How Much Risk Do You Need to Take?

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Merriman assumes that the equity portion of each portfolio is split equally between the S&P 500 and international stocks, and the fixed income side is half intermediate-term, 30% short-term and 20% inflation-protected Treasuries. They also deduct a 1% management fee and assume the portfolio is rebalanced monthly. Here’s a summary of the results:

	Annualized return	Standard deviation	Worst 12 months	Worst 60 months
100% fixed income	6.9%	4.6%	-4.8%	14.1%
10% equities	7.5%	4.6%	-5.3%	14.3%
20% equities	8.2%	5.1%	-11.6%	10.1%
30% equities	8.8%	5.9%	-17.5%	5.9%
40% equities	9.4%	6.9%	-23.1%	1.6%
50–50	9.9%	8.2%	-28.5%	-2.7%
60% equities	10.5%	9.5%	-33.5%	-7.0%
70% equities	11.0%	10.8%	-38.3%	-11.3%
80% equities	11.5%	12.2%	-42.8%	-15.5%
90% equities	11.9%	13.7%	-47.1%	-19.7%
100% equities	12.4%	15.1%	-51.1%	-23.9%