Vanguard suggests 70% should be in bonds long term

8,437 Views | 59 Replies | Last: 3 mo ago by NoahAg
GeorgiAg
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12:57p, 8/21/25
AG
https://www.businessinsider.com/investing-advice-60-40-portfolio-vanguard-stock-vs-bond-2025-8

Quote:
  • Vanguard suggests a 70/30 bond-to-stock allocation for better long-term returns.
  • Stock valuations are high, making bonds more attractive despite elevated bond yields.
  • Vanguard predicts US equities to return 3.3%-5.3% annually versus 4%-5% for bonds over 10 years.

That seems crazy to me. I guess they are predicting the bubble will burst?
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Yukon Cornelius
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1:00p, 8/21/25
AG
Hard to have a bubble with that much fear in the market.
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wessimo
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In reply to Yukon Cornelius • 1:14p, 8/21/25
AG
What fear? The only fear lately is FOMO...
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Yukon Cornelius
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In reply to wessimo • 1:20p, 8/21/25
AG
Recommending 70% in bonds is fearful to me
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Dill-Ag13
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1:35p, 8/21/25
AG
full send on VTSAX/VTI thank you very much!
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Diggity
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In reply to Yukon Cornelius • 1:45p, 8/21/25
AG
devil's advocate would be that Vanguard's (contrariation) recommendation is a response to the perceived "greed" they see in the market
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GeorgiAg
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1:46p, 8/21/25
AG
Vanguard still won't let you invest in Bitcoin, so there's that.
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chris1515
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2:30p, 8/21/25
AG
I think JPM has similar analysis based on current market valuation levels.
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Yukon Cornelius
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In reply to Diggity • 2:33p, 8/21/25
AG
Obviously that's their perception. However you can't have a bubble when you have so many large institutions with that view.

It goes to show how much money is still sidelined too.

Also not to mention vanguard missed out on the easy btc gains because of their stupid no btc stance.
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JobSecurity
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2:44p, 8/21/25
AG
10 years seems like a long horizon for this. Typical downturn cycle is what 2-4 years peak to peak?
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Diggity
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In reply to Yukon Cornelius • 3:15p, 8/21/25
AG
sure you can.

that's illogical. "there can't be a bubble if people say there's a bubble"
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Yukon Cornelius
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In reply to Diggity • 3:33p, 8/21/25
AG
Every little pump people come out of the woodwork sayings it's a bubble it's a bubble it's a bubble. Vanguard is likely overweighted sidelined and their recommendations are justifying their already existing positions.
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Diggity
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In reply to Yukon Cornelius • 3:40p, 8/21/25
AG
you may disagree with their opinion...but them having one doesn't prove (or disprove) anything.
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Big Baccala
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4:02p, 8/21/25
AG
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.
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Yukon Cornelius
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In reply to Big Baccala • 4:39p, 8/21/25
AG
This.
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Ag CPA
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In reply to Big Baccala • 6:43p, 8/21/25
AG
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

I do, most of that MM cash would already be invested in bonds instead of cash in a lower interest rate environment.

The kind of people with a lot of cash (usually wealthy and older) who experienced the dot-com bust and GFC aren't going to flip risk-free returns into an overheated market.
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oragator
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6:54p, 8/21/25
Ive mentioned it before, but even if the baseline on this chart has gone up significantly with more access and wealth to invest in the market, it's not sustainable, and it's not likely not a small correction we are facing.

https://www.multpl.com/shiller-pe

So it's a fair question to ask on where cash goes, but whether it's tomorrow or in a year or two, in bonds or cash, the money is going to need to sit somewhere safer. And maybe for an extended period.
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Yukon Cornelius
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In reply to oragator • 7:23p, 8/21/25
AG
I don't think most people have mentally adjusted to how much money was made during Covid. Maybe we have a market correction. But to me all the metrics and charts are essentially outdated because of the exponential growth of money. So looking at historical PE numbers is a bit challenging. Like you said the money has to go somewhere. Right now the 4% on MM near risk free is a heck of deal. But as rates come down you got to deploy that cash somewhere.
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Superfreak
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7:31p, 8/21/25
AG
I remember an almost identical prediction in about 2015. Also about 2015 international was going to outperform the US for the decade. Well neither of those came close to true. Maybe vanguard is right this time but predicting a decade is foolish.
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chris1515
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7:59p, 8/21/25
AG
Lately I've been curious how so many people buying into the S&P 500 is skewing the current market, especially through 401Ks.

Twice a month this flood of people show up to the market to buy the S&P500 stocks, and they mostly don't care at all about the price. They just buy. Every two weeks, they show up and effectively take billions of dollars of stocks out of the market thanks to their buy and hold strategies. And who is showing up to sell them those stocks?
I'm curious if that effect is big enough to make a difference.
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Mas89
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In reply to Big Baccala • 9:20p, 8/21/25
AG
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

Mm not that high lately.
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Mas89
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In reply to Ag CPA • 9:22p, 8/21/25
AG
Ag CPA said:
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

I do, most of that MM cash would already be invested in bonds instead of cash in a lower interest rate environment.

The kind of people with a lot of cash (usually wealthy and older) who experienced the dot-com bust and GFC aren't going to flip risk-free returns into an overheated market.

Exactly
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EliteZags
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10:40p, 8/21/25
AG
what are bonds
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pfo
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10:49p, 8/21/25
AG
There are faster ways to lose money than bonds but few surer ways to lose money when the currency the bonds are issued in is devaluing at a higher rate than the bonds pay.
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TxAG#2011
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In reply to Yukon Cornelius • 12:09a, 8/22/25
Yukon Cornelius said:
I don't think most people have mentally adjusted to how much money was made during Covid. Maybe we have a market correction. But to me all the metrics and charts are essentially outdated because of the exponential growth of money. So looking at historical PE numbers is a bit challenging. Like you said the money has to go somewhere. Right now the 4% on MM near risk free is a heck of deal. But as rates come down you got to deploy that cash somewhere.


