In a era of high valuations/low interest rates conceptually time averaging might be better than constant weighted.
Either starting with 50/50 stock/bond and 'spend' bonds so the portfolio transitions to 100/0 stock/bonds (so averages 75/25), or constant weighted 75/25 stock/bond (rebalancing to 75/25 each year) and generally the expected outcomes are much the same. Differences will be apparent, but that's a coin flip situation, unpredictable as to which might be the better.
If stocks dip whilst adding/accumulating then additional savings buy shares at a lower price. If stocks just rise it would be better to have lumped in at the earliest opportunity.
Consider a newly retired, they start with 50/50, draw 2.5 each year from bonds for spending, and another 2.5 from bonds that is used to buy more stock shares. But where in years when stocks have performed well some shares are sold instead to provide the income, and maybe also to top up bonds if bonds are below 50% weighting. In the event of a bad decade, stocks repeatedly lose -5% annualised real then all of bonds are spent or were sold to buy more shares. After such a bad decade typically the next decade tends to compensate and more for that prior bad decade, likely stocks will not only comfortably cover income/spending, but also see good real gains on top.
That's very much like the AIM way, can go to all-stock, no cash remaining, reduces cash to add to bonds during declines, replenishes cash when stocks are performing well. And that is broadly the better way than simple constant weighting, you have more capital available at the lows. And it tends to work best when current valuations are relatively high.
I suspect the 2020's may prove to have been a good decade for AIM. Not necessarily a good decade, but rather better results for AIM'ers compared to constant weighting. And more so for retirees.
So when you next hear others expressing concerns about high/rising inflation, low reward expectations etc., just sit back and smile, and turn your focus elsewhere, towards family/friends, or that pleasant sunset horizon. AIM has you covered.
Fathers day on Sunday over here. I took the family out this (Saturday) evening however as restaurants otherwise feel uncomfortably overcrowded and rushed on the Sunday. Great food, great company, just absent the sunset that was obscured by clouds.
Clive.
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