Considering the opinions of Robert Shiller, a Nobel Prize winner and Warren Buffett, the most successful investor still in the money business, then the next 10 years doesn’t look too bright for an all-stock portfolio. Shiller is the more optimistic than Buffet. He expects the S&P to grow by 2.6% over the next decade. Buffett believes the S&P will lose 2% between now and 2028.
But no matter whether it’s up 2% or down 2%, if you’re over 50 years of age and have an all-stock portfolio in any market, it’s an ultra-high-risk scenario. The idea of being paid no matter what the market does, long term or short term, is the strongest argument for owning bonds. In fact, it doesn’t only justify owning bonds, but it also shows how necessary it is to increase the percentage of bonds in our portfolios as we age. The only way to protect yourself from the downside of the stock market is to own your age in bonds. Here is the rule:
If you’re 60 years old, hold 60% of your portfolio in bonds. At 70 years old, allocate 70%.
This is the only way to negate the uncertainty of the next 10 years or any period in the stock market.
Adapt your portfolio to your age!
Sven Franssen