting to gold (link to gyroscopic investment forum).

Wouldn't it be great to know what the gurus will be recommending in 2030? Odds are that it will be widely different from what is in fashion now, just as the allocations changed so much from 1989 to 2011.

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