Most investors take an asset allocation approach to investing. They understand diversification will smooth their path vs. a stock-only benchmark like the S&P 500. But do they realize just how long they can underperform?
If you ask most investors how long they can handle underperforming, they usually say just a few years. (Polls here, here, and here.)
We examined how long various portfolios can underperform the S&P 500 in my paper “A Bear Market in Diversification“.
The best-performing asset allocation model in my old GAA book (free download) underperformed the S&P500 for…wait for it…
TWELVE YEARS IN A ROW (ending 2022). This period is argueably the worst underperformance in history in terms of magnitude and length. The only comparable period would be post WWII.
No wonder everybody is all in on US stocks at any price. However, with markets shifting in 2025 have we entered the “Bull Market for Diversification”….we think so….
