Mid-Twenties Portfolio by Burton Malkiel
The Mid-Twenties Portfolio is the most aggressive of Burton Malkiel's age-based model allocations, presented in A Random Walk Down Wall Street. Malkiel, a Princeton economics professor and influential advocate of index investing, designed this allocation for young investors in their mid-twenties who have a very long time horizon ahead of them and the greatest capacity to absorb short-term portfolio losses. The allocation is heavily weighted toward equities, reflecting the mathematical reality that a young investor who stays invested through market cycles stands to benefit enormously from compounding.
Investment Philosophy
For investors in their mid-twenties, Malkiel recommends a portfolio that is almost entirely in equities, with a very small or negligible bond allocation. The rationale is straightforward: with thirty or more years until retirement, the risk of a prolonged equity market downturn is manageable because time allows for recovery. The risk Malkiel views as most dangerous for young investors is not short-term volatility but the long-run cost of being too conservative and missing out on decades of equity returns.
Who It's For
This portfolio is designed specifically for investors in their mid-twenties with a retirement time horizon of roughly thirty or more years. It suits those with stable employment, limited near-term liquidity needs, and the emotional fortitude to watch their portfolio decline significantly without selling. It is not appropriate for investors who cannot stomach large drawdowns, regardless of age.
Pros
- Maximum equity exposure captures the full benefit of long-run equity returns and compound growth
- Diversification across domestic and international stocks reduces single-market concentration risk
- Simple and low-cost when implemented with broad index funds
Cons
- Very limited or no bond allocation provides almost no cushion during severe equity bear markets
- Young investors with limited savings may find large percentage drawdowns psychologically difficult to endure
- Generic age-based guidance does not account for individual circumstances such as job security or near-term financial goals
Signals are available for a curated set of tactical portfolios. This portfolio is not currently covered.
See covered portfoliosarrow_forwardTarget Allocation
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -41.6% | +8.7% | +59.7% |
| 3 Year | -12.2% | +7.5% | +24.5% |
| 5 Year | -2.8% | +7.3% | +19.4% |
| 10 Year | +1.7% | +7.4% | +12.6% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.
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