If you retire early, minimizing mistakes becomes even more important since even little mistakes can grow into big consequences regarding portfolio longevity when your horizon is 50 years rather than 30 or less. Diversity is the free lunch of investing.
Work is about converting your time into money. Do not lose sight of this while gazing at your asset allocation navel, for at some point your time will become more valuable than its money equivalent in your life.
Stocks are ownership in capitalism, pure and simple. Once Alan Greenspan was asked, “What should you own?” His proper Mascowitzian reply was “everything”.
Why own bonds? They add diversity, are sometimes income producing, less risky than stock, and get paid first. They tend to be uncorrelated with stocks and are part of the whole greater than the parts in the formula of Markowitz.
Cash is ballast and insurance. It’s insurance for the catastrophe and ballast against a market downturn. Its danger is inflation and the fact it returns virtually nothing.
Gold (GLD) is an uncorrelated to negatively-correlated asset. When the market goes down, GLD tends to go up and vice versa. It tends to stabilize volatility without being a huge drag on capital appreciation.