Thanks for the clarification. I’ll research the long-term effectiveness of a nearly 100% equity strategy (such as VWCE) versus a more diversified portfolio including bonds, REITs, and money market or savings allocations, particularly for someone pursuing a CoastFIRE approach with high-to-moderate risk tolerance.I’ll also look into how this applies both globally and to European investors, considering tax implications, withdrawal strategies, and the role of emergency funds or safer cash-equivalent allocations.I’ll get back to you with a detailed analysis shortly.

100% Stock vs Diversified Portfolio in a CoastFIRE Strategy

Introduction

A CoastFIRE investor focuses on aggressive early investing to “coast” on compound growth until retirement. In this case, the investor currently invests €2,700/month primarily in a global stock ETF (Vanguard All-World, VWCE) and plans to scale back contributions to €500–1,000 to enjoy life and save for a home. This raises a critical question: Should the portfolio remain nearly 100% stocks, or shift to a diversified mix including bonds, real estate (REITs), and cash? This report analyzes the trade-offs in performance, volatility, and risk between a 100% stock allocation and diversified portfolios, with a focus on global/eurozone investors. We also examine the role of emergency funds vs. bonds, how to adjust asset allocation over a 30+ year horizon, and tax-efficient withdrawal strategies for European investors.

Performance and Volatility Comparison

Historically, stocks have delivered significantly higher returns than bonds or cash over the long run. Global equities have earned about 6–7% real annual returns (after inflation) for over a centurycurvo.eu. For example, $1 invested in stocks in 1900 grew to roughly$ n3,230 (in real terms) by 2023, versus only about $9 in bonds and$ n2 in cashcurvo.eu curvo.eu. In nominal terms, U.S. equities returned ~10% annually over the last ~100 years, about double the ~5% from bondswww.reddit.com. A diversified world equity fund like VWCE has itself returned ~9.4% annually since 2005curvo.eu. These higher returns from stocks come at the cost of higher volatility. Equity markets can swing dramatically – for instance, global stocks have climbed +45% in strong years and plunged around –40% in severe crashes (e.g. 2008)curvo.eu. By contrast, bonds and cash equivalents produce lower returns (historically ~1–4% yearlycurvo.eu curvo.eu) but with much smaller fluctuations.100% Stocks vs. Diversified Mix: A nearly all-stock portfolio will, on average, outperform a balanced portfolio over long periods in absolute returns. However, adding bonds and other assets can improve risk-adjusted returns and reduce the frequency and severity of downturns. For example, over recent decades a classic 60/40 stock-bond portfolio delivered a slightly lower CAGR than 100% stocks, but with far less volatility. One analysis found that from 1987–2023, a 60/40 portfolio had a higher Sharpe ratio (~0.66) than a 100% equity portfolio (~0.61), meaning better return per unit of risk. In other words, while pure stocks achieved higher raw returns, the diversified portfolio was more efficient relative to its risk. This makes a difference in practice: a 100% global equity portfolio might historically return around 8–10% per year with ~15–20% annual volatility, whereas an 80/20 or 60/40 portfolio might return ~6–9% with perhaps 8–12% volatility.Volatility and Upside: With a high risk tolerance and long horizon, an investor may well accept the bumps of 100% stocks in exchange for maximal growth. Over 30-year spans, stocks usually win – and indeed some studies argue that long-term investors “should” be 100% in equities to maximize growthwww.aqr.com www.reddit.com. A recent study by Cederburg et al. (2023) concluded that a 100% equity allocation outperformed a traditional 60/40 in most historical scenarios, given the higher average equity returnswww.reddit.com www.reddit.com. This reflects the fact that in many 20–30 year periods, stocks provided the highest ending wealth. In some cases a balanced 60/40 even matched or beat all-stock portfolios over certain horizons (e.g. starting in the 1970s), but generally full equities maximize expected growthwww.reddit.com www.reddit.com. For a CoastFIRE investor who needs the portfolio to grow mostly on its own (with minimal new contributions), this upside can be very attractive – “the money is doing all the work now,” as one coasting investor notedwww.reddit.com.Downside Risk: The flip side is drawdown risk. A 100% stock portfolio will experience deeper and more frequent drawdowns than a balanced portfolio. Historically, a global equity index has seen peak-to-trough collapses on the order of –50% (e.g. during 2008–09, or the early 2000s). By contrast, a 60% stock/40% bond mix might have fallen on the order of –25% to –30% in those same crises – still a painful hit, but only about half as severe. Backtests confirm that the downturns of a 100% VWCE portfolio are much deeper and longer-lasting than those of a 60/40 portfoliocurvo.eu. Stocks can take years to recover after a major crash, whereas the bond cushion helps balanced portfolios recover faster. For example, in 2008 global stocks (VWCE) dropped roughly –40%, while a 60/40 fund dropped much less and rebounded soonercurvo.eu curvo.eu. This volatility gap means an all-stock investor must be confident they can emotionally and financially withstand a 50% drawdown without panic-selling. If an investor sells out in a crash, the higher long-run returns of stocks become moot – hence the importance of aligning allocation with one’s true risk tolerance.Summary of Performance vs. Risk: In sum, a nearly 100% stock ETF portfolio offers superior growth potential and has historically delivered higher end-wealth in many scenarios. But a diversified allocation (adding bonds, REITs, etc.) reduces volatility and drawdowns, improving the consistency of returns. Over a 30+ year horizon, the pure equity approach is likely to grow a larger nest egg if held through all turbulence. The diversified approach, on the other hand, sacrifices some return for a smoother ride – which can reduce stress and the risk of behavior mistakes. It also provides options to rebalance or withdraw from non-stock assets during equity bear markets. The decision depends on the investor’s risk capacity (financial ability to endure losses) and risk tolerance (emotional ability to stay invested). Since this CoastFIRE investor is high-to-moderate in risk tolerance, they may lean toward stocks now but should be wary of overestimating their fortitude in a severe downturn.

