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Warren Buffett suggests a portfolio of 90% S & P 500 index fund and 10% short term bonds
Hank - my first point was not so much that Buffett has been recommending this particular allocation to most investors. Just that he has been referring to "most investors" in one way or another for many years, and it seems no one (okay, a slight exaggeration) was questioning what "most investors" meant. It means now the same thing he's been meaning for years. Whatever that is
On the second point, I agree with you, at least most of the way. (Hmm, there's that "most" again.) We're talking a level of refinement, though. The first level is stocks/bonds/cash (and if you wish, alternatives). The next level down for equity is which equity - large, small, foreign, domestic. Personally, I would (and do) allocate a good chunk to foreign assets.
Regarding Buffett being one of a rare few suggesting a pure US portfolio ... it's the quality, not the quantity, of voices that matter. I've already said that I agree on the value of international investing. So I'm not trying to dissuade here. FWIW, Bogle has also advocated for a US portfolio for many years. Like you, he notes that this approach does invest in companies which make a lot of their profits overseas. He's not as absolute as Buffett, but that seems to be more a concession to people who want to dabble (i.e. if you want to play around, no harm so long as it's limited).
Buffett's plan strikes me as a variant of the recently discussed study saying one should increase equity as one gets older. (Buffett is keeping equity allocation stable, but at the final, high figure.) Here's an article by Jane Bryan Quinn (whom I certainly don't group with the sages above), describing how/why this approach can work well.
I've been looking into these plans because, while investing during working years can be relatively straightforward (using new money to adjust allocations), disinvesting during retirement seems more complex. If nothing else, these plans provide more ideas to think about.
P.S. Like you, I've yet to read the full transcript. Should make for some interesting reading.
With a 90-10 portfolio such that you wish to take out lets say 30k each year and if your strategy is to take from only the bond fund in case of a bear market and early recovery for lets say 5 years (a reasonable worst case scenario) it would seem you need to have $100k in bonds at the minimum and hence a least a million dollar portfolio . If you wanted to take out 100k per year you would need a 5 million dollar portfolio. For smaller and "more average" portfolios it does not seem like it would work very well if one did not have a pension in addition to social security so the drawer down could be in the ballpark of 5-10k.
Comments
On the second point, I agree with you, at least most of the way. (Hmm, there's that "most" again.) We're talking a level of refinement, though. The first level is stocks/bonds/cash (and if you wish, alternatives). The next level down for equity is which equity - large, small, foreign, domestic. Personally, I would (and do) allocate a good chunk to foreign assets.
Regarding Buffett being one of a rare few suggesting a pure US portfolio ... it's the quality, not the quantity, of voices that matter. I've already said that I agree on the value of international investing. So I'm not trying to dissuade here. FWIW, Bogle has also advocated for a US portfolio for many years. Like you, he notes that this approach does invest in companies which make a lot of their profits overseas. He's not as absolute as Buffett, but that seems to be more a concession to people who want to dabble (i.e. if you want to play around, no harm so long as it's limited).
Buffett's plan strikes me as a variant of the recently discussed study saying one should increase equity as one gets older. (Buffett is keeping equity allocation stable, but at the final, high figure.) Here's an article by Jane Bryan Quinn (whom I certainly don't group with the sages above), describing how/why this approach can work well.
I've been looking into these plans because, while investing during working years can be relatively straightforward (using new money to adjust allocations), disinvesting during retirement seems more complex. If nothing else, these plans provide more ideas to think about.
P.S. Like you, I've yet to read the full transcript. Should make for some interesting reading.
No doubt, in this case, I believe it has.
Old_Skeet