Model Portfolio #5: A Random Walk Down Wall Street

(This is the fifth in my series of Model Portfolio Comparisons.)

First written in 1973, Burton Malkiel’s A Random Walk Down Wall Street (my review) has become an investing classic, pioneering the controversial idea that stock prices are random and thus a monkey throwing darts would be just accurate as any stock-picker. Below is a recommended asset allocation from the book for an investor in their “mid-twenties”.

Bold Investor Model Portfolio

Asset Allocation for suggested 75% Stocks/25% Bonds ratio
43% Total US Stock Market
22% Total International Stock Market
10% REIT
20% Treasuries/TIPS/High-Quality Corporate Bonds
5% Cash

This breakdown looks very similar to the basic “Early Saver” portfolio from All About Asset Allocation. See the rest of the model portfolios for example mutual funds and ETFs for each asset classes.

As you age, the recommended percentage of stocks goes down to 65% at age 40 and 40% in late retirement. It is interesting to note that while Malkiel consistently recommends real estate as part of your portfolio, REITs were not explicitly included in the recommended portfolios until recently. I noticed this when comparing my personal copy (published in 1996) to the most recent edition. I’m guessing the growing availability of index funds that track REITs is the reason behind this.

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