Drawdown Risks and Risk Management

Volatility and Drawdowns: The chief risk of an all-equity portfolio is large drawdowns (temporary but sometimes prolonged losses). Historically, global equities have experienced sharp crashes: e.g. the MSCI World fell ~–50% in 2008–09, and ~–30% in the pandemic shock of 2020 (albeit with a quick recovery). With 100% stocks, an investor should be prepared for their portfolio to potentially halve in value during rare but brutal bear markets. By contrast, adding bonds and other diversifiers cushions these blows. Bonds often rise or hold value when stocks crash, because interest rates typically fall in recessions (boosting bond prices)curvo.eu. In the 2008 crisis, high-quality bonds actually gained value as investors fled to safety. As a result, a balanced 60/40 portfolio might have seen ~–20% to –30% drawdown in 2008, versus –45% to –50% for stocks alone. The maximum drawdown for 100% stocks is much worse than for a stock/bond blend (e.g., one analysis showed ~–50% vs ~–32% in the 2007–2009 period)curvo.eu. Moreover, the recovery time can be far longer with all stocks – it took global equities about 4–5 years to fully recover after 2008, while a 60/40 portfolio recovered faster due to bonds buoying it. The Curvo study on “VWCE and chill” highlights that the stock-only portfolio’s drops are “sharper and take a lot longer to recover” compared to a portfolio with bondscurvo.eu.Sequence of Returns Risk: For a CoastFIRE investor, sequence risk is a crucial consideration. This is the risk that a major market downturn in the early retirement or “coasting” period derails the plan. If our investor reaches their “CoastFI” number and then stops hefty contributions, a deep early bear market could shrink the portfolio such that it no longer compounds to the needed future amount. With 100% stocks, this risk is more acute: a 50% crash early on means the portfolio may not recover in time, especially if contributions have tapered off. A diversified portfolio lowers sequence risk by reducing the magnitude of early losses. Bonds or cash reserves can be tapped for income so that one doesn’t have to sell stocks at the bottom – allowing the stocks time to recover. This is why many retirement studies (like the Trinity study and subsequent research) found that some bonds improved portfolio survival rates for withdrawalswww.reddit.com. For instance, the Trinity Study showed a ~98% success rate for a 75% stock/25% bond portfolio under a 4% withdrawal rate, versus ~95% for 100% stocks – indicating that a bit of bond exposure historically prevented failure in a few worst-case scenarioswww.reddit.com. Although some argue these historical simulations were skewed by unusually high bond yields in the pastwww.reddit.com www.reddit.com, the general principle is that a cushion of safer assets shields you from having to liquidate stocks at a bad time.Mitigating Drawdowns: There are several strategies to manage drawdown risk without abandoning growth:

Emergency Funds and Cash Buffers: Maintaining a dedicated emergency fund in cash or a money market fund is essential, especially if one’s portfolio is aggressive. This ensures that any surprise expense (job loss, medical bill, etc.) can be covered without selling investments during a downturn. Many all-equity investors keep 6–12 months of expenses in cash for this reason. In fact, given current interest rates, parking cash in a high-yield savings or money market fund can yield ~3–4% with virtually zero volatility – often comparable to bond yields, but without downside riskwww.reddit.com. As one commentator noted, “right now, you are better off holding a cash equivalent than bonds because the cash has (1) a better yield and (2) zero downside risk”www.reddit.com. This “barbell” approach (most money in stocks for growth, plus some cash for safety) is an alternative to holding traditional bond allocations, at least while cash rates are high.
Diversification (Bonds & Alternatives): Including even a modest bond allocation (say 10–30%) materially reduces volatility. Government bonds, in particular, tend to rally in deflationary or crisis periods, offsetting stock lossescurvo.eu. High-quality bonds can thus act as “dry powder” – an asset you can rebalance from into stocks after a crash, buying equities at cheap prices. Other diversifiers like real estate (REITs) or gold can also help, though they may still fall in a stock crash. REITs, for example, often move somewhat independently; real estate returns have low-to-moderate correlation with broad equities, so adding REITs can smooth volatility to a degreewww.reit.com. (During 2008, REITs fell heavily along with stocks, but over longer periods real estate sometimes zigs when stocks zagwww.reit.com.) We discuss REITs more below, but the key is that multiple asset classes rarely all crash at the same time, so diversification provides resilience.
Risk Management and Psychology: Ultimately, the ability to weather drawdowns is as much psychological as it is mathematical. If a 100% stock portfolio would cause you sleepless nights or panicked selling in a downturn, then it’s too risky – despite the higher long-term return. The best portfolio is one you can stick with. European passive investors often emphasize finding the allocation that “lets you sleep at night”curvo.eu. That may mean accepting a slightly lower expected return in exchange for peace of mind and the discipline to stay invested through bear markets. Remember: selling low can ruin a CoastFIRE plan, so controlling risk to avoid panic sells is paramount. Losing, say, 30% in a crash feels a lot different than losing 50%. Each investor must honestly gauge their comfort with volatility. In practice, even those with high risk tolerance sometimes find a 100% stock drawdown harrowing (“Is my CoastFI ruined?!”). Thus, some buffer of safety assets can act as a psychological armor. In summary, drawdown risk is the Achilles heel of the all-stock approach. It can be managed by diversification, holding cash reserves, and planning withdrawals wisely. The CoastFIRE investor should ensure they have contingencies for a bad sequence – whether that’s an ample emergency fund, flexibility to cut spending in a downturn, or a tilt toward a balanced portfolio as retirement nears.

