If You Hate Investment Risk, High Interest Rates
Are Great. With a Catch.
https://www.nytimes.com/2023/12/08/business/interest-rates-stocks-bonds-retire.html
Investors who want to lock in safe income may be hurt over the long haul if they don’t also hold stocks, our columnist says.
https://www.nytimes.com/2023/12/08/business/interest-rates-stocks-bonds-retire.html
Investors who want to lock in safe income may be hurt over the long haul if they don’t also hold stocks, our columnist says.
Portfolios Across the U.S. Wealth Distribution
https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-39
https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-39
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You’re Better Off Going All in on Stocks Than
Bonds, New Research Finds
https://www.bloomberg.com/news/articles/2023-12-08/bonds-role-in-retirement-plans-questioned-by-new-research
Related:
Beyond the Status Quo: A Critical Assessment of
Lifecycle Investment Advice
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406
Abstract
We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for labor earnings, Social Security benefits, and mortality and captures the salient time-series and cross-sectional properties of long-horizon asset class returns. Given the sheer magnitude of US retirement savings, we estimate that Americans could realize trillions of dollars in welfare gains by adopting the all-equity strategy.
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https://www.bloomberg.com/news/articles/2023-12-08/bonds-role-in-retirement-plans-questioned-by-new-research
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406
Abstract
We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for labor earnings, Social Security benefits, and mortality and captures the salient time-series and cross-sectional properties of long-horizon asset class returns. Given the sheer magnitude of US retirement savings, we estimate that Americans could realize trillions of dollars in welfare gains by adopting the all-equity strategy.
https://www.bloomberg.com/news/articles/2023-08-25/even-best-stock-pickers-face-an-uphill-battle-beating-the-market
In years like this one, when just a few big companies outperform, it’s hard to assemble a winning portfolio.
This is why stock picking is so hard - and index investing so easy - for favorable returns
https://www.theglobeandmail.com/investing/investment-ideas/article-positive-skewness-shows-how-just-a-few-stocks-enhance-index-returns/
Do stocks outperform Treasury bills?
https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills
https://ssrn.com/abstract=4448099 or http://dx.doi.org/10.2139/ssrn.4448099
https://doi.org/10.1080/0015198X.2023.2188870
Abstract
We study long-run shareholder outcomes for more than 64,000 global common stocks during the January 1990 to December 2020 period. The majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the United States, 1.41% of firms account for the $US 30.7 trillion in net wealth creation.