Interesting. Did 50/50 outperform 60/40? What was the optimum AA over that same period? Did the bond holding have a significant influence? Eg, did it matter if bonds were all intermediate treasuries vs something like BND? Thanks.Bonds are there to protect against volatility. You potentially get a higher return if you have more equity. The following is a graph plotting a 90/10 portfolio vs a 60/40 with a 4% withdraw rate. The 60/40 was bad enough. I don't people want to experience a 90/10 portfolio
Another reason is that stocks can have long periods of underperformance. You could get a crappy decade where stocks underperform bond. Mixing it some bonds may mitigate that somewhat.
As for bond stability, take a look at the following graphs of stock vs bond.
Will you based the performance of bond on a single period around 2022?
As for the asset allocation placement. It's a good idea for keep bonds in IRA and the stock in taxable. Stock funds, especially stock index fund are very tax efficient. If your intention is to leave the money to your kids, you definitely want to put it in taxable. An IRA inherited by your kids will have to be emptied in 10 years, this mean your $4M portfolio will have to be withdraw at $400K a year and taxed at around 30ish tax bracket. If the money is in taxable, the money will step up and they can sell it without capital gains. Note that roth ira will also be good.
As for your allocation, remember what I said about volatility. Withdrawing from a portfolio has the reverse effect as the contribution phase. You plan is ok if you can stand the volatility.
Statistics: Posted by artbuc — Tue Aug 13, 2024 5:24 am