If You're Not Puking, Are You Really Diversified?

Allan Roth had a short writeup at Barron's about why low volatility stocks are not bond substitutes (agree) but he does like the idea of paying off debt when the relationship between the interest on the debt exceeds the yield earned by owning bonds. He also said this about AGG.

The iShares Core U.S. Aggregate Bond ETF has earned a respectable 4.69% annually over the three years ending December 31, 2025. That pales in comparison to the 22.25% annual return of the iShares Core S&P Total U.S. Stock Market ETF. I predict that when stocks tank, you will be glad you have some boring bonds.

Ok, so fair enough about AGG.

But if you'd be ok with AGG then you might also be ok with more total return, less volatility and smaller drawdowns than AGG. All of those are in my ownership universe. Instead of one big allocation to AGG, it appears to be safer to split between several alternatives like the ones above. 

The Wall Street Journal had an article about Americans losing confidence in having enough to retire. This anecdotal quote caught my attention, "Janet Kieffer, 73, estimates that her spending is about 20% above the level a year ago, because of rising prices for items like groceries, gas and her Medicare Advantage plan. The Georgetown, Texas, resident recently paid $400 for a new medication."

A couple of things here. One is she is spending more than she expected, like her hand is forced if we're talking about food and other essentials. Price inflation is not an outlying event, it's an easy thing to go wrong and force adjustments. The other item is paying $400 out of pocket for medication. Not talking in absolute terms but many chronic medical problems can be reversed or prevented by cutting sugar consumption and lifting weights. Yes, I am absolutely a broken record on this point but if someone is living a modest retirement on $4000/mo, maybe $2000 from Social Security and $2000 from portfolio income, it would be great to avoid spending 10% on one drug if at all possible. 

This Tweet caught my attention.

We have made this exact point countless times. Believe me when I tell you, a lot of people don't understand this. Even advisors who I am going to say should absolutely understand this point, do not. Jason Buck has talked about the few holdings in this context that make you want to puke. Hopefully, it's not that bad, maybe I would use the word frustrated, holdings that cause frustration.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.