Q1 2021 Review: Highest average equity allocation to the worst ever long term expected return. Be a better investor than Isaac Newton.

March 23, 2021

Sign Up for Weekly Insights

Keep abreast of the latest changes in the markets and the economy as a whole by signing up for the Weekly Insights newsletter. Every week, Chris Belchamber tells you what’s on his mind when he’s thinking about his clients’ investments. Our blogs, emails, and postings on social media provide key insights as well as updates on strategies, backed with cutting edge research explained in terms investors can understand quickly

Q1 2021 Review: Highest average equity allocation to the worst ever long term expected return. Be a better investor than Isaac Newton.


Many smart and successful individuals often make tragic investment errors. It is not because they lack intelligence. The problem is they have not comprehensively covered  and incorporated the principles and practices of the “Best Investors” into an effective game plan or process.

Sir Isaac Newton was one of the most intelligent individuals of his time. However, he realized too late that he had overlooked one of the most important factors in investing, behavioral economics.

He is reputed to have said in retrospect that he could:

“calculate the motions of the heavenly bodies, but not the madness of people.”


My recently published book, https://geni.us/InvestLiketheBest, highlights the behavioural awareness of “best investors” and how  to develop an “Investment Mindset Framework”. 

Investment bubbles often lead to tragic investment errors, and it’s not because of a lack of intelligence. It’s a lack of broad awareness of what is needed for a comprehensive and effective investment gameplan.

John Kenneth Galbraith, highlights just one of many traps that investors get caught up in.

“Those involved with the speculation are experiencing an increase in wealth – getting rich or being further enriched. No one wishes to believe that this is fortuitous or undeserved; all wish to think that it is the result of their own superior insight or intuition. As long as they are in, they have a strong pecuniary commitment to belief in the unique personal intelligence that tells them there will be yet more. Accordingly, possession must be associated with some special genius. Speculation buys up, in a very practical way, the intelligence of those involved. Only after the speculative collapse does the truth emerge. What was thought to be unusual acuity turns out to be only a fortuitous and unfortunate association with the assets.”

– John Kenneth Galbraith, A Brief History of Financial Euphoria

In 2021 if you don’t believe that you are in a bubble of monumental proportions you may not be aware of what a bubble is and how dangerous it could be to your financial well being. 

It is well documented in my book that investors generally increase their allocation as markets rise. As a consequence they do well in the short term as the trend continues, but very poorly in the long term, as they end up being most invested at the highs and least invested at the lows. So, as you would expect, today, after a very long bull market in stocks and bonds, passive investing in stocks and bonds is unusually popular.

Sure enough, as the chart below shows, most investors and fund managers are as heavily invested in equities as they have ever been. This is just what naturally happens throughout every cycle. This is just an unusually extreme cycle.


Here is the problem. Even though the rally may continue for a while, even basic projections of expected long term returns are broadly absent. In fact, objective measures of future expected returns are the worst they have ever been.

There is a remarkable correlation between the price/revenue ratio of the S&P 500 index and future 10 year returns. The chart below shows that the higher the price relative to revenues the lower is the subsequent 10 year performance. At the current price/revenue ratio, your expected return for the next 10 years is NEGATIVE 5% annualized return!


Bond allocations are also problematic. The 10 year Treasury Bond yield is still well below the market’s own measure of inflation over the next 10 years. The breakeven inflation rate shown in the chart below has just broken out to a new 5 year high.


Passive investors have the prospect of negative real returns on 10 year Treasury bonds, with the breakeven inflation rate some 0.70% higher than the current yield.

Looking ahead passive investors based mainly on a stock/bond basic allocation need a new long term strategy. Don’t let the windfall gains of recent years evaporate. There are many ways to avoid capital gains tax and avoid drawdowns.

I believe there are far better ways to invest and become proactively engaged in much improved expected returns. Preserve your capital and find better ways to invest. Widen your asset class allocation when expected long term returns are so poor in stocks and bonds.


Educational use Only. The market update published by CB Investment Management, LLC (“CB Investment”)  is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. 

Advertising and Marketing. Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with CB Investment is a licensed attorney or tax professional and the information contained herein should not be considered tax  or  legal advice. 

Links to Third Party Content. This Market Update contains links to articles or other information maintained by unrelated third parties. You acknowledge and agree to the following: All such information is provided solely for convenience purposes only because we believe that it may provide useful content and all users thereof should be guided accordingly. We disclaim any responsibility for the link’s performance or interaction with your computer, its security and privacy policies and practices, and any consequences that may result from visiting it.  We do not control the content published by the third-party; we do not guarantee any claims made on it, nor do we endorse its sponsor or any of the content, policies, activities, products or services offered by any advertiser on the site. CB Investment assumes no liability for any inaccuracies, errors or omissions in or from any data or other information provided by the third party and inclusion or reference by CB Investment to any third party link should not be construed by any consumer and/or prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. 

Important Information regarding Registration Investment advice is offered through CB Investment Management, LLC (“CB Investment”), 8231 Crestwood Heights Drive, Mclean VA 22102 an investment adviser registered with the states of Virginia and Maryland. Registration with the states of Virginia and Maryland should not be construed to imply that the SEC has approved or endorsed qualifications or the services offered, or that or its personnel possess a particular level of skill, expertise or training. Important information and disclosures related to CB Investment are available at https://chrisbelchamber.com. 

More Info


Start Today

Investing like the best can lower your stress and risk levels while bringing you higher, long-term returns. It can provide a stable platform for planning and give you more financial security now and for the rest of your life. Let’s get started.