[quote=gzz]ucodegen, using long term US stock market returns has serious survivorship bias issues.
How did Russian stocks do from 1871? Farmland in Poland? Confederate and Third Reich bonds?
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It looks like you didn’t read what I referenced in the FIRE group simulation using historical data. You set a choice of investment selection categories and run a historical regression on how those choices would pan out over time.
[quote=gzz]To put it another way, any asset class we have long term historical data on is cherry-picked and better than average, simply because so many asset classes had drastically negative, -100% returns.
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Incorrect, only cherry picked asset classes have had -100% returns. Index funds are using large groups that are averaged together. Again, on the ref I had for FIRE and the sim, take a look at what type of asset classes. You can also change inputs and run against multiple simultaneous scenarios.
[quote=gzz]
What number to use then?
In my view, it is mistaken and often hubris to assume one’s investments will do better than treasuries. So about 2%.[/quote]
You should have lead with this. That said, realize that one of the more conservative and yet successful investors is still primarily in stock, less than 15% bonds. The way I look at it is that I am buying part of a business with stock. With bonds – you are buying someone’s debt. You need to make sure that they have means to pay off debt from earnings and not inflate it away(in the case of governments). In the case of corporate debt, it gets paid back from revenue generated by the business and I prefer having the business. The only advantage in having corp bonds would be if the business goes T-U. In that case you have ‘almost’ first order of picking over the bones of that business.