Global & European Context

Investing from a European/global perspective introduces additional factors in the stocks-vs-diversification debate. A few key points for European investors holding VWCE (a global equity ETF):

Global Diversification vs. Home Bias: Unlike a US-based portfolio often centered on domestic equities, VWCE is already globally diversified (covering ~3,700 stocks across US, Europe, EM, etccurvo.eu). This global approach greatly reduces country-specific risk. History shows why this matters: a German investor in 1914 or a Japanese investor in 1989 faced devastating local market losses (wars, crashes). But a globally diversified portfolio spreads risk. Research on international safe withdrawal rates found that including global stocks makes extreme bad outcomes (like a total domestic market collapse) much less likelyearlyretirementnow.com. Essentially, don’t put all your eggs in one country’s basket. Holding VWCE ensures broad equity exposure; similarly, if adding bonds, one might consider global or at least European bonds rather than only one country’s bonds. The global context also means exposure to multiple currencies, which can be both a source of volatility and a diversification benefit (when one currency falls, others rise). For a Euro-based investor, VWCE’s returns will fluctuate with EUR/USD swings since ~60% of the fund is US stocks. Notably, currency movements can cushion local investors at times: e.g., in 2022, global stocks fell but the US dollar strengthened against the euro, softening the impact for eurozone holders. Over long periods, unhedged global equities provide an implicit currency diversification; most EU investors accept this rather than hedging, since currency effects tend to even out over decades.
Interest Rates and Bond Yields in Europe: The case for bonds in Europe has been complicated by the low (even negative) interest rates of the past decade. Euro government bond yields were near zero for much of 2015–2021, meaning meager returns and even the risk of price declines if rates rose (which indeed happened in 2022). This led many young European investors to shun bonds entirely – “why hold a guaranteed low return asset?” However, as of 2023–2025, bond yields have risen (German bunds, for example, yield positive rates again). Higher yields make bonds more attractive now than a few years ago, both in expected return and as a buffer. European investors should also consider currency when buying bonds: International bond funds often come in currency-hedged versions to eliminate FX risk. A euro investor adding, say, US Treasuries would typically use a EUR-hedged global bond ETF so that bond portion isn’t volatile due to USD swings. The current yield curve also matters – if short-term euro money markets yield 3%+ risk-free, holding some cash or ultra-short bonds may be preferable to long-term bonds that carry interest-rate risk. Indeed, in recent years short-term instruments have matched or out-yielded intermediate bonds with less volatilitywww.reddit.com.
Role of European Real Estate: Including REITs or real estate in a European context can be a diversifier. Many European investors consider real estate exposure via REIT ETFs (global or regional) to hedge against inflation and add an asset class not perfectly correlated with stocks. Real estate often behaves differently in inflationary periods and provides income. However, note that European REIT markets are smaller than the US, and global REIT indexes are still quite correlated with equities (they are stocks after all). Over the very long run, REIT total returns have been competitive with broader equities, and their low-to-moderate correlation with other stocks and bonds historically helps reduce overall volatilitywww.reit.com www.reit.com. For example, property values might hold up or decline less in certain recessions (depending on interest rates), giving some cushion. So, a diversified portfolio might include a 5–10% allocation to REITs for income and diversification. That said, one should be aware of tax differences (REIT dividends can be taxed higher as income in many countries) and the fact that direct real estate ownership (like buying an apartment) can substitute for REIT exposure in a personal balance sheet.
European Tax Considerations: Taxation heavily influences effective returns and portfolio strategy. European investors often invest through taxable brokerage accounts (as truly tax-sheltered retirement accounts are less common or more limited than in the US). Two main tax issues are dividend/coupon taxation and capital gains tax. VWCE is an accumulating ETF, meaning it reinvests dividends internally. This is usually tax-efficient for Europeans because you don’t receive dividends annually (which would be taxable each year); instead, the gains compound until you sell. Many European countries (e.g. Germany, Italy) do tax accumulating funds on “deemed” distributions or at sale, but often the tax is deferred or somewhat minimized. In contrast, bond interest and REIT dividends are typically taxed at one’s marginal rate or a flat withholding, often around 25–30%. For example, in Belgium bond fund gains are subject to a 30% “Reynders tax” on the bond portion’s incomecurvo.eu. This means adding bonds/REITs can increase yearly tax drag compared to equity growth that is largely unrealized until sale. European investors should thus weigh the after-tax returns: equities held long-term in accumulating ETFs enjoy a form of tax deferral, whereas bond interest may be taxed annually. However – and this is important – tax considerations should not override appropriate risk management. As one analysis noted, even if bond returns get taxed more, “the consequence of selling your portfolio at the wrong time because it was too risky is much worse than losing some of your bond profits to the tax man”curvo.eu. In other words, a slightly higher tax bill on a modest bond allocation is a small price for preventing a potential costly mistake of panic selling stocks in a crash.
Regulatory and Product Differences: European investors must use UCITS-compliant funds like VWCE. These often have different withholding tax arrangements (e.g., VWCE is Ireland-domiciled, benefiting from partial US withholding tax treaties). When comparing all-stock vs diversified, one should consider that any fund’s domicile and structure affect taxescurvo.eu. For instance, accumulating vs distributing ETFs, Ireland vs Luxembourg domicile, etc., can change the net returns. A pragmatic approach is to choose tax-efficient versions of whatever asset classes you hold (like accumulating equity ETFs, and perhaps accumulating bond ETFs if available, or holding bonds in any tax-advantaged accounts one might have). In summary, the global context reinforces diversification benefits (reduce reliance on any single economy). For a Euro-based CoastFIRE investor, it’s wise to keep the equity allocation global (as VWCE does), consider currency hedging for bonds, and mind the unique tax wrinkles of your country. Broadly, the 100% stock vs diversified decision is not fundamentally different in Europe, but the execution (in terms of product choice and tax strategy) needs to be optimized for European conditions.

