Malkiel life-cycle (50s)
Malkiel life-cycle portfolio, age 50s (A Random Walk Down Wall Street)
Where it stands today
Our calculation, 1926-07 – 2026-09
Growth of $10,000
Where it came from
'A Random Walk Down Wall Street' first appeared in January 1973. Malkiel, a Princeton economics professor, argued that stock prices follow something close to a random walk, so professional stock pickers cannot reliably beat the market, and that ordinary investors do best with broad, low-cost index funds. The book has been revised many times; sources count twelve editions by 2019 and a 13th edition for the book's 50th anniversary in 2023.
Malkiel served on the U.S. Council of Economic Advisers from 1975 to 1977 and spent 28 years as a director of the Vanguard Group (Wikipedia), which fits the book's index-fund advice; later he was chief investment officer at the robo-adviser Wealthfront (the 2013 CNBC piece introduces him in that role).
From the middle editions on, the book added a 'life-cycle guide to personal investing': model portfolios by age and risk tolerance built from low-cost funds, with a rule of thumb that stock share should fall as the investor ages. A blog comparison of the author's 1996 copy and a 2007-era edition notes that real estate (REITs) was not explicitly in the recommended portfolios until the recent edition.
The portfolio used on this site is the one Malkiel himself gave to CNBC (26 November 2013) as the portfolio 'for an investor in his or her 50s' in recent editions: 5% cash, 27.5% bonds, 12.5% REITs, 55% stocks, with the stock share to be raised or lowered by age and risk tolerance. In the same interview he said the 60/40 norm was an oversimplification and disliked any universal norm; he also rejected the 'bonds equal your age' rule.
For the younger 'bold' version, the My Money Blog summary gives about 75% stocks and REITs for someone in their mid-twenties (43% total US stock, 22% total international, 10% REIT, 20% bonds, 5% cash), falling to 65% stocks at age 40 and 40% in late retirement. A Bogleheads post quotes the book saying even in the late sixties it suggests 40% in ordinary common stocks and 15% in REITs.
What is in it
| Stocks (broad, low-cost index funds; US and international) | 55% | split between US and international not given for this age band in the sources we could open |
| REITs | 12.5% | |
| Bonds (broad bond index fund) | 27.5% | 2013 update replaced part with dividend-growth stocks, emerging-market and tax-exempt bonds |
| Cash | 5% |
How we model it
| US large companies (S&P 500) | 37% |
| US bond market (aggregate) | 27.5% |
| Developed markets outside the US | 18% |
| Real estate (REITs) | 12.5% |
| Cash (Treasury bills) | 5% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| US large companies (S&P 500) | 37% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
| US bond market (aggregate) (closest match) | 27.5% | iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc) IE00BDBRDM35iShares Core Global Aggregate Bond UCITS ETF USD (Dist) IE00B3F81409 |
| Developed markets outside the US (closest match) | 18% | iShares Core MSCI Europe UCITS ETF EUR (Acc) IE00B4K48X80iShares Core MSCI Japan IMI UCITS ETF IE00B4L5YX21 |
| Real estate (REITs) | 12.5% | iShares US Property Yield UCITS ETF IE00B1FZSF77iShares Developed Markets Property Yield UCITS ETF IE00B1FZS350 |
| Cash (Treasury bills) | 5% | Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C LU0290358497iShares USD Treasury Bond 0-1yr UCITS ETF (Acc) IE00BGSF1X88 |
The idea
Index the core, own real estate (REITs) as a separate diversifier, match stock share to age and ability to tolerate drops, and hold safe assets in a broad bond fund plus some cash. Malkiel says allocations should depend on individual circumstances and not on a universal norm.
How people buy it
A low-cost total-US-market fund, a total-international fund, a REIT index fund (Vanguard REIT index began in 1996), a total bond market fund (e.g. BND) and a money-market or cash account.
Rebalancing as published
Not specified in the sources we could open; the book recommends periodic rebalancing back to targets (not verified here). Malkiel: use the 50s mix as a starting point and move allocations up or down by age.
Variants
- Mid-twenties 'bold' model (My Money Blog): 43% total US stocks, 22% total international, 10% REIT, 20% bonds (Treasuries/TIPS/high-quality corporates), 5% cash.
- Stock share by age: 75% mid-twenties, 65% at age 40, 40% in late retirement (My Money Blog); book quote: 40% stocks and 15% REITs in late sixties (Bogleheads).
- 2013 updated 50s portfolio: 5% cash, 27.5% dividend-growth stocks / emerging-market bonds / tax-exempt bonds, 12.5% REITs, 55% stocks (CNBC).
- A reader comment (unverified) says the latest edition holds 70% equities split half US, a quarter emerging markets and a quarter developed markets.
