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Chart of the Day: Buffett’s 90/10 vs the Barclay Macro Index

In the Fortune piece I linked to excerpting Warren Buffett’s 2014 letter, he recommended a very simple approach to asset allocation – a 90/10 split between stocks and bonds in low fee index funds.  As I mentioned, he also said macro views were pretty much useless.  So I compared the two using the Barclay Macro Index:



That’s pretty interesting.  Obviously, past performance doesn’t mean much, but it puts things in some perspective.  Specifically, it puts the concept of quantifiable risk in some perspective.  Although I hate to use the idea of “risk” as “standard deviation” this picture really highlights what a 90/10 portfolio puts you through over the course of a few business cycles when we look at “risk” as variance.

A 90/10 portfolio is essentially a version of “stocks for the long run”.  This is a fine type of portfolio for someone with a holding period of forever (which is virtually no one), billionaires and trust funds, but it’s a pretty imprudent way to allocate assets for most people.  There’s so much that I find misleading about the concept of “stocks for the long run” that I could write a book about it…But I’ll spare you any further ranting.


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