Asset Allocation Strategies - Let’s reduce our risk

[George Lucas]

Asset allocation is a long-term investment strategy. Day traders, crypto fags, speculators, and TA fags can kindly leave the thread without posting, thank you.

Asset allocation in a nut shell:

Assume stocks make 12% YoY
Assume bonds make 4% YoY

Buy stocks, right? Well, stocks can go to $0, while bonds hold their principle. In this case, bonds are a less risky investment but give us a lower return.

What if we want to have more return then bonds but less risk than stocks? We build a portfolio:

80% stocks
20% bonds

Theoretically, our long term YoY returns should be 10%. This is the first basis for asset allocation. The second basis is the allocation itself. Let’s say your stocks do poorly and you end up with a portfolio like this:
70% stocks
30% bonds

Now what you do is you sell some of your bonds to get back to your 80-20 ratio. This rebalancing enables you to maintain the risk/return profile you want.

For me personally, I hate bonds so I have a portfolio entirely of stocks, but I maintain the same allocation of stock classes using this methodology.

 

[peachlover669]

Yeah i guess bonds are a good investment... IF YOUR A FUCKING PUSSY!!!!!!
Triple chuck that shit on dice baby!!!! scared money dont make money!

 

[Polock]

>Stocks can go to zero
Individually, yeah. This is why if you're a dummy you just park your money in an index fund.

I've never understood the point of bonds when real YOY inflation is greater than your returns will ever be. I guess you're offsetting your losses better than if you just had a pile of cash under your mattress?

If I was going to diversify my portfolio from just stocks I'd buy things like precious metals or guns or something.

 

[Vecr]

Very safe EFTs (index funds essentially) are better at the current inflation level. If "stocks go up" appears to be failing overall, bonds would be a good idea. I-bonds are good as a start, but you're limited on the amount you can buy, and the government is incentivized to keep their official inflation numbers down due to their payouts.

If the government is either lying about inflation or there isn't much inflation, and the stocks aren't really going up any more, you would then start buying regular bonds in quantity.

 

[Sexy Senior Citizen]

I suggest buying the Vanguard Total Bond Market Index Fund (BND). Let them deal with figuring out what bonds to buy and when to redeem them.

 

[The Repeated Meme]

Allocate deez nuts

 

[Cats]

all of my cash is tied up in cat treats

 

[I hate women (like you)]

I personally like to get the best of both worlds via buying leveraged inverse natural resources etfs

 

[Hollywood Hulk Hogan]

I am 80% stocks, 20% bonds, with almost all of my stocks being in index funds and ETFs (I use like 5% as play money for riskier stuff). I buy twice a month, whether market is high or low. Don't try and time the market, you won't be able to do it reliably.

 

[Peaches the Wonder Cat]

I no longer thing bonds are great.

They're not keeping up with inflation. Even the inflation indexed ones likes TIPS pay 2% or so above government-stated inflation which is being fudged.

We had a bond bull market for decades, and the 20% bond/40% bond rule was fine when bonds were paying 15% and appreciating in value due to rate cuts. Then bonds became "ballast" which sort of kept up with inflation. Now they've lost that.

To deal with government debt, they will just let inflation run and keep bond rates low. It's an easy way to make the national debt less of an issue - just inflate it away. The US did this before after WW2 and bond holders were left holding the bag for decades.

What are alternatives? At the very least if you insist on bonds, buy TIPS that have a positive return over "inflation" so you're not getting screwed, and buy the individual bonds, not a fund. Look at precious metals, Bitcoin, maybe commodities or commodity-producing companies, and reliable dividend payers. I know some like real estate and maybe that will be good as well, the government would love higher real estate prices because it means more property taxes.

 

[Fascist Kirk]

inverted yeild curves, bond rate controls, endless manipulation. Taxation over returns make the yeild negative.

1.1 Trillion dollars per year on interest on the debt alone. I would rather do like the joker in the Dark night and set cash on fire.

because if you trust the treasury thats what you doing setting cash on fire, don't belive me look at japan 1995 till today

 

[tradecode]

The entire stock market is a Ponzi scheme.