The Money WizardEven while testing this during one of the worst periods in stock market history, the portfolio with about 75% stocksbe the time when the "all-cash" or "all-bond" investor can say, "Ha! I told ya so! You stock investors felt rich when times were good, but now that prices have crashed back down, I've got the last laugh!"
Again, this is about the least advantageous time possible for the stock-heavy portfolio. Had I run this test a few months ago, say on January 31, 2020, at that point the stock-heavy portfolio would have been nearly $100,000 higher than the cash portfolio.And the longer the game is played, the more stocks should pull ahead. For example, running this test over a 30-year time period finds the stock portfolio $1.8 million richer than the cash portfolio and $1.
In the test, my stock-heavy portfolio was "riskier" than the all-cash portfolio, according to traditional finance definitions. Why? The all-cash portfolio didn't go down in value, while the heavy stock portfolio lost 20% in just 40 days. I don't know about you, but I don't consider a random drop in the value of my portfolio to be a risk. Because I'm not selling any time soon.
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