Rates aren't coming down and you have a whole host of financial "experts" to tell their clients how safe their money is whether the market goes up or down.
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Big Baccala
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In reply to Mas89 • 8:35a, 8/22/25
AG
SNAXX 7 day yield is 4.29%, for example.
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I bleed maroon
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In reply to Big Baccala • 8:42a, 8/22/25
AG
Big Baccala said:
SNAXX 7 day yield is 4.29%, for example.

Sure, if you can handle the $1,000,000 minimum investment. The rest of us have to deal with 4.14% in SWVXX.
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LMCane
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In reply to Ag CPA • 8:46a, 8/22/25
Ag CPA said:
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

I do, most of that MM cash would already be invested in bonds instead of cash in a lower interest rate environment.

The kind of people with a lot of cash (usually wealthy and older) who experienced the dot-com bust and GFC aren't going to flip risk-free returns into an overheated market.


this seems insane to me-

if you are at the beginning of retirement you may live for THIRTY MORE YEARS!

so locking in a 4% return in bonds for three decades is better than the AVERAGE 7% return per year in equities?!
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LMCane
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8:47a, 8/22/25
and how many Americans have millions to invest when they are STARTING their retirement to then put into bonds-

which will BARELY eke out a small gain over INFLATION every single year?!?!

answer- not many!
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insulator_king
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In reply to Mas89 • 10:35a, 8/22/25
AG
Mas89 said:
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

Mm not that high lately.

FIDELITY TREASURY MONEY MARKET FUND (FZFXX) paying 3.93% right now.
and
FIDELITY GOVERNMENT MONEY MARKET (SPAXX) paying 3.96%

And actual inflation is probably close to twice that.
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I bleed maroon
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In reply to LMCane • 11:30a, 8/22/25
AG
LMCane said:
Ag CPA said:
Big Baccala said:
Lots of cash sitting in money markets earning 4.2%-4.7%. When rates drop, that money is going to be looking for better returns and I don't think it will be in bonds.

I do, most of that MM cash would already be invested in bonds instead of cash in a lower interest rate environment.

The kind of people with a lot of cash (usually wealthy and older) who experienced the dot-com bust and GFC aren't going to flip risk-free returns into an overheated market.


this seems insane to me-

if you are at the beginning of retirement you may live for THIRTY MORE YEARS!

so locking in a 4% return in bonds for three decades is better than the AVERAGE 7% return per year in equities?!

Good example of a bot reaching a reasonable conclusion without getting many of the details right. Facts, provided as a public service to the board:

65 year old male average life expectancy = 18 years
Average inflation rate = 3.25%
Average treasury bond return = 3.2%
Average bond return = 6.4%
Average equity return = 9.6%

The key words above are "AVERAGE". Your mileage may vary based on your individual health situation, your investment risk tolerance, and very importantly, the sequencing of your returns (i.e. putting all your money in equities before a 20%+ down year can have significant long-term consequences).

In no way is anyone "locking in" a bond return. They are subject to many additional risks that few people really understand, such as interest rate risk, liquidity risk, credit risk, and bond covenant differences. As a rule, bonds are less volatile than equities, and outperform equities about 3 years out of every 10 or so over time.
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@NFLPlayerProps
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11:38a, 8/22/25
70% bonds would keep me up at night, absurd portfolio mix IMO
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Dirt 05
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In reply to GeorgiAg • 11:44a, 8/22/25
AG
Bonds can't / won't outperform equities over multi year periods and especially over a decade outside of prolonged economic contraction event(s), and even then I'm not sure how other than complete reorder of the global financial system. That kind of thing would only happen historically as a precursor to or subsequent result of global war and reshuffling of major powers.

Rates are currently around historical norms, not high levels like the early 80's where a predication of long series rate cuts would lend to bonds outperforming equities. If equities can't outperform debt, how are they supposed to repay it? They can't, which means bonds get slaughtered too.

@chris1515
American's pumping money into the stock market has led to the greatest global economic expansion the world has ever seen, enabling instant communication across the planet with literally anyone and everyone, the ability to produce and distribute food for 8 billion people everyday, lightning fast manufacturing, shipping, and distribution channels. The most significant improvements in quality of life globally, ever.

Maybe it's not sustainable, but it'd be real stupid to cut the capital flow to the greatest market economy that has benefitted the entire human species and redirect it to government bonds for the "safety" of 4% yields and the direction and control of short sighted bureaucrats and narcissists that run governments - unless you want them to send your kids and grandkids off to fight them "other" people.
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BCG Disciple
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1:07p, 8/22/25
AG
Out of curiosity, what was their recommendation last year? I was told that it was very similar bearish take on stocks for several years. Probably would have left 20%+ on the table heading their advise.

That being said, hard to not agree with them with what I see…
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JSKolache
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In reply to chris1515 • 12:24a, 8/23/25
AG
chris1515 said:
Lately I've been curious how so many people buying into the S&P 500 is skewing the current market, especially through 401Ks.

Twice a month this flood of people show up to the market to buy the S&P500 stocks, and they mostly don't care at all about the price. They just buy. Every two weeks, they show up and effectively take billions of dollars of stocks out of the market thanks to their buy and hold strategies. And who is showing up to sell them those stocks?
I'm curious if that effect is big enough to make a difference.

Sa e. Just constant uphill push of buy buy buy.
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