Ben Graham lived through The Great Depression, so he knew of what he spoke.I assume you're joking but I'll humorlessly go ahead and quote the source. Finance professor Benjamin Graham (1894-1976) was the mentor of Warren Buffett, and coauthor of the influential textbook, Security Analysis.I could be misremebering things but, didn't a wiseman say " Never less than 25% nor more than 75% bonds.." ? Now where did I park..?
In his book for laypersons, The Intelligent Investor, he wrote:We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds. There is an implication here that the standard division should be an equal one, or 50–50, between the two major investment mediums.
He didn't live through (all) of The Great Inflation. When both equities had lousy returns, but bondholders got slaughtered by the high inflation (and the high interest rates that eventually were used to crush it). I would also venture that the unusual level of institutional and political consensus that accompanied the experiments with radical monetarism in the late 1970s and into the 1980s no longer exist in most major countries.
That event complicates things (a bit).
I would suggest that one should consider in that bond weighting, whether instruments like ibonds and TIPS have a place. Big fan of ibonds (because we don't have them, here, the equivalent instrument has been suppressed, mostly).
The problem (with TIPS) is the nominal volatility in price. I think there is a school of thought that says one should be heavily towards TIPS in the near pre-retirement years, and retirement years. I believe the equivalent DFA fund (target date retirement?) is something like 80% TIPS?
Statistics: Posted by Valuethinker — Sun Mar 09, 2025 4:27 am — Replies 27 — Views 1628