Role of Bonds, REITs, and Cash in the Portfolio

Let’s examine the specific roles of bonds, REITs, and cash-equivalents in a long-term CoastFIRE portfolio, and how they compare to holding almost all stocks:

Bonds (Fixed Income): The primary role of bonds is not to boost returns, but to stabilize the portfolio and provide ballastcurvo.eu. High-quality bonds (government and investment-grade) have low volatility and tend to hold value or appreciate when stocks are tanking. By including, say, 10–30% bonds, you greatly reduce overall portfolio swings. Historically, bonds have a low correlation to stockscurvo.eu. This negative or low correlation is key: when equities zig, bonds often zag, which smooths your overall returnscurvo.eu. For example, a 80% stock / 20% bond mix might cut volatility by a quarter compared to 100% stocks, and significantly cut maximum drawdowns (as we saw earlier). The trade-off is lower expected return – bonds’ long-run real return has been ~1–2% vs ~5–7% for stockscurvo.eu. In a CoastFIRE context, bonds can act as a “time-buying” asset: if the market crashes early in your coasting phase or retirement, you can draw from bonds (or at least not worry as much about your entire portfolio free-falling). They also enable rebalancing – you can sell some bonds to buy more stocks when stocks are cheap, thereby accelerating recovery. Another role of bonds is to generate income: even though yields have been low, they pay interest that can fund some expenses in retirement without needing to sell principal. Given that our investor has a high-to-moderate risk tolerance, a small bond allocation (e.g. 10% initially) could be a good insurance policy that doesn’t drag too much on returns. It’s notable that some CoastFIRE adherents remain 100% stocks during accumulation, arguing that “using bonds just leaves so much growth on the table... coast FIRE is all about growth rather than protecting your assets”www.reddit.com. This is a valid stance early on. But as the goal corpus grows, protecting the accumulated assets with some bonds becomes increasingly prudent. We will discuss the timing of adding bonds in the next section (glidepath).
REITs (Real Estate Investment Trusts): REITs are equities, but they represent real estate holdings (commercial properties, apartments, etc.) which behave differently from other sectors. The inclusion of REITs in a portfolio can provide diversification through a different economic exposure. Historically, REITs have delivered competitive total returns (much of it from high dividend payouts) and have somewhat low correlation with broader stock marketswww.reit.com. During certain market cycles, REITs “zig” while other stocks “zag”www.reit.com, for instance if interest rates or property values move inversely to general corporate profits. REITs also can be an inflation hedge – property values and rents tend to rise with inflation, so REIT dividends may grow in inflationary periods when fixed-coupon bonds suffer. In a diversified portfolio, a typical REIT allocation might be ~5–15%. Having, say, 10% in a global REIT ETF could marginally lower volatility and provide a different income stream. However, note that in extreme crises (like the 2008 credit crunch or 2020 pandemic), REITs were hit hard alongside stocks – their diversification benefit is not as strong as bonds. They are best seen as a way to get exposure to real estate as an asset class, which over time can improve risk-adjusted returns by not putting all money in traditional equities. For our CoastFIRE investor, REITs could be useful especially if they don’t yet own a home. Since they plan to save for an apartment, one could argue they already have future real estate exposure (and indeed might treat the house down-payment fund as part of the fixed-income side). But until then, holding a bit of REIT can substitute for owning property. One caution: REIT dividends often face higher tax (treated as interest in some jurisdictions), and accumulating REIT funds are rarer. So from a tax perspective, REITs in a taxable account may not be as efficient. Nonetheless, from a portfolio perspective, adding real estate can slightly reduce overall volatility while maintaining solid returns, thanks to real estate’s unique return driverswww.reit.com.
Cash and Cash-Equivalents: Cash is king when it comes to stability. A cash allocation (or equivalents like money market funds, short-term T-bills, etc.) has near-zero volatility and 100% liquidity. Its role is to cover short-term needs and emergencies, and to serve as “dry powder.” Holding cash yields almost nothing in some environments (and loses to inflation), but in 2024–2025 many currencies have higher short-term interest rates, making cash surprisingly attractive. For example, euro money market funds or savings accounts can yield ~2–3%, and US dollar money markets >4%. As mentioned, some investors prefer holding cash instead of bonds for stability: “$300K in cash, IMO, is excessive... but to be safe in retirement have maybe 10% in cash and 90% in equities” one early retiree suggestedwww.reddit.com www.reddit.com. Another argued that in recent years bonds haven’t “paid” better than cash, so “own equities and cash, and ignore bonds” for better outcomewww.reddit.com www.reddit.com. This reflects the current yield curve – if short-term rates exceed long-term yields, a barbell of stocks + cash can outperform stocks + bonds (since bonds fell in 2022 when rates rose, whereas cash doesn’t fall). However, cash has a big drawback: no growth above inflation in the long run. It will not compound like stocks or even like bonds (which at least have term and credit risk premia). Therefore, large cash holdings significantly drag a portfolio’s long-term growth. The key is to hold “enough” cash for liquidity and safety, but not so much that it undermines growth. For CoastFIRE, an emergency fund is non-negotiable – typically 6+ months of expenses in cash or a liquid savings account. Additionally, if the investor plans a large expense (like a home purchase in the next few years), that portion of money should be in cash or very safe instruments (short-term bonds), not in stocks. You don’t want stock market risk on the down payment you need in, say, 3 years. It would be wise to segregate the “house fund” from the retirement portfolio and keep it in cash equivalents. Beyond emergency and near-term funds, holding perhaps ~5% of the portfolio in cash during retirement can provide a buffer for withdrawals (a “cash bucket” strategy). Many retirees keep 1–3 years of expenses in cash, so that if markets tank, they can spend from cash and delay selling investments. In accumulation, however, excess cash is usually a drag – better to invest spare money in higher-return assets, since you have income to cover needs. In summary, bonds, REITs, and cash each play distinct roles: Bonds dampen volatility and provide modest growth/income, REITs diversify into real assets and yield income with equity-like growth, and cash provides stability and liquidity. A 100% stock portfolio, by contrast, forgoes these stabilizers entirely – which is fine for maximum growth, but leaves no margin for error. A prudent approach for a CoastFIRE investor might be: remain mostly in stocks during the high-growth phase, but maintain an emergency cash reserve always; optionally include a small % of REITs for diversification; and plan to introduce more bonds or cash-equivalents as the target date approaches to protect what’s been accumulated. Ultimately, the mix should align with personal comfort and financial goals, ensuring the investor can stay the course.

