Asset allocation

We'll do one more of these live ones and then we'll go back up to the stored ones.

Can you comment on the 4% rule as a retirement guideline? Also, can you comment in investing asset allocation for the next 5 to 10 years in the era of AI?

So with the 4% rule as a retirement guideline...

I don't think it's the worst thing in the world, but at the same time, it has a very prescribed set of assumptions attached to it that generally don't apply in real life.

Okay.

So just to have it clean since we're recording this, I'll probably snip all of these.

Can you comment in investing asset allocation for the next five to 10 years in the era of AI? Okay.

No, we cannot.

This is my near-term spending money.

for slightly far away i need stability but i can begin to take a little bit of risk that's where this combination of debt and equity can work and for long-term goals when i have many years before me i can do a hundred percent allocation into equity the further the money is from today the money need is from today the more risk i can afford to take the money i need now should never ever depend on the value of the market That is why this asset allocation is such a shock absorber.

Imagine that equity falls 30%.

If you have a portfolio that is 100% equity, you will take a full blow of 30%.

Its job is to provide stability, liquidity, predictability, and the ability to stay for long.

So the staying part of the portfolio, because the biggest risk in a market crash is not the fall, but what you do because of the fall.

there are people who because they get afraid they will sell all that they have and that is the worst thing absolutely worst thing you can do and this is where the next part of the asset allocation strategy comes in rebalancing when markets fall dramatically or rise dramatically you have to rebalance your portfolio suppose we are starting with 70 equity 30 debt and the market falls Let's say the equity part has come down to 60 equity and 40 debt by doing nothing.

The equity part has fallen.

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And maybe this is it, although we've had a couple of false results.

dawns on this one before but as I said my surprise is actually why long yields haven't been even higher and from NASA allocation point of view I think we've been thinking about positioning on the presumption that they are going to go higher and sort of being reasonably defensive around that hasn't been overly costly but it's nice to see it actually finally starting to happen.

Mike, can you, just for listeners, draw the connection between nominal yields and nominal GDP?

I mean, one way of looking at it is a sort of rate of return on capital.

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This is Optimal Finance Daily, Asset Allocation by Steve Pavlina of stevepavlina.com. And I'm Justin Malek, your narrator, reading to you from the best articles online every single day of the year with permission from the authors.

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Asset Allocation by Steve Pavlina of stevepavlina.com.

Recently, I took a three-week course on financial planning offered through UNLV.

The most important topic covered was asset allocation.

Asset allocation refers to how you allocate the money you have available to invest.

What percentage of your money goes into your secure, moderate growth, and aggressive growth baskets? You have many options for where to invest your money, and every option has a different risk-reward ratio.