I’m at a slightly different asset allocation than Warren Buffet proposes – but I’m doing essentially what he’s recommending.
What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.
Index funds with an asset allocation of equities and bonds. I’m at a 60/40 mix… The key is not to sell when the market goes down… and to do the counter-intuitive – when equities go up a lot – sell some and buy bonds, when bonds go up a lot, sell some and buy equities. Rebalancing and having a mix of bonds and equities is like dampening the volatility of the market.
