We pick the mix of investments that maximizes the expected returns while not exceeding a fixed maximum risk. In the past month, we have continued to make money in bonds and the money market.
In the last newsletter, I wrote that I still did not believe that stocks were in a true rally. This was at a time when stocks were really booming. (They’ve come down a little since then.) I’ve received a few emails about this. Someone asked me what a “true rally” was. Stocks had made a lot of money, and that was that. How could a rally be true or false?
A true rally means that I am fairly confident that after I move my money into a fund, the price of that fund will continue to increase. The relevant question is not whether stocks have made money, but what is the optimal investment decision at this point? I am still not confident that the stock rally will continue, and so I am still not advising moving money into stocks.
On the other hand, it’s very clear that bonds are continuing to earn money. The trend is so clear, that I am advising going all in the F Fund (“Total Bond”), even in our Conservative allocation.
