“Asset allocation doesn’t matter at all.”
That is probably taking things a little too super far. Whether we put in cash, or bonds, or equity, or a different percentage of the allocation does matter to a certain degree. Asset allocation determines your return: Equity historically has given higher realised return but is highly volatile. Fixed income historically has given decent returns, but lower than equity, and has lower volatility. Cash is not volatile at all, but...The concept of the safe withdrawal rate (SWR for short) framework is something that I find challenging to explain to my readers, friends, and co-workers. To get them to understand is equally difficult. Getting them to accept, which means to relegate their existing income strategy to a lower importance, is even more difficult. I had this lively debate with someone regarding how important is asset allocation in our income strategy. My exact words:
