No. The timeframe is too long for someone starting out saving today to go 40/60.So let's say hypothetical today's your grandson's first day in his 401k plan at work. Do you tell him to be 40/60?The reason for the flip over the next 10 years is the extremely elevated valuation levels of US stocks. They are by all measures very high today.
The argument goes that both international stocks and US bonds have more room to run over the next 10 years than US stocks. It's not just Vanguard. Most organizational projections have US stocks "reverting to the mean" over the medium term.
It makes logical sense. US stocks have run at a roughly 14% yearly clip for the past 10 years while international and bonds have underperformed. If you believe in the historical averages of 9 - 10% as the normal for stocks, then at some point US stocks will underperform to get back to those "normal" historical levels. All that said, markets are anything but logical. We can check back in 10 years to see if the projection was correct.
Don't get me wrong I agree with everything you said. But your personal situation matters more than cookie cutter advice. I literally just last Thursday went from 70/30 to 50/50 but it had nothing to do with future returns but my need, willingness and ability to take risk.
I totally agree with you. Personal situation and tolerance is absolutely the most important thing. For someone that's closer to withdrawal and is approaching a point where it's time to start protecting the downside a bit more, this information is probably something to consider. Maybe you adjust AA a bit earlier than you would have otherwise. I get it. That is just a form of "market timing". "No one knows anything". "This time is not different". etc. etc. I know all of the sayings and I largely agree with them. All that said, "reversion to the mean" is another one of the big sayings and if you believe in it, you have to think that at some point things will flip a bit and US can't outperform forever (which seems to be happening now). It's mostly about your risk tolerance and your own personal glide path (and costs). Those are most important. No argument. The whole point of the asset allocation is so you don't have to worry about all of these variables as they adjust and change in unpredictable ways over the shorter term.
Statistics: Posted by markjk — Fri Dec 19, 2025 5:28 am — Replies 85 — Views 15285