Historical returns provide an objective context for providing an understanding of how asset classes behave. Based on current bond yields, it is reasonable to assume future returns may be lower, especially in bonds. Real life considerations are incorporated into Target Allocations, which are designed to be very close to the Efficient Frontier when using historical results but not necessarily exactly on it. Correlations between asset classes vary over time, but using long term results is a prudent way to apply the principles of Modern Portfolio Theory.
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