Asset Allocation Over a 30+ Year Horizon (Glide Path)

Asset allocation should not be static over 30+ years – it can evolve as the investor’s situation and goals evolve. The CoastFIRE strategy inherently has (at least) two phases: (1) an Accumulation/Coasting Phase (~10–20+ years) where the portfolio is growing and the investor may still be working (albeit contributing less after hitting CoastFI), and (2) the Early Retirement or Full FI Phase (the start of withdrawals, which could also last 30+ years). The optimal asset allocation early on may not be the optimal allocation when retirement draws near or begins. Here’s how it can evolve:

Aggressive Early, Conservative Later: A common approach is to be more aggressive (equity-heavy) in the early years, then gradually increase allocation to safer assets as one approaches retirement. This mirrors the logic of target date funds (which start ~90% stocks and glide down to ~50% stocks by retirement). In the CoastFIRE Reddit community, many coasters report staying 100% stocks until they are, say, 5–10 years from retirement. “I’m coasting now with 100% stocks and 30 years to go… coast FIRE is all about growth rather than protecting assets, isn’t it?” one member notedwww.reddit.com. Another echoed that with 30 years left, equities provide as much or more protection (via growth) than bonds wouldwww.reddit.com www.reddit.com. The idea is that in the early decades, there is time to recover from any market crashes, and the priority is maximizing growth. During this phase, ongoing (if smaller) contributions and a long horizon mitigate the risks of high volatility. Indeed, if a downturn happens at year 5, the investor has 25 years of compounding left – being 100% in stocks allows capturing the full rebound and subsequent growth.
The 20-Year Milestone – Reassess Risk: In the question prompt, it mentions “transition toward more stability after 20 years.” This likely aligns with, say, an investor who starts aggressive in their 30s and by their 50s (20 years later) wants to dial down risk as retirement (maybe at 60 or 65) comes into sight. Around 10–15 years before the retirement target, it’s wise to gradually reduce equity exposure. Many call this building a “bond tent.” The “bond tent” strategy (popular in FIRE circles) involves increasing bond allocation in the few years bracketing retirement, then possibly decreasing later. The shape looks like a tent: you go from maybe 10% bonds at age 45, to 30% bonds by retirement at 55, then possibly down to 20% bonds by age 70 (for example). The rationale is to have extra bonds during the critical sequence-risk window (around retirement start), then one can afford a bit more equity risk once the initial years are safely navigated (since by then portfolio may be smaller due to withdrawals or you have more information about market conditions). One CoastFIRE poster shared: “I haven’t changed allocation yet and won’t until closer to RE, when I’ll build a bond tent”www.reddit.com. They prefer to overshoot their FI number by staying aggressive, then shift conservatively at the moment of retirement to safeguard against a crash. Another investor described gliding from 90/10 to ~75/25 by CoastFI, and planning an even more elaborate allocation at full FI: a combination of cash cushion, bond tent, yield-focused “bucket”, and even risk-parity strategies to mitigate sequence riskwww.reddit.com. This underscores that as the goal (financial independence) is reached, preserving capital becomes as important as growth.
Example Glide Path: For our high-risk-tolerance investor, one possible glide path could be: remain ~90–100% equities (plus emergency cash) during the first 10–15 years of accumulation. Then, starting ~15 years from the retirement date, start adding bonds gradually. For instance, each year shift 2% from stocks to bonds (or cash) so that over 15 years you move from 100% to perhaps 70% stocks / 30% bonds by retirement. One CoastFIRE individual did something similar: “currently 79/21, bond allocation going up 1% a year until full retirement”www.reddit.com. By doing this slow glide, there’s never a drastic change, but by the time retirement arrives, the portfolio is much more stable. At retirement, a 60/40 or 50/50 mix is a common recommendation for sustaining withdrawals (it balances growth and stability). In fact, one forum member said: “I assume when it’s time for me to draw down... I will downshift to a traditional retiree 60/40 portfolio. I think that’s probably the best way to go.”www.reddit.com. This reflects a general consensus that as you pivot from accumulation to decumulation, you swap some offense for defense.
Alternative Approaches: Not everyone agrees on de-risking with age. Some research (and practitioners like AQR’s Cliff Asness) suggest a constant-risk or even rising-equity glidepath might be rational. For instance, if an investor accumulates much more wealth than needed, they could afford to take more risk (since even a loss leaves them with sufficient assets). And some argue that the old “age = bonds%” rule is outdated, especially as people have longer retirements and need growth. There is a viewpoint that if you have flexible spending and strong nerves, you could stay heavily in stocks even in retirement, as long as you have a cash buffer for a few years. One FIRE study by Kitces and Pfau found that a “rising equity glidepath” in retirement (start ~50% stocks at retirement, then gradually increase to maybe 70% over 30 years) historically improved success rates by avoiding big losses early and adding growth later. This is somewhat contrarian but worth noting: you don’t necessarily have to become ultra-conservative at retirement – you just need to protect the first decade of withdrawals. Our investor, with a CoastFIRE mindset, might continue part-time work or have flexibility, which could allow staying stock-heavy longer. One of the Redditors in their late 30s, planning to coast by 50, said: “You may well prefer to be more conservative once coasting, but you don’t need to decide that now… FIRE depends on the higher returns from stocks”www.reddit.com. The takeaway is flexibility: you can decide as you get closer whether you feel the need to dial down risk or not.
Life Events and Allocation: Over 30 years, life doesn’t follow a smooth plan. Buying that apartment, having children, career changes, health issues – all can affect how you allocate. If a home purchase is upcoming, you might temporarily hold a larger cash/bond position to secure that goal, then revert to a higher equity allocation after. If you “coast” by working part-time, having some income reduces the need for ultra-conservative allocation (since you’re not fully dependent on the portfolio yet). Many CoastFIRE folks report staying 100% stocks until they truly retire. “We’re 3 years into coasting, 100% stocks with no plan to shift that anytime soon. Aggressive growth while working part time is generally part of the coastFIRE plan, is it not?”www.reddit.com. This makes sense – if you still earn enough to cover expenses, you can afford to keep your portfolio growth-oriented. But once you fully stop working, the portfolio becomes your sole support, and that is when most feel the need to introduce more safety. In summary, an appropriate asset allocation glidepath for a CoastFIRE investor might be: High equity (90–100%) during the heavy growth phase and early coasting years; Gradually increasing diversification (adding bonds/cash to 20–40%) in the decade before full retirement; and Substantial stability (perhaps 40–50% in bonds/cash) in the initial withdrawal years to guard against sequence risk. After the first 5–10 years of retirement, one could maintain a moderate allocation (e.g. 50–70% stocks) depending on outcomes and legacy goals. The overarching principle is to take more risk when time is on your side, and preserve capital when you’re about to start depending on that capital. This way, you capture growth when you can afford volatility, and you shelter your nest egg when you can’t.

Tax and Withdrawal Strategy Considerations (Europe)

Achieving CoastFIRE is one thing – harvesting the portfolio in retirement is another. A smart withdrawal strategy will ensure the money lasts 30+ years, and minimize taxes along the way. Here we outline considerations for European investors:

