Fourth Quarter, 2024
This time of year, we are inundated with Wall Street’s market predictions about AA—Asset Allocation. “Treat it as entertainment much like you would a sports match,” reports Bloomberg in a December 21, 2024 article.

Traditionally, on average, more than half of the market soothsayers predict a 0% to 10% gain for the stock market. As you can see from the chart above, annual returns are far more volatile. Since 2000, strategists, on average, missed the mark by more than 15 percentage points. Longer term, the pattern is the same. Over the last century, large gains and losses were more frequent than single-digit gains, which only occurred fourteen times in 97 years.
Sound like a bad bet?
Don’t be a speculator with your investment assets. The roles of asset allocation to bonds and cash in your investment portfolios should be that of shock absorbers to the short-term annual volatility of the stock market, especially as we age. As this chart reflects, short-term stock market returns vary between (25%) to +50%. I tell my clients that the older we get, the less time we have to make up for large losses. So, allocating more to the shock absorbers of fixed income and cash as we age becomes more valuable to our portfolios and net worth than betting your hard-earned money on Wall Street prognosticators.
-Phyllis
Sources include: Bloomberg
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