Stocks and bonds are typical of an asset allocation portfolio. The classic "Graham" allocation with 50% of bonds and 50% of stocks is among those that offer the best return/risk ratio.
Graham even suggests that the slightly more active investor should oscillate his share of stocks (and therefore bonds) between 25 and 75% depending on the market level, with the equilibrium point remaining at 50%. Personally, even if I find it enormous to allocate 50% to bonds, I like Graham's approach which involves thinking in terms of the relationships between these two assets, since we know that long-term bonds offer a good negative correlation to stocks.
However, it should be noted that the very expansionist policy of central banks is currently problematic from this point of view. Indeed, for several years now, we have seen a simultaneous rise in the price of shares and long-term bonds, going hand in hand with a fall in the yield of these two assets. It is therefore difficult to arbitrate between the two.
Les actions sont surévaluées par rapport à la hausse du PNB et les obligations ne rapportent pratiquement plus rien. Elles risquent même de chuter si l'inflation se pointe ce qui est tout à fait possible. Dans les années '40 les US connaissaient des taux bas comme maintenant et l'inflation n'a fait que progresser les 30 années suivantes...
Since the abandonment of the gold standard, deflationary phases have become much rarer than inflationary phases, which does not speak in favor of long-term bonds, especially not at the moment. It could therefore be that stocks will still remain more attractive than bonds, despite the significant increase in their prices.
Pour récapituler, concernant les actions et obligations à long terme : acheter avec parcimonie et arbitrer entre les deux. Donc, pour chaque position en actions, il faut une certaine pondération en obligations à long terme ou inversement. Personnellement je ne suis pas à l’aise avec les obligations en direct, donc je couvre (en petite partie) mes actions avec l’ETF CSBGC0. Ce n’est pas du très long terme, mais on est quand même sur du 7-15 ans et le ratio rentabilité/risque est meilleur.
Pour les actions, ceux qui ne veulent pas les acheter en ligne directe, peuvent se rabattre sur l’ETF CHSPI (Swiss Performance Index) ou CHDVD (grosses capitalisations suisses payeuses de dividendes). Paradoxalement je ne suis pas un monstre fan de ce dernier car il considère que les sociétés qui paient un dividende seulement 4 années sur 5 peuvent figurer dans l’ETF. C’est clairement insuffisant.
On peut aussi bien entendu choisir ses titres, en particulier des sociétés de qualité, qui paient des growing dividends depuis des décennies (rendement supérieur à 2% avec un taux de distribution inférieur à 70%). C’est le meilleur antidote du point de vue des actions aux diverses crises (inflation, déflation, récession).
However, you have to be aware that only a very small minority of investors (about 10%) manage to do better than the market. So when in doubt, fall back on the ETF. I will give some small tips later on to do better than the market.
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Excellent series of articles, thank you Jerome.
Thanks! We're not even halfway there!
Currently I have exposure to 0% bonds given the anemic or even negative yields and the fact that I am in the "portfolio construction" phase. In addition, I consider myself to be sufficiently exposed to this asset class indirectly (via my pension fund) for the time being.
However, once financial independence is achieved and if bonds are yielding a few % again at that time, I plan to build a small portfolio of bonds for diversification purposes.
I can imagine an allocation of 60-65% stocks, 20-25% bonds and the rest in real estate (either as an owner or through indirect investments in real estate).
As for me, I currently have about 10% of long bonds via the aforementioned ETF. But this allocation can vary to zero during certain periods. I will come back to this point later. In the distant future, it is also possible that the proportion of long bonds will become equivalent to that of stocks, according to Graham's principles. This will mainly depend on the height of interest rates. But for the moment we are very far from that, so no or few long bonds.