Safe Withdrawal Rates (SWR): The “4% Rule” (withdrawing 4% of the initial portfolio per year, adjusted for inflation) is a US-based guideline that historically gave high success for 30-year retirements on a 50/50 to 75/25 portfolio. European and global data suggest a bit more caution. In some countries and periods, a 4% withdrawal had failure risks, especially with 100% stocks. For example, in certain international cases the worst-case safe withdrawal was only ~3% or even 2.5% for all-stock portfolios (e.g. Spain in the 20th century)portfoliocharts.com portfoliocharts.com. However, global diversification improves outcomes – a globally invested portfolio would have supported around a 4% withdrawal in most historical scenariosearlyretirementnow.com earlyretirementnow.com. Our investor, aiming for a 30+ year horizon, should perhaps target a withdrawal rate in the 3.5–4% range for safety (assuming no other pensions early on). If they remain 100% in stocks, some studies show a slightly lower success probability for 4% withdrawals versus having some bondswww.reddit.com. For instance, one update found ~95% success for 100% stock vs ~98% for 75/25 over 30 yearswww.reddit.com. Thus, including 20–40% bonds can raise the worst-case withdrawal success, by cushioning sequence risk. It’s worth noting that if the investor is willing to adjust spending (flexible withdrawals), a higher equity allocation can work fine. Many FIRE retirees actually favor holding ~75–100% stocks and then cutting spending in bear markets to compensate (this is a form of dynamic strategy). Yet for a fixed withdrawal plan, a balanced portfolio is historically more robust.
Withdrawal Order and Buckets: As retirement approaches, one should plan which assets to tap first. A conventional approach in Euro jurisdictions might be: use any cash cushion first (e.g., keep 1–2 years of expenses in cash and spend that in a market downturn while not selling stocks). Next, if the stock market is down, try to withdraw from bonds (or even do Roth conversions in the US context – but in Europe, more likely just selling bonds) to allow equities to recover. Conversely, in a strong bull market, you can take more from stocks (and even refill the cash bucket). This is often called a bucket strategy: Bucket 1 = cash (1–2 years expenses), Bucket 2 = bonds (5–10 years “medium-term” money), Bucket 3 = stocks (long-term growth). The retiree periodically refills Bucket 1 from the others when markets are favorable. This approach is intuitively appealing and helps avoid selling at lows. It essentially means the portfolio at retirement is segmented, which again argues for having those safe assets (cash/bonds) in place by the time retirement starts.
Tax-Efficient Drawdowns: In Europe, tax rules vary widely, but some general tactics include:
Use Allowances and Low Brackets: Many countries have annual tax-free allowances for capital gains or dividend income. For example, the UK has (had) a capital gains allowance (though shrinking), or Germany has an €801 tax-free amount on investment income per person. A retiree with no salary can often realize some gains at a 0% or low tax rate up to certain limits. It can be wise to sell just enough shares each year to utilize the tax-free band or stay in a low bracket. Over time, this can significantly reduce tax on withdrawals. If our investor has both stocks and bonds, one might choose to sell the assets with the lowest tax cost first (e.g., perhaps selling an accumulating equity ETF that has a large untaxed gain could incur capital gains tax, whereas selling a bond fund mostly just returns principal and some accrued interest which might be taxed differently). Planning which fund to liquidate first can save money.
Accumulating vs Distributing Funds: European investors often choose accumulating ETFs (like VWCE) during accumulation to defer taxes. In withdrawal, however, one might prefer switching to distributing share classes that pay dividends, using those dividends for income (so you sell fewer shares). It depends on local tax: in some countries, capital gains are taxed more favorably than dividends, in others vice versa. For example, in the UK, dividends and gains have different tax rates; in Germany, both are taxed at ~26% flat, so it’s indifferent. The investor should consult local tax rules to decide whether to realize gains or take income. It’s worth reviewing the fund’s domicile and any tax treaties – e.g. Ireland-domiciled ETFs like VWCE handle withholding taxes on US dividends (15% at fund level), which is usually efficient. Upon selling shares, capital gains tax will apply on the accumulated growth. The investor might try to spread sales over multiple years to avoid a giant one-year tax hit, especially if there’s a progressive tax or if large sales could, say, reduce eligibility for certain benefits.
Pension and Insurance Products: Some European countries offer tax-advantaged accounts (like a French Plan Épargne en Actions, or German Rürup/Riester, etc.). These often have strings attached (limited contribution, locked until retirement, etc.). If our investor has any such accounts, the strategy could be to hold bonds in tax-sheltered accounts (since bond interest is taxed yearly at high rates) and hold stocks in taxable (since stocks get favorable capital gains treatment if held long and can be tax-deferred in accumulating funds). This is the asset location strategy. Upon withdrawal, one would draw from the taxable stock assets first (perhaps using the allowances as mentioned) and later use the pension accounts (which might be annuitized or taxed as income at withdrawal). The specifics are highly country-dependent, but the principle is to optimize which account to tap to minimize lifetime tax.
