Allocations, Returns, and Market Cycles

Market volitility may be increasing soon. Many observers believe we are preparing for a market peak in 2015 to 2016 (i.e. Peter Eliades, June 16, 2016, go to minute 25). Others who are more bullish imagine the beginning of a new 20 year bull market, which started in March 2009 (Brian Belski, BMO). The reality is there is no perfect investment and a low probability that anyone can consistently, accurately time when to be in and out of the market (John Hussman, weekly comments). Investing experience requires many skills, but also a bit of luck for many investors. Being able to dollar cost average into a market for multiple decades without an unlucky patch of a job loss, divorce, health issue or other item that derails your plan is a sign of discipline and luck. Paul Merriman has created this table to show you how various allocations have impacted investors' returns since 1970. Many can argue the sample size is too small, but it also includes many different market environments. If your allocation shows too much downside risk, maybe it is time to work with your financial advisor to reallocate. Paul leaves us with this quote:

This is always true: We cannot know in advance the best time to invest our money nor the best time to withdraw our money. The best guidance I can give is to invest money when it's available and withdraw it when you need it.

Please consult a financial advisor before making any changes to your portfolio. This blog is for information purposes only and does not constitute individual investment advice.