Re:The Line Between Aggressive and Crazy
by ThrustVectoring on Monday October 30, 2017 @12:14PM
(#15586169)
Maximum expected value isn't the same thing as best distribution of results. The levered portfolio does better in expectation, but at the cost of being in for a really bad time in a bear market.
Plus, many investors can't stomach the losses of a 100% equities portfolio, let alone something levered up.
>How do we reconcile this? Intuitively, the function of your age needs to be included in this equation (I think somebody commented on this already).
Age is a proxy for funding amount. A lot of investment goals aren't just "maximize the amount of money I get". They often care about things like "I need to spend $X/yr in retirement". So your investment goal should also put some weight on how likely it is to sustain that, and a higher bond percentage at higher investment amounts will do that.
Plus, many investors can't stomach the losses of a 100% equities portfolio, let alone something levered up.
>How do we reconcile this? Intuitively, the function of your age needs to be included in this equation (I think somebody commented on this already).
Age is a proxy for funding amount. A lot of investment goals aren't just "maximize the amount of money I get". They often care about things like "I need to spend $X/yr in retirement". So your investment goal should also put some weight on how likely it is to sustain that, and a higher bond percentage at higher investment amounts will do that.