Buffett has recommended everyone should read Ben Graham. Graham suggested a stock allocation spectrum, ranging from 25% when stocks are overvalued to 75% if undervalued, with the balance invested in bonds. Interestingly, this advice did not take into account the age or time horizon of the investor. As for your comment about rebalancing too early, I hear you. In retrospect, my portfolio today would be larger, had I not rebalanced when I did. By the way, Jonathan had mentioned this momentum effect, hinting one could allow the stock portion to rise a bit higher before rebalancing. This continued increase in the stock valuations after rebalancing means the safety we hope to get from rebalancing comes at a price. I think the regret we may feel about this will be offset on those occasions when the market falls after rebalancing. On the one hand, articles about the continuing bull market stir feelings of FOMO and regret for my not holding more stocks. But simultaneously appearing articles about the market being overpriced counterbalance those feelings. So, after using some "very high level math", I came up with a solution to the dilemma: 50% Stocks/50% Cash plus Short-term Treasurys/TIPS. Somewhat protected from a bear market, somewhat positioned to cash in on the continuing (so far) rise in equity prices. Finally, my planning, unlike Graham's advice, does take into account where I am in my life cycle. I'm 72 and have been retired for over 7 years. A younger person with a much longer horizon might choose a more aggressive allocation.
For those fortunate enough to succeed in amassing "enough", anything beyond that amount can be thought of as surplus. The question is whether and what to do with the surplus. One could leave it untouched, providing a "margin of safety". Or, do something different with the surplus. To paraphrase Bill Bernstein: Once you have accumulated "enough" and put it all in secure investments (such as TIPS and normal treasurys) any remaining amount can be considered as your "risk portfolio" and invest it in any manner you wish. Of course, the reader should read his actual words in his revised edition of "The Four Pillars of Investing". Incidentally, I found the most interesting part of this book to be his comments on how his thinking has evolved since the publication of the first edition.
I prefer to keep such private matters private, and only discuss financial details with professionals. An excellent book I read a few years ago was "The Righteous Mind" by Jonathan Haidt. The subtitle was "How Good People are Divided by Politics and Religion." Seems to me that today too many forget the "Good" when criticizing those with whom they disagree. I highly recommend this book to the Humble Dollar community.
I am an optimist by temperament. Reading "Factfullness" by Hans Rosling reassured me that it was rational to have this outlook. And I would add "Not the End of the World" by Hannah Ritchie, a scientist influenced by Rosling, is a must-read for anyone who suspects headlines may give a very misleading or distorted view of any number of topics.
I manage my own. On the other hand, there are many who are not comfortable doing so, and would benefit from hiring a reputable advisor. They should decide how little or how much they want the advisor to do, and at what cost. Some might prefer meeting with a fee-only advisor periodically while handling the necessary transactions on their own. Others might prefer the advisor to handle everything on their behalf. Just know what services you are getting and at what price.
I did this about 5 years ago. Your excellent article has given me some ideas on how I can not only update my previous letter, but improve on it. Thanks.
I was going to write about the same thing, but you stated it more eloquently. Cliffs ought to be replaced by a sliding scale. And taking steps to legally save on both taxes and medicare premiums are appropriate.
Comments
Buffett has recommended everyone should read Ben Graham. Graham suggested a stock allocation spectrum, ranging from 25% when stocks are overvalued to 75% if undervalued, with the balance invested in bonds. Interestingly, this advice did not take into account the age or time horizon of the investor. As for your comment about rebalancing too early, I hear you. In retrospect, my portfolio today would be larger, had I not rebalanced when I did. By the way, Jonathan had mentioned this momentum effect, hinting one could allow the stock portion to rise a bit higher before rebalancing. This continued increase in the stock valuations after rebalancing means the safety we hope to get from rebalancing comes at a price. I think the regret we may feel about this will be offset on those occasions when the market falls after rebalancing. On the one hand, articles about the continuing bull market stir feelings of FOMO and regret for my not holding more stocks. But simultaneously appearing articles about the market being overpriced counterbalance those feelings. So, after using some "very high level math", I came up with a solution to the dilemma: 50% Stocks/50% Cash plus Short-term Treasurys/TIPS. Somewhat protected from a bear market, somewhat positioned to cash in on the continuing (so far) rise in equity prices. Finally, my planning, unlike Graham's advice, does take into account where I am in my life cycle. I'm 72 and have been retired for over 7 years. A younger person with a much longer horizon might choose a more aggressive allocation.
Post: The Conversation: Contrarian Meets Momentum
Link to comment from November 8, 2025
For those fortunate enough to succeed in amassing "enough", anything beyond that amount can be thought of as surplus. The question is whether and what to do with the surplus. One could leave it untouched, providing a "margin of safety". Or, do something different with the surplus. To paraphrase Bill Bernstein: Once you have accumulated "enough" and put it all in secure investments (such as TIPS and normal treasurys) any remaining amount can be considered as your "risk portfolio" and invest it in any manner you wish. Of course, the reader should read his actual words in his revised edition of "The Four Pillars of Investing". Incidentally, I found the most interesting part of this book to be his comments on how his thinking has evolved since the publication of the first edition.
Post: The Conversation: Contrarian Meets Momentum
Link to comment from November 8, 2025
I prefer to keep such private matters private, and only discuss financial details with professionals. An excellent book I read a few years ago was "The Righteous Mind" by Jonathan Haidt. The subtitle was "How Good People are Divided by Politics and Religion." Seems to me that today too many forget the "Good" when criticizing those with whom they disagree. I highly recommend this book to the Humble Dollar community.
Post: Discussing money matters with friends- a slippery slope
Link to comment from November 7, 2025
I am an optimist by temperament. Reading "Factfullness" by Hans Rosling reassured me that it was rational to have this outlook. And I would add "Not the End of the World" by Hannah Ritchie, a scientist influenced by Rosling, is a must-read for anyone who suspects headlines may give a very misleading or distorted view of any number of topics.
Post: The hard work of optimism
Link to comment from November 6, 2025
Good article, thank you. Do you know the reason why transferring a QCD to a DAF is not allowed?
Post: 10 Ways to Give—Without Writing a Check
Link to comment from November 6, 2025
I manage my own. On the other hand, there are many who are not comfortable doing so, and would benefit from hiring a reputable advisor. They should decide how little or how much they want the advisor to do, and at what cost. Some might prefer meeting with a fee-only advisor periodically while handling the necessary transactions on their own. Others might prefer the advisor to handle everything on their behalf. Just know what services you are getting and at what price.
Post: Does My Sister Need a Financial Advisor?
Link to comment from November 5, 2025
I did this about 5 years ago. Your excellent article has given me some ideas on how I can not only update my previous letter, but improve on it. Thanks.
Post: The Letter
Link to comment from November 3, 2025
I was going to write about the same thing, but you stated it more eloquently. Cliffs ought to be replaced by a sliding scale. And taking steps to legally save on both taxes and medicare premiums are appropriate.
Post: IRMAA 2026 Of course it is fair
Link to comment from November 1, 2025
I agree with him, and thats why I chose traditional medicare.
Post: John Oliver does a complete show skewering Medicare Advantage
Link to comment from October 31, 2025
This was California in 1985. Not sure that is still available these days.
Post: Cash: The False Prophet
Link to comment from October 30, 2025