Comment on My E-Mail to Bill Bengen by Rob
There is no one “method” that I recommend, JCL. I advocate Rational Investing, which is the opposite of Passive Investing. I say that we should buy stocks heavily when the long-term value proposition is strong and not so heavily when the long-term value proposition is poor. (Passive Investing posits that there is no need to take the long-term value proposition into account, that it is okay or even a good idea to stick to the same stock allocation regardless of whether valuations are high or low.)
You can check out The Stock-Return Predictor to assess the long-term value proposition of stocks at different valuation levels. The calculator shows that the long-term value proposition is very strong indeed when valuations are low. So, yes, as a general rule, the Rational Investor is going to go with a high stock allocation when prices are low. You of course need to take your personal circumstances into account and make whatever adjustments are needed as a result of doing so.
Rob
