Strategic allocation

The risk ladder

The most useful result from the strategic work is not a single recommended portfolio. It is the shape of the trade-off — and in particular where that trade-off stops paying.

Two findings that survived

The benefit of more risk flattens early. Across the tested range, the improvement in clearing a long-run spending target levelled off around the middle of the ladder, while drawdowns and the regret of a badly timed start kept rising. Beyond that region you are reliably buying more pain and unreliably buying more outcome.

Low volatility is not safety. This is the one that surprises people. Measured over a century rather than a decade, portfolios dominated by bonds and cash suffered severe losses in real terms and took a very long time to recover them. A portfolio that barely moves in nominal terms can still quietly destroy purchasing power for years. Choosing the bottom of the ladder is a decision with its own risk, not an absence of one.

What it does not establish

It does not identify a correct risk level for any particular person — that depends on circumstances this research knows nothing about. It identifies a broad region where the historical trade-off was most favourable, which is a different and much weaker claim than a recommendation.

The modern portion of the record also covers an unusually strong period for equities with mostly helpful bond behaviour. It is useful for understanding how these portfolios behave to hold and to trade; it is not a forecast.