Withdrawal Flexibility: A CoastFIRE retiree often has more flexibility than a traditional retiree. They might retire early (no state pension yet) and perhaps have the ability to work part-time or take on projects if needed. This flexibility allows a more aggressive portfolio if desired because there’s a human capital fallback. Many early retirees remain stock-heavy (80%+ stocks) and plan to tighten belts or earn side income if a crash occurs rather than keep a big bond allocation. If our investor is comfortable with that approach, they might plan to withdraw less in bad years and more in good years (a variable withdrawal strategy). That can allow a higher equity share without increasing failure risk, effectively substituting personal flexibility for bond ballast.
Tax Example – Belgium and Reynders Tax: To illustrate how tax can influence asset choices: In Belgium, capital gains on stocks are generally tax-free for private investors (a huge advantage), but fixed-income funds are subject to a 30% tax on the bond portion’s gains (the Reynders law)curvo.eu. If our investor were Belgian, this would mean a 100% equity portfolio’s growth is largely untaxed (until possibly a transaction tax on sale, but no CGT), whereas a 60/40 portfolio would get a 30% tax hit on 40% of the returns when selling. This tilts the favor toward stocks for Belgians from a tax perspective. However, as Curvo notes, this doesn’t outweigh the benefits of holding bonds if they’re needed for risk managementcurvo.eu. It just means one should go in aware of the tax cost. Other countries like Germany tax all investment income (interest, dividends, gains) at a flat rate, so the playing field between stocks and bonds is more even (except that accumulating equity ETFs allow deferral). The investor should research their country’s treatment of equity vs bond income. For instance, if bond interest is taxed at a higher marginal rate, maybe favor government bonds that have lower yields but perhaps exemption (some countries exempt government interest) or use life insurance wrappers, etc.
Legacy and Currency in Withdrawal: If the plan is to possibly leave Europe or have expenses in another currency, currency risk should be managed. For example, if one might retire to a country with a different currency, consider aligning some assets to that currency over time. Also, European retirees might have to consider inheritance tax and how remaining portfolio will be passed on – certain assets (like tax-deferred pensions) might not be inheritable or have different rules. This goes beyond the scope here, but it’s part of holistic planning. Putting it together: A possible withdrawal strategy for our European CoastFIRE investor at retirement could be:
Before retirement: simplify to maybe two or three funds (global equity, global bond, maybe REIT) for ease of management. Ensure at least 2–3 years of expenses in cash or short-term bonds by retirement day.
At retirement (Day 1): Have, for example, 60% global stocks (VWCE), 30% bonds (perhaps a EUR-hedged global aggregate bond fund), 5% REIT, 5% cash. This is just a ballpark balanced stance.
During retirement years: Withdraw yearly spending in a tax-efficient way – e.g., set up automatic quarterly sales from the bond fund to produce living cash (since selling bonds in normal times is fine; in a market crash, one would adjust). Monitor market conditions: if equities are up a lot, take the opportunity to sell some equities (harvest gains up to allowance) and refill the cash bucket. If equities are down >20%, lean on the cash and bond bucket for income and potentially rebalance (sell some bonds to buy stocks low).
Tax moves: Each year, realize capital gains up to the 0%/low-tax threshold by selling some equity and immediately rebuying a similar exposure (to step up cost basis) – this is tax-gain harvesting if applicable. If married or with a partner, split withdrawals to use both persons’ allowances. Keep an eye on any wealth taxes or other rules (some countries have wealth taxes where the composition of assets might matter). Ultimately, the goal is to sustain a stable income stream without running out of money. A diversified portfolio tends to make withdrawal strategy easier because you have multiple “taps” to draw from. A 100% stock retiree can succeed (indeed, many FIRE folks do that by holding mostly equities), but they must be comfortable with possibly cutting spending or finding side income in bad markets, since selling stocks after a 50% crash to fund living expenses is very damaging to longevity. With some bonds/cash, one can avoid selling stocks at a bottom – one of the biggest keys to success.From a tax angle, each investor should tailor the plan to local laws, but the general advice is: defer taxes as long as possible (hence use accumulating funds during accumulation), then realize income in the lowest-tax manner available in retirement. Europe lacks universal rules, so this may involve some careful planning or consultation with a tax advisor.

