May 15, 2026 - The Most Controversial Investment Strategy and the Research Behind it: 100% Stocks for a Lifetime

Most advisors are aware of an investment strategy that, on paper, could make clients better off. But, hardly any advisors recommend the strategy. They're probably right not to. With a Yogi Berra quote included.

The Research

This edition of the newsletter is a distillation and (over)simplification of this idea, the research behind it, and my own critique.

It's a simple idea: a 100% globally-diversified stock portfolio throughout one's lifetime yields the best results in terms of utility (consumption and bequest), required savings rate, and probability of financial ruin. An important assumption for these results is that the couple saves 10% of their income.

The idea of a 100% globally-diversified stock portfolio occasionally makes waves in personal finance news. The most recent wave was in 2023 when the paper Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice was published. It isn't a particularly new idea, but it is provocative.

Based on the research, data, and methodology of the authors, the optimal portfolio for a long-term investor throughout their lives (including retirement) consists of 33% domestic stocks and 67% international stocks. The paper is 89 pages long and contains everything you'd need to know about how they arrive at this conclusion. Here is a link to the paper for the curious: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406

The research suggests that investors who opt for this investment allocation can spend more during retirement, have more assets to leave to their heirs, need to save less money during their working years, and have a low probability of financial ruin compared to other portfolios. The paper compares this investment strategy to other strategies: 100% domestic stocks, 60% stocks - 40% bonds, target date funds, and 100% bonds.

The paper tests its own results under certain circumstances such as high equity valuations (like the US is going through now), using only post-WWII data, or excluding specific markets (like the US) from the data. There are some interesting results from these other scenarios, but they don't change the overall results much - 100% globally-diversified portfolios often yielded the best results under the authors' criteria.

These results contradict conventional wisdom and advice. Advisors rarely, if ever, recommend their clients hold 100% stocks throughout their lifetimes. A typical investment allocation starts out with a high allocation to stocks when the investor is younger and decreases over time with the addition of more bonds. Alternative assets can be added for diversification.

But, if the research makes a compelling case that a 100% globally-diversified portfolio provides better results, why don't advisors recommend it? Why don't clients go for it? What are we missing?

The Reality

Yogi Berra said, "In theory, there is no difference between theory and practice. In practice, there is."

First, what would happen if every investor followed this advice and bought index funds to match the research? Would returns diminish? Would a different portfolio become the "best" for the chosen criteria?

Second, and maybe most importantly, is human psychology. A mix of domestic stocks, international stocks, bonds, cash, and alternatives may be more psychologically pleasing to an investor. This may sound like a cop-out, but it has real impact on investment performance. An investor may exchange lower returns, a higher required savings rate, and lower lifetime spending if their portfolio (and news about their portfolio) were less volatile as a result of diversification. A "less-optimal" allocation may be better than the "most-optimal" allocation if the investor can actually stick with it rather than sell when the portfolio experiences major short-term volatility. Panic sell when the portfolio is down and it doesn't matter what the research said. In other words, diversification and risk tolerance matter.

It's not news that 100% stocks can outperform less-risky assets over the long-term. The nuances of the research paper provide examples and a defense of the theory. The question every good advisor asks is, "Will this investor be able to stick with this strategy through hard times?" It is much more difficult than you would think. Fear, greed, and other emotions can drive many investing decisions. Is anyone going to remember an 89-page research paper on why their portfolio is "optimal" when it's down 20%? 30%? 40%? Could you even sleep at night if this were the case?

Professionals and academics have responded to this research (and this paper specifically) so you don't have to take my word for it. If sophisticated portfolio managers have issues with the research conclusions, then I think it is right to be skeptical.

Conclusion

I actually enjoy this research and I'll probably read more on it. The research gets updated occasionally so it's not going away. But, I struggle to see real-world applications for it. Nevertheless, it is a strategy to be aware of. But proceed with caution, do your research, be critical of the research results, and always consult a professional for advice.

In theory, there is no difference between theory and practice. In practice, there is