When it comes to expected return, we love big numbers. We gravitate to it like paparazzi to a celebrity. We do it with performance and projections because it sells.
But there’s one tiny problem. Our expectations change with the market.
A while back I covered how asset allocation lowers volatility. In it, I showed how four different asset mixes performed against an all stock and an all bond portfolio. It looked like the graph below. It showed how volatility lowers as you decrease the amount of stocks in your portfolio. But did it?
Of course it did. It was a simple exercise to prove a point. But it also showed how much better an all stock portfolio performed over the same period. Continue Reading…