Earlier than we begin, I’m going to counsel we limit dialogue to an ordinary inventory and bond portfolio that you simply rebalance every year. Usually with this dialogue, somebody will counsel that you simply simply create a bond ladder to cowl every year of expense, basically changing the mounted revenue to a revenue stream. I really feel that in the event you assemble your portfolio on this method, you would not have this query.
The largest drawback for a excessive mounted revenue portfolio could also be when rate of interest is low. To search for a nasty state of affairs. I take a look at historical past at https://pages.stern.nyu.edu/~adamodar/N … retSP.html, rate of interest dropped proper across the starting of 1930’s and stay low for about 30 years. Nonetheless, Portfolio visualizer do not have knowledge for that point interval. One other interval seems to round 2002 the place rate of interest dropped after which trended up at round 2022. For instance we run a portfolio throughout this time interval with a 4% withdraw. This era consists of one of many worse bond market in historical past in 2022 LINK
On account of inflation, a inventory/money portfolio has an actual return of -5.81%. A inventory/quick treasury has an actual return of -3.43%. A inventory/intermediate treasury had an actual return of -1.42%. Even with the inventory market crash, the intermediate bond got here out forward. On the finish of the interval a $1M portfolio of inventory/money has an actual portfolio worth of $327K, A inventory/quick time period treasury has an actual portfolio worth of $480K. A inventory/Intermediate Treasury has an actual portfollo of $740K
I didn’t embrace longer length bond as a result of if you’re utilizing a 30% fairness, you in all probability do not wish to take care of the excessive volatility of a protracted treasury. Nonetheless, I’m questioning in the event you additionally really feel that it could not be a good suggestion to have too loow of a length for a low fairness/excessive mounted revenue portfolio?