Like all investments there are risks to the capital but a diverse portfolio and balancing should mean a positive result in the medium to long term. Equities have out performed historical performance by a big margin over the last 5-8 years. Between 1900 to the crash of 2008 the mean return on equities is approximately inflation plus 4%.
The suppression of real interest rates to never before seen lows and nearly USD $10 trillion yielding negative, central banks have taken everyone into uncharted waters. Portfolio theory of which you talk cannot balance a portfolio as risk is not priced. Just how can a bond yield negative? Switzerland's 10-year note was yields negative as does Japan. In effect you give them money to borrow yours. Bizarro world.
Fundamentally using historical data upon which to model returns into the future with the distortions present is not for the weak of stomach. Sometimes return of capital more important than return on capital. Counter party risk in my mind is to be avoided.
Do realise is no consolation, but the whole western world is in the same boat.
Bill Gross has been warning of the unintended consequences of low interest rates for years:
Fund managers that have been counting on returns of 7 percent to 8 percent may need to adjust that to around 4 percent, Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, said during an Aug. 5 interview on Bloomberg TV. Public pensions, including the California Public Employees’ Retirement System, the largest in the U.S., are reporting gains of less than 1 percent for the fiscal year ended June 30.
With baby boomers heading for the exits, there are serious shortfalls in funding all across the globe. Funding short falls of all sorts of retirement models is to become something we all will be familiar with into the future.
On the good news front, rest assured the elected 'representatives' will be made whole and continue to tell you all is well, until it isn't.