Criticism
- Malkiel himself said in 2013 that bond index funds were risky after years of low yields and 'financial repression', and that the earlier 60/40-type mix could badly hurt bond investors.
- Some readers argue REITs need not be held separately because total-market funds already hold them (Bogle's view, in comments on My Money Blog).
- The book's allocations changed across editions, so there is no single fixed 'Malkiel portfolio'.
- Principles are US-centred (a general criticism noted by an investing explainer).
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| Roaring Twenties boom | 1926-07 – 1929-08 | +97.3 % | +23.9 % | −4.0 % | +153.7 % |
| Wall Street crash and Great Contraction | 1929-09 – 1932-07 | −60.6 % | −27.3 % | −68.0 % | −78.2 % |
| New Deal recovery | 1932-08 – 1937-02 | +173.1 % | +24.5 % | −23.3 % | +268.7 % |
| Recession within the Depression | 1937-03 – 1938-03 | −36.4 % | −34.2 % | −36.9 % | −49.5 % |
| Rearmament and World War II | 1938-04 – 1945-09 | +143.5 % | +12.6 % | −17.9 % | +205.8 % |
| Postwar expansion | 1945-10 – 1965-12 | +676.8 % | +10.7 % | −17.0 % | +1212.9 % |
| Golden age of the 1950s | 1950-01 – 1959-12 | +262.2 % | +13.7 % | −10.2 % | +438.8 % |
| Go-go years and nifty-fifty | 1966-01 – 1968-12 | +27.5 % | +8.4 % | −11.0 % | +34.0 % |
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +116.1 % | +5.8 % | −30.0 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | −25.9 % | −13.9 % | −30.0 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +52.7 % | +12.2 % | −9.8 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +994.1 % | +14.7 % | −19.6 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −14.0 % | — | −19.6 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +5.6 % | — | −11.2 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −2.1 % | — | −4.1 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +12.0 % | +8.9 % | −10.0 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | −11.8 % | −4.6 % | −18.1 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +93.2 % | +14.3 % | −3.8 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −33.2 % | −23.6 % | −37.7 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +219.9 % | +11.4 % | −11.7 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −8.4 % | — | −8.4 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +29.4 % | +14.4 % | −14.0 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −16.7 % | −16.7 % | −21.5 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (1192) | −48.7 % | −7.1 % | +10.5 % | +25.5 % | +107.6 % |
| 3 y (1168) | −29.3 % | −0.8 % | +9.6 % | +17.3 % | +32.6 % |
| 5 y (1144) | −11.7 % | +2.8 % | +9.0 % | +15.0 % | +26.0 % |
| 10 y (1084) | −1.4 % | +5.0 % | +8.9 % | +13.6 % | +16.5 % |
| 15 y (1024) | +1.9 % | +6.2 % | +8.9 % | +13.1 % | +15.6 % |
| 20 y (964) | +3.3 % | +6.8 % | +9.4 % | +12.3 % | +14.2 % |
| 30 y (844) | +7.0 % | +8.1 % | +9.7 % | +11.0 % | +12.4 % |
How it behaved in history
- 1973-1974 bear market. First edition appeared in January 1973, just before the 1973-74 stock crash; the life-cycle portfolios did not yet exist then and no model returns are published for that era. en.wikipedia.org
- Post-2008 low-yield era. By 2013 Malkiel argued that conventional bond holdings were unattractive and adjusted the bond part of the portfolio. www.cnbc.com
Published results (by others)
- Book is in its 12th edition (as of 2019) with over 1.5 million copies sold; 13th edition 2023 (1973-2023): 12 editions by 2019; 13th in 2023 alumni.princeton.edu
- The classic 60/40 portfolio returned about 10% a year (cited by CNBC as background to Malkiel's critique) (1990-2011): about 10% per year www.cnbc.com
What we could not verify
- We could not open the book's own life-cycle table; the 50s weights come from a CNBC interview and the 25-year-old model from a blog.
- US versus international split of the 55% stock share for the 50s band is our assumption.
- The year the life-cycle guide first appeared in the book, and the exact edition for each table, were not verified.
- No published returns for the model portfolios were found.
Sources
- www.cnbc.com
https://www.cnbc.com/2013/11/26/lk-down-dangers-in-diversification.html - www.mymoneyblog.com
https://www.mymoneyblog.com/model-portfolio-5-a-random-walk-down-wall-street.html - en.wikipedia.org
https://en.wikipedia.org/wiki/Burton_Malkiel - bogleheads.org
https://bogleheads.org/forum/viewtopic.php?t=169559 - alumni.princeton.edu
https://alumni.princeton.edu/events/virtual-book-talk-random-walk-down-wall-street-50-years-later
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.