This is defensible, because even casual experimentation with PortfolioVisualizer backtests will reveal that changes in the composition of the bond part of the portfolio make very little difference in the portfolio as a whole, much less than changes in stock composition. In any portfolio with a meaningful stock allocation, the risk behavior of the stocks really dominates the portfolio.burritoLover wrote: ↑Thu Jun 08, 2023 8:56 am The definition of tilts on this forum is weird. On the one hand, apparently whatever bond allocation (not market cap weight) and whatever bond assortment you have (not at market-cap weights either) are NOT tilts, even though, obviously, if they are not market-cap weighted, they are tilts. And apparently 100% US bonds is not a tilt even though you are excluding the rest of the world's bonds. Same with stocks - a 100% US total stock allocation is not a tilt either. Apparently the definition of maximally diversified here is simply holding 100% US total stock - nothing else in your portfolio matters as long as you have some bonds no matter what they are and no matter what their allocation is.
Decisions such as US-only or total global are much more consequential on the stock side than the bond side.
Thus: using four Vanguard index funds--Total [US} stock market, total international stocks, total [US] bond market, total international bonds--we construct three portfolios, all 60/40 stocks/bonds.
- Below, the blue line is our starting point, US only.
- The red line shows the effect of globalizing stocks only, 50/50 between US and international. (It's the one on the bottom.)
- The yellow line shows the effect of globalizing bonds only, 50/50 between US and international. (Hard to see because it's so close to the blue line).
Please let me emphasize: the point is not that international stocks happened to underperform over this particular time period, no, that is truly not my point.
My point is that in a "typical" whole portfolio, tinkering with the stock holdings made a big difference, while tinkering with the bond holdings made only a little difference.
If you try some experiments, with realistic stock and bond choice you might actually think about making, I think you'll find that this holds generally.
Bond flavor differences, as represented e.g. by the Morningstar style boxes--stand-ins for the rarely-mentioned Fama-French bond factors--only look big if you are exploring 100%-bond portfolios. Once you add stocks to the picture, their importance recedes.