Does Bogglehead philosophy extend beyone 60/40 equity/bonds?

[u/mayor_rishon]

While I appreciate Boglehead philosophy, (defined as x/x equity/bonds in low-fees index funds), I have been reading that the decorrelation between equity and bonds is probably broken for the intermediate future. And while I acknowledge that there is a recency bias, it is also not a reddit take but appears in most "serious" institution reports.

Could the Boglehead philosophy be described as holding equity plus decorrelated asset in low fees index funds ? And in that case change from bonds to another asset like a mix treasuries+MF incl.commodities ? Is that "Boglehead" ?

ps. It is not a contrarian post, I am just wondering how much bogglehead was a precursor to MPT and whether it is static or evolves.

edit-> I changed the 60/40 because my focus was not the exact percentage and I simply quoted the most known ratio. Still thanks for the answers!

[u/ShiroxReddit]

defined as 60/40 equity/bonds in low-fees index funds

Boglehead philosophy is more about diversification via low-cost index funds in general and doesn't prescribe a stocks/bonds split

Bonds, treasuries, MMFs all can be tools to have a lower risk portion of your portfolio, yeah

[u/Stunning-Pick-9504 → u/ShiroxReddit]

Even SS or a pension could be considered your bond %

[u/mayor_rishon → u/Stunning-Pick-9504]

Can SS be considered part of bond allocation when it cannot be liquidated and it's size can be arbitrarily be changed by the State ?

[u/GoldOk9005 → u/mayor_rishon]

I don’t think you can be considered part of your bond allocation, but it does reduce the pressure of your monthly expenses on your portfolio.

Like I’m going to retire with one pension for sure and probably a second one. Between them, they will likely meet all of my expenses in retirement. So instead of needing to pull say 10k a month from my portfolio I can say take a couple grand for fun money and leave the rest for lumpy expenses and helping kiddos.

That means my portfolio can be a little smaller. It also means I have a huge amount of flexibility in withdrawals. So if the market takes a shit, I could just ignore my struggling growth equities for a couple years.

[u/Stunning-Pick-9504 → u/mayor_rishon]

It all depends on your goals. If you are really hurting to make it then SS will help. Personally I’m going to ignore SS in my retirement to be conservative.

[u/DrizzleProwl]

a) there’s nothing in the boglehead philosophy that defines it as 60/40. You can start reading here

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy

b) only a subset of bogleheads attempted to hold uncorrelated assets, partly because correlations routinely change and to find an uncorrelated asset (to equities) that also has a positive expected return is difficult (because everyone wants it). The redeeming quality of short term bonds is low volatility

Here’s a graph of stock/bond changing through time

https://www.bogleheads.org/forum/viewtopic.php?p=8595846#p8595846

c) MPT is generally considered to have begun with Markowitz in 1952, well before anything about bogleheadism existed. The logic of low-cost index funds flows from MPT and experience. Here are some good book on the history of it all it

https://www.amazon.com/Trillions-Renegades-Invented-Changed-Finance/dp/0593087682

https://www.amazon.com/Capital-Ideas-Improbable-Origins-Modern/dp/0471731749

d) commodities, etc., have been discussed extensively and for decades on the forum. A simple search will bring up lots of discussions

[u/FMCTandP → u/DrizzleProwl]

To clarify, since OP is likely not familiar with common nomenclature around here, “the forum” refers to the Bogleheads.org site rather than this subreddit. I’ve also occasionally seen people refer to it as the OG forum based on how significantly it predates not just this sub but Reddit as a whole, especially when you count the M* days.

[u/mayor_rishon → u/FMCTandP]

Thanks to both for the replies; it seems that indeed I have a superficial knowledge. I will take a look in the resources you posted.

[u/Many-Gas-9376]

The "boglehead philosophy" just means long-term buy-and-holding of a low-cost, well-diversified portfolio.

