Thirty Second Course on Asset Allocation

If I only had thirty seconds to teach a young person about asset allocation, I probably wouldn’t bother with anything written. I’d also dispense with any sort of formula, equation or model.

Instead, I’d come armed with just one chart and force my erstwhile pupil to spend the entire half-minute staring at it.

That chart is below, a gem from Professor Jeremy Siegel (via Vox):

stocks bonds

In the above table, originally pulled from Siegel’s epic Stocks for the Long Run (now in its fifth edition), we see that stocks have beaten Treasury bonds and T-Bills (a cash equivalent) in almost 100 percent of all thirty-year periods. Phrased another way, only during less than one percent of all thirty-year periods for more than two centuries did it make sense to stay out of the stock market with a retirement portfolio. 

Now of course, there are caveats – the first is, nobody lives for two hundred years. This is true, which is why the gains of the stock market from the entire period are not important ($1 turned into $704,000, in case you were wondering).

The second caveat is that, prior to the 1970’s and the advent of the index fund at Wells Fargo, nobody could have done anything quite so simple as buy the stock market passively. As such, these historical returns would have been unattainable, even if the numbers themselves are reality as represented by the indexes.

But to those caveats, the reasonable person says “So what?  Just because I’m not going to live for centuries or because my grandparents could not have owned an index fund, what does that have to do with my own future and the next thirty years?”

Thirty seconds doesn’t offer us a lot of time for nuance and there are certainly other issues that should be brought to the fore in a discussion about portfolio management and risk. But if that were all I had, this chart would be all I’d need to make the most important point a younger investor needs to be armed with, the earlier the better.


Only 24% of the US knows where to put their money (Vox)

Check out the book or gift it to the new investor in your family or office:

Stocks for the Long Run – Fifth Edition (Amazon)


This post originally appeared here on August 17th, 2014

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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  1. Shawn commented on Dec 10


    good info!!

  2. Donald commented on Dec 14


    good info!!

  3. tony commented on Dec 19


    good info.

  4. homer commented on Jan 14


    tnx for info!!