I've been researching the efficient frontier due to this comment.
It appears that moving from 100% stocks to an 80-20 stock/bond split reduces theoretical gains by 0.6% and decreases variance (risk) by roughly 3%.
Here's my question:
That's a 3% average decrease in variance. I imagine during huge swings in the market the variance reduction created by holding 20% bonds would be much larger than the overall average?
Please no "don't try to time the market" responses. I'm interested in how the outcome would play out in a controlled experiment where a known stock market crash was on the horizon, and what the impact on holding bonds would be for a general portfolio.
If anyone knows of a web tool I could experiment with that used historical data and showed performance of a portfolio depending on different equity/bond asset allocations at given points in time that would be awesome too, but I imagine someone here has general knowledge enough to provide a rough estimate of what I could expect.
Submitted May 16, 2017 at 01:04PM by billmalarky http://ift.tt/2pTbwhA