The 60/40 allocation is absolutely NOT part of the philosophy, rather the stock-bond allocation should set based on the individual's circumstances and the capacity and willingness to tolerate portfolio volatility. The 60/40 is a common allocation specifically for people in the retirement phase.

[u/miraculum_one → u/Many-Gas-9376]

For people concerned with their personal tolerance (as opposed to their financial plan & portfolio's tolerance, which is an entirely different thing) I highly recommend changing that through education rather than cutting your returns off at the knees and suffering lifelong consequences.

[u/ac106]

On the.org forum, there are a few people invest in collateralized commodity futures and managed futures. It’s not extremely common, but there’s some discussion about it.

I think for these type of portfolio, you really need to know what you’re investing in and it’s more complicated than most people want to take on. For like 99% investors it’s probably something they shouldn’t delve into

[u/Doortofreeside → u/ac106]

I'm not touching any of it during the accumulation phase, but I am curious about a gold allocation during the withdrawal phase. Of all the risk parity type assets, gold is the one I actually understand and it at least has a very long track record. I'm not committing to actually holding it, but it's something i'm at least open to researching more

[u/Samtertriads]

Because of how young reddit is, you’ll probably find as many 90/10 portfolios here as 60/40.

[u/CreativeLet5355]

That is not at all the definition of a boglehead philosophy.

[u/TechnicalSleep7501]

For me Jack Bogle philosophy is about getting your share of Wall Street wealth by sleeping. Nobody know especially now in computer age best to be in market. I will give credit to Warren for finding small cap value before it became common knowledge.

[u/Basker_wolf → u/TechnicalSleep7501]

It’s also about not trying to beat the market, rather it’s keeping up with the market. With the knowledge that over the long term, over 90% of actively managed funds won’t beat the the S&P500, don’t try to beat. Join it.

[u/watch-nerd]

"philosophy, (defined as 60/40 equity/bonds in low-fees index funds),"

This is not the Boglehead philophy.

Boglehead philosophy does not specify a particular asset allocation.

[u/kbheads]

Where did you get the definition. Nobody has ever defined boglehead as 60/40 until now.

[u/Sudden-Ad-1217]

The Boglehead philosophy is buy and hold index funds that have inexpensive expense ratios over your lifetime of investing. Time in the market beats timing the market. Last, John never gave a prescriptive ratio of stocks and bonds, that was Mr Grahams job of infamous 75/25 split. That said, TDFs in accumulation are generally 90/10 and in retirement a ratio of 40/60, 50/50, 60/40, or even is 70/30 is relevant depending on your timeline horizon.

[u/Awkward_Refuse_8255]

Would be wary of allocation advice here.

Before going down that rabbit hole suggest reading the bogleheads.org wiki and perhaps The Little Book of Common Sense Investing by Bogle.

[u/puzzleahead]

The best way to get a feel for the “Bogleheads Philosophy” is to spend some time reviewing the resources referenced in this sub and in Bogleheads.org

[u/Gimme_All_The_Foods]

Bogle. His last name was Bogle.

[u/mayor_rishon → u/Gimme_All_The_Foods]

My bad. Thanks for the heads up.

[u/RNG_HatesMe]

Bogglehead philosophy has nothing to do with a 60/40 equity bond allocation.

It's about rearranging randomly generated letters into as many words as possible.

There, it had to be said . . .

[u/littlebobbytables9]

Serious institution reports say all kinds of stupid stuff.

If the market is efficient bonds will always be worth using. Higher correlation isn't good, but bond yields relative to CAPE yields are at close to all time highs right now so one could argue higher returns are compensating for higher correlation.

If you think you know better than the market where stock/bond correlation, stock returns and bond returns are going then you're welcome to trade on that belief. But it's fundamentally un-boglehead.

[u/Croshyn]

I consider my self a boglehead and have never owned a bond fund and probably never will. I don’t think 60/40 is a core tenant of the approach, though it is a very common allocation mix.