Personal Finance and Investing

don't advocate 100% stock ownership, but rather a mixed stocks to fixed income allocation that varies by age.

Including yours, as annuities are considered to be in the fixed income category, even hybrid ones, thanks to a guaranteed minimum.

You wrote once that at the beginning, this financial adviser put about half of what you had into two annuities. That helps cushion you from falls in the stock market, as you wrote -- "in early 2020 when the Dow lost some 10,000 points, or around 30%. My investments dropped significantly less than that, perhaps 15%".

This advice to have some assets in fixed income is also backed up by innumerable simulations in AAII Journal and elsewhere by many different authors or retirement savings where the person is dependent on drawing upon the savings a certain amount a year (the classic example is withdrawing 4% in the first year, and increasing the withdrawal by the inflation rate each year). High allocations to equities do the best in terms of number of years to depletion, but not the highest.

I was 89% in equities as of 2018 or so (IIRC), and I found that I couldn't stomach nearly 9 out of 10 of my investible assets being subject to pullbacks like 1929 (89%, with a 25 year recovery time), 1974-75 (48%), dotcom (49%), or housing bubble (57%). Or the Nikkei 82% peak-to-trough, and which is still well below its year-end 1989 level of 32 years ago. Or a 14 year recovery times in the S&P 500 like in 1968-1982 (which included the 1974-1975 48% pullback). Particularly given that I don't expect to live that long, given my gender, age, and health.

As for "the current market" - yeah, in the current market (meaning the market overall since March 2009 and leaving aside the past month's mild downturn), yeah, 100% equities would have been the greatest by far. It's when the market isn't like the current market is when there is a problem, like outliving greatly depleted assets in the worst cases during prolonged downturns.

The stock market is at historically very high values according to common measures like the Case-Shiller P/E ratio and the total equity market value to GDP ratio.

That equities are relatively very high-valued compared to historic levels is not surprising given the poor returns of their main competitors for investor dollars -- bonds -- compared to past historic levels. As long as this continues, I expect stocks will continue to do well and continue to have very high P/E ratios compared to historic averages. But if there is a sustained secular rise in interest rates (something we haven't seen since about 1981), all bets are off.