Buffett's Asset Allocation Advice: Take it ... With a Twist

Posted: 20 May 2019

Date Written: October 26, 2015

Abstract

One of the most important decisions retirees need to make is the asset allocation of their portfolios. They can have a static or a dynamic allocation, and simplicity usually favors the former. Warren Buffett recently added another vote for static allocations by revealing that he had advised a trustee to split the bequest his wife will receive 90% in stocks and 10% in short-term bonds. The evidence discussed here shows that, relative to other static allocations, a 90/10 split has a very low failure rate and provides investors with very good upside potential and downside protection. The evidence also shows that two minor twists to the 90/10 split result in two very simple dynamic strategies with even better upside potential and downside protection.

Keywords: Asset allocation, withdrawal strategies, warren buffett,

JEL Classification: G11

Suggested Citation

Estrada, Javier, Buffett's Asset Allocation Advice: Take it ... With a Twist (October 26, 2015). Available at SSRN: https://ssrn.com/abstract=2680084 or http://dx.doi.org/10.2139/ssrn.2680084

Javier Estrada (Contact Author)

IESE Business School ( email )

IESE Business School
Av. Pearson 21
Barcelona, 08034
Spain
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)

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