Oops! All equities — and no, that’s not the latest Cap’n Crunch flavor.

We all know the classic 60/40 portfolio. While long a staple, some advisors argue it’s outdated, suggesting a 50/30/20 split with a slice for alternatives. But, for those who like to live on the edge, there’s a bolder option: a 100% equity portfolio.

Portfolios holding a mix of domestic and foreign stocks could be a more optimal way of diversifying than allocating to bonds, regardless of age, according to research from economists at the universities of Emory, Arizona and Missouri at Columbia. All-equities sounds risky, but the researchers argue that stock markets trend upward over time, and balanced portfolios or target-date funds, with their large bond allocations, can drag returns.

“While bonds seem to be safe, good diversifiers at short horizons, their long-term properties are really unfavorable for investors,” said Scott Cederburg, professor of finance at the University of Arizona and one of the authors of the report. “They become riskier and more correlated with stocks as the horizon grows. Combined with their low average returns, bonds are ultimately unattractive.”

Bonds, Schmonds

Analyzing stock and bond returns from 39 countries from 1890 to 2023, the researchers found that an all-equity portfolio — roughly one-third domestic stocks (likely higher for US investors) and two-thirds foreign stocks — outperformed balanced portfolios in retirement wealth, income, capital preservation and bequest at death:

• The all-equity strategy delivered 50% more retirement wealth on average.
• Under the 4% withdrawal rule — where retirees withdraw 4% of total savings in the first year — a balanced portfolio has a 17% chance of running out of wealth before death, versus 7% for the all-equity strategy.

Still, the researchers noted that holding a small share of Treasury bills early in retirement can act as a cushion as clients start withdrawals.“Even if financial planners and advisors are unwilling to recommend the optimal 100% equity portfolio, increasing their clients’ equity allocations from their current levels will likely benefit the savers over the long run and support better retirement outcomes,” Cederburg told Advisor Upside.

Risk On, Risk Off. As investors age, focus typically shifts from growth to preservation. A younger worker can ride out volatility, but a 75-year-old facing mounting medical costs may not. In Vanguard defined contribution plans, only 5% of participants are entirely in equities. The key risk for all-equity investors remains volatility. The S&P 500 took six years to recover from the Great Recession, and some Wall Street names forecast a market correction in the next two years. Moments like that could spell disaster for investors holding only stocks. “Markets have historically rewarded long-term patient investors,” said Bryan Gum, founder of Lighthouse Planning. “At the end of the day, it comes down to the investor’s risk tolerance and the time horizon of their needs for money.”

Come on up and place your bets.

It’s not advice that most financial planners would give their clients about managing their portfolios, for sure. But that’s not curbing investors’ interest in prediction-market platforms like Kalshi and Polymarket that use derivatives contracts to enable wagers on outcomes of public events — anything from the winners of the Super Bowl or elections to who will be Time magazine’s Person of the Year. Their rise, especially among younger retail investors, has the financial industry on edge.

“It’s fairly dangerous and reflects the on-going gamification trend,” said Richard Coffin, host of the Plain Bagel YouTube channel and analyst at WDS Investment Management. “There’s clearly a demand for these kinds of platforms, but it’s such a wild west right now with how fast we’re seeing it explode and the lack of regulation.”

Is It Gambling?

Yes? No? It’s complicated. Prediction markets may feel like betting, but because investors can base decisions on data and analysis, they’re not viewed the same as dice rolls or slot machines. They’re also regulated by the Commodity Futures Trading Commission, not state gaming boards, which has caused tension as platforms push deeper into sports. Nevada, Arizona, New Jersey and more have all sent cease-and-desist letters to Kalshi over its sports contracts, yet the platform remains widely available.

Coffin, based in Ontario, Canada, where such markets are banned, sees a stark contrast with the US. “It’s seeing a lot of players do their best to cement their position,” he told Advisor Upside. “Especially with the Donald Trump-era, they’re taking advantage of lax regulation to build out as fast as possible and make it much harder to crack down on them in the future.”

Platforms like Polymarket and Kalshi have already permeated portfolios, while others are only getting started:

• Robinhood launched its prediction markets hub in March, focusing heavily on the NCAA basketball tournament. The unit reached $100 million in annualized revenue faster than any of the company’s other business lines.
• Just this week, eToro, with more than 40 million users globally, announced it will add prediction markets next year.

The trend is spelling trouble for traditional wealth managers. “I just don’t want young people in our country to think gambling on the Monday Night Football game is the same as investing in stocks and bonds,” Charles Schwab CEO Rick Wurster said during the recent Schwab Impact conference.

Double Down. Prediction market users aren’t just young thrill-seekers, though. Many are disillusioned with Wall Street, largely because of the 2008 financial crisis, Coffin said. “Add in GameStop and the narratives around hedge funds controlling the price of stocks, and it’s led to a lot of distrust of traditional investing,” he said. “Those concerns have merit, but they also open people up to being taken advantage of by the alternative.”

The FPA has a new leader ready to bring a 25-year-old organization into 2026.

The Financial Planning Association tapped Dennis Moore as full-time CEO last month, elevating him from an interim role following the death of former chief executive Patrick Mahoney in February. A veteran of the organization, having also served as its COO and the president of two chapters, Moore steps in just as the trade association turns 25. He said he plans to helm a revitalized conference strategy, new educational content and ongoing advocacy projects. The new captain of the ship will also have to navigate the ongoing AI flood and the Great Wealth Transfer. He’s also no stranger to the FPA and became familiar with the association while getting his undergraduate degree in personal financial planning, as well as his MBA, from Texas Tech University. Currently living outside San Antonio, he is also pursuing a Ph.D. in financial planning.

Advisor Upside spoke with Moore this week after his new role was announced.

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