Conclusion

So, 100% stocks or diversified? The answer lies in balancing growth vs. safety over the investor’s journey. A nearly 100% stock ETF portfolio (like >95% in VWCE) maximizes long-term growth and has historically delivered strong returns for wealth-building – an attractive feature for a CoastFIRE investor who relies on compounding. It leverages the full power of equities, which over decades have handily outpaced inflation and other assetscurvo.eu curvo.eu. However, this growth comes with significant volatility and drawdown risk, which can be perilous at certain junctures (e.g. just when one plans to coast or retire). A diversified portfolio including bonds, REITs, and cash-equivalents provides smoother, more predictable performance, lowering the risk of a major loss at the wrong time and helping an investor stay the course. It may slightly reduce the expected final wealth, but it also reduces the probability of catastrophic outcomes or behavioral mistakes.For a CoastFIRE strategy, one might utilize both approaches over time: in early years, lean toward the 100% equity approach to aggressively grow the portfolio; in later years, gradually shift to a diversified allocation to lock in gains and protect the nest egg. The investor described (high-to-moderate risk tolerance) could reasonably remain in all-world equities during the heavy lifting phase (with a steadfast emergency fund on the side), especially given the long timeline and ongoing (albeit smaller) contributions. But as the portfolio matures and contributions dwindle, introducing 10%, then 20–30% in bonds/cash will significantly lower the chance of a nasty surprise. By ~20 years in, it would be prudent to allocate more toward stability – aiming perhaps for a 70/30 or 60/40 mix entering retirement, which historically balances growth and capital preservation.In the European context, the investor should not ignore practical details: use tax-efficient funds (e.g. accumulating ETFs like VWCE), be mindful of how bonds or REITs are taxed (and choose allocations accordingly), and plan withdrawals to minimize taxes (using allowances, etc.). They should also ensure their currency exposure and asset mix align with their future spending (for example, if they will retire in the Eurozone, consider hedging some fixed-income to EUR).A few final takeaways:

A 100% stock portfolio will likely yield the highest long-term wealth, if you can endure the ride. It is a high-risk, high-reward proposition. During the accumulation phase, that risk is mitigated by time and human capital (continued earnings).
A diversified portfolio (stocks+bonds+REITs+cash) offers resilience. It may lag in booming equity markets, but it shines in downturns by losing less, and thus recovers faster. This can actually make the journey towards FIRE less stressful and more certain.
The optimal strategy for CoastFIRE might be “100% stocks until you’ve won the game, then take some risk off the