@cocoach I think it also depends on the person. If we accept the buy-and-hold philosophy, the holding part is the most important and being "aggressive" by nature won't represent the majority of people. Being "moderate" will, if we assume investor risk tolerance is like a bell curve.
"Not foolish, but aggressive" also paints an image of a spectrum for me. I think the best measure of this would be risk-adjusted return. If we look at that measure, the CSI portfolios are generally second rate.
I think this
article by the Economist is pretty great. Some key highlights:
- Much of the data quoted by investment advisers is based on America, which is something of an outlier
- As of February 2013, the longest period of negative real returns from US equities was 16 years. But it was 19 years for global equities (and 37 for world ex-US), 22 for Britain, 51 for Japan, 55 for Germany and 66 for France.
- Even in the US, there was a point in 2011 when equities had lagged Treasury bonds over the previous 30 years.
- Once one accepts that equities can underperform, then one needs to worry about starting valuations. It makes sense that when starting valuations are high, future returns will be lower than normal.
From this I think we can see that there is evidence of long term equity underperformance without a Mad Max Armageddon occuring as many assume. The article also hints at the solution - worrying about valuations. Most investors imo are not capable of making excellent valuations of the current market, but if their portfolio includes assets with low correlations (adding some F fund to a CSI portfolio) they can set an automatic rebalancing schedule that will by nature sell off/buy less of inflated assets and buy more of the currently undervalued asset.
This is part of the reason I recommend people just stick with the L funds, especially the new L funds that come out next year as they will be less conservative and in line with industry peers.
