Asset Allocation: Some New Numbers.

Some interesting tidbits on asset allocation.

STOCK AND BOND REBALANCING - If you had invested $100,000 on 1/1/79 and split the money 70/30 between stocks (S&P 500) and bonds (Lehman Brothers Aggregate Bond Index) and never rebalanced, the total would have been $1.96 million after 30 years (1/1/09). If you rebalanced back to a 70/30 split at the end of each year, the final accumulation would be $2.07 million. The Lehman Brothers Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 10 years, was used as the bond measurement (source: BTN Research via Direxion Funds-By The Numbers. 6.29.09).

USING BOTH ASSET CLASSES - In the last 30 calendar years (1979-2008), a 70/30 mixture of stocks to bonds (with annual rebalancing) produced an average annual total return of +10.6% with the worst year being a 24.3% loss in 2008. A 100% stock portfolio produced a +11.0% average annual total return with the worst year being a 37.0% loss in 2008. Thus the stock/bond combination produced 96% of the return of the all-stock portfolio with less volatility. The S&P 500 was the stock proxy while the Lehman Brothers Aggregate bond index was used as the debt proxy (source: BTN Research via Direxion Funds- By The Numbers. 6.29.09).