Asset Allocation
Good Morning,
This may not be the proper place to ask this question, but as I respect the members of this community, I am hoping to tap into some of the collective wisdom here.
I am curious as to everyone's thoughts on asset allocation, specifically around the allocation to equities and bonds. I think we would all agree that under modern theory, the role of bonds (and bond funds) is in effect to reduce volatility and assist in preserving capital. If one subscribes to something around the 4% withdrawal rule in retirement, I somewhat see the value of this kind of allocation. It assumes of course that one intends to finance retirement through the sale of assets.
However, where I am struggling is if this strategy is of any value to those of us that plan on living off of dividends and perhaps interest payments, as opposed to asset sales. If, perhaps, one was indexing for a long time, and the portfolio has or is planned to reach a value that allows for the sale of index funds and reallocation into div payers/growers and/or specific bonds/preferreds, then where is the value in the bond allocation?
I realize there are assumptions at play here: that the portfolio of all equity index funds will reach a particular value that if reallocated to stocks that pay a reasonable market rate of divs at that time meets all of one's income needs in retirement, etc.
I look forward to people's opinions on this.
Thanks. |
