Valuations based asset allocation at retirement

[1nvest]

Some investors hold a barbell of 1 and 20 year gilts, that combine to a central 10 year bond bullet. Personally I consider a 50/50 barbell of stock/gold to combine to a central bullet - somewhat like a volatile currency unhedged global bond.

Another factor is that starting with perhaps 20/80 stock/bond, ending after a number of years with 100/0 stock/bond, is broadly the same as holding 60/40 stock/bond constantly.

With those in mind a investor about to retire might opt to load up 30 years of spending into a 30 year ladder of inflation bonds, allocating 75% to that, and 25% initial allocation to stocks for longevity. If those stocks accumulate at 4.75% annualised in real terms then at 30 years the stock value will compare to the original inflation adjusted start date total portfolio value.

Transitions from 25/75 to 100/0 stock/bond over 30 years, averages 62.5/37.5 stock/bond.

Choices. Do you opt for the ladder of 30 rungs, or a 1 and 20 year barbell, or a central 10 year bond bullet; Start with 25/75 and transition to 100/0 or just rebalance back to 62.5/37.5 yearly ...etc.

So why not apply start date valuations to that to identify what might be the better choice. If stocks were relatively low then 62.5/37.5 might be more preferred over that of starting with 25/75. If valuations were high then 25/75 and progressive migration to 100/0 might be more preferable, a form of cost averaging into stocks over time.

With recent negative real yields on bonds, yuk! It requires more of today's money to buy the same purchase power in 10, 20, whatever years time. Stock values might also be considered relatively high, but perhaps better value than bonds. Gold, well the Dow/Gold is moderately high so that looks reasonable value.

So on that measure, favouring stock and gold over bonds then 75% initial bonds with 25% initial stock might be held via a stock/gold barbell instead of the 75% bonds, so in total 62.5/37.5 stock/gold, and where over 30 years gold weighting is reduced to zero (so could alternatively could be held as (near-as) 80/20 stock/gold yearly rebalanced back to target weightings).

Later, that might all change. If bonds decline a lot and start paying positive real yields then review the portfolio and perhaps switch over to a better valued alternative. If for instance index linked gilts were paying 3% real yields.

Much of longer term rewards are subject to the start and end date relative valuations. Buy at a peak, sell at a trough and it might even have been better just to have held cash. Buy at a trough, sell at a peak and the rewards can be fantastic. Selecting the right asset allocation to start with can make a significant difference to overall outcome, even if two styles have the same broad reward expectancy as each other then opting for one over the other according to valuations at the time can yield vastly different rewards over the actual time you invested.

What do others opine to be the better valued at present? Time averaging? progressive transition rather than constant weighting? Which assets?