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Ok, maybe some confirmation bias and Buffettology but I enjoyed this piece by Robert Pozen (5 minute read) which resonated with my own (and my late father’s) 90-95% equity strategy over the decades.

Traditional Financial Wisdom Says a 60-40 Portfolio Is Best. Is That Still True?
https://www.barrons.com/articles/traditional-finan...

Excerpt:

“…Bonds just aren’t as attractive as stocks. While the positive returns on stocks are driven mainly by the growth of company earnings, the returns on bonds are driven mainly by interest rates, which depend upon macroeconomic conditions and government policies. In inflationary periods, interest rates are high and bonds do poorly. And although high interest rates can also adversely affect stocks, successful companies have leverage. They can raise prices, control costs, and increase earnings.

As a result, the returns of stocks are better than those of bonds in most inflationary periods. When annual inflation averaged more than 8% between 1972 and 1982, the average nominal total returns of the S&P 500 were 7.7%, as compared with 5.7% for 10-year Treasuries. During a more recent inflationary period, 2021 to 2024, the annual nominal total returns for the S&P 500 and the 10-year were 13.5% and -5.4%, respectively...”

…Bonds just aren’t as attractive as stocks.

But we don't hold bonds for high returns. We hold them because we can't handle seeing our net worth drop by 50%*. So, we offset a bit, or a lot, with some "bonds".

I'm counting T-bills as "bonds", the 10% in the Buffett 90/10 portfolio.

* Really happened to me in 08/09. Down 50-odd% at one point. Vowed never to do that again. Currently 80% stocks, with the 20% being more than total net worth in 2008.

We were down 65% in 2008/2009. Two years later we were up nicely over our what our earlier valuations had been prior to going into the 2008/2009 decline. It truly illustrated Munger’s view of being Stoically willing to suffer a 50% decline.

I’m mentally ready for whatever Black Swan event triggers the next big decline. As has been mentioned before, I read all sorts of information (including paid research) and listen to podcasts most every day, yet may go a long time between purchasing or selling positions. Lately I’ve been researching and testing scenarios that are 180 degrees different from today’s hot stock positions involving companies holding physical assets that have historically, with enough time, repriced to their original valuation after a currency crisis and/or massive inflation era.

The prospective positions must also not be vulnerable to state supported competition or to obsolescence. Additional criteria include having a light debt load, management with some skin in the game and a demonstrated ability to reinvest in the business at relatively good ROE over the years.

There are companies fitting these requirements. Their stock valuation charts look terrible over the past ten years. In many cases a dollar invested ten years ago in many of these companies has appreciated at less than a 5% annual rate. Dividends help, but when figuring inflation into the mix, investors have not done well.

Still, these companies have been growing assets while their P/E multiples have been declining. It is the age old question for value investors as to “Will the next ten years be different for the valuations of these companies?”

Stay tuned and I welcome your insights.

Uwharrie

Really happened to me in 08/09. Down 50-odd% at one point. Vowed never to do that again. Currently 80% stocks, with the 20% being more than total net worth in 2008.

Is down 40% so much better than down 50% (psychologically)? Because 100% stock allocation down 50% is roughly the same as 80% stock allocation down 40%.

“Is down 40% so much better than down 50% (psychologically)? Because 100% stock allocation down 50% is roughly the same as 80% stock allocation down 40%.”

Might want to check your arithmetic there.

But yes, very much better. 100% down 50%, bargains everywhere and zero cash to buy them with. 80% down 50%, still have a ton of cash available to buy. In 08 I scraped around for cash to buy. In 2020 I was able to load up on Berkshire at slightly over book value.

I don’t have a static allocation.

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Berkshire Hathaway FAQ

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