Compute Target Percent Equity

How to use this calculator:

  1. Because the values of equities are volatile and can undergo large, long-lasting changes in value, predetermine the maximun percent of exposure of the portfolio to loss due to changes in value of equities (to preserve value) and the minimum percent (to take advantage of returns, i.e., dividends and rising value of equities). This should be done very infrequently. See notes below.
  2. Choose a model for projecting the "expected" value of the "Shiller PE10". See notes below.
  3. Periodically look up the "Shiller PE10" using the link below by the corresponding cell.


Minimum % equity risk threshold:
Maximum % equity risk threshold:

16.32 (median for 1872-2020)
22.33 (trend for 1872-2020)
Current PE10 from https://www.multpl.com/shiller-pe:


Notes:

There is nothing mysterious about the calculations of minimum and maximum percent equity. Each is computed as:

    {percent equity} = ( {Current PE10} * {risk threshold percentage} ) / ( {Current PE10} - {Projected PE10} )
when
    100 * ( {Current PE10} - {Projected PE10} ) / ( {Current PE10} ) < {risk threshold percentage}
and
    {percent equity} = 100
otherwise.