As a rule of thumb, investment advisors and wealth managers say that an ideal portfolio allocation should be 60:40. This means that 60% of the portfolio should be in equities and the balance 40% in bonds. However Burton Malkiel, author of a book on investing called A Random Walk Down Wall Street, stated that investors following this rule would be "badly hurt". The reason is the change in scenario.
You see when the rule was written, bond yields were higher and interest rates were not close to zero in the US. The US had not started printing money and things were different. But now a lot has changed. And this change necessitates a change in asset allocation as well. The one size fits all idea no longer holds. This is something we agree with too. Just because one allocation strategy works for one person, does not necessarily mean it would be equally beneficial for another person. Each individual is different so an asset allocation plan will differ from person to person based on his or her personality traits, age, risk taking capacity and the ultimate investment objective in mind. One cannot take a 'one size fits all' approach.
You see when the rule was written, bond yields were higher and interest rates were not close to zero in the US. The US had not started printing money and things were different. But now a lot has changed. And this change necessitates a change in asset allocation as well. The one size fits all idea no longer holds. This is something we agree with too. Just because one allocation strategy works for one person, does not necessarily mean it would be equally beneficial for another person. Each individual is different so an asset allocation plan will differ from person to person based on his or her personality traits, age, risk taking capacity and the ultimate investment objective in mind. One cannot take a 'one size fits all' approach.
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