J.L. Collins

So the more bonds you have, the smoother the ride, but they're also a drag on your performance.

So personally, I tilt very heavily in equities, like 80-20, 80% equities, 20% bonds.

For somebody who's more conservative or maybe has barely enough money invested for it to throw off at 4% what they need to live on, they're probably going to want to be a little more conservative, tilt a little more towards bonds.

You never want to go, in my view, below 50% in stocks.

Because if you do that, you have lost too much of the engine of growth that stocks provide that is what allows your portfolio to survive for decades.

And you can see this clearly if you look at the Trinity study that looks at different allocations over 30-year periods.

So personally, I wouldn't go below 60% in stocks, but never below 50%.

That's kind of how I look at it.

I think it's a great guideline, right?

I think, and I use, as you point out, I use it in the book as a barometer of whether or not you are FI.

So let's suppose you need $40,000 a year to live on.

If you multiply that by 25, it will give you the amount that you need to have invested, which is a million dollars.

Or you can look at the other direction.

You can say, I've got a million dollars and 4% of that is 40,000 a year.

So that's how much I can spend.

I think that's a great guideline.

It's also a very conservative guideline.

And that's a point that the Trinity study illustrates.

It's also a point that Benkin makes himself.

And in fact, actually, I think if my memory serves me, the number he came up with was 4.2%, a little higher.