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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a former chair of Yale’s Investment Committee, an ex-board member of Vanguard and the author of 21 books, mainly about finances and investing.
It has long been shown that the returns on bonds are lower than those for equities for long-term investors. And most investors are going to be investing for so long that a bond-laden portfolio is far from optimal for them.
A century ago there was a near monopoly of bonds in investor portfolios until economist Edgar Lawrence Smith proved that higher returns that could be earned by investing in equities. Gradually, over the following decades, a consensus developed that a 60/40 stock-to-bond ratio was “prudent” for both individuals and pensions and endowments.
Then, David Swensen, when he was Yale’s brilliant chief investment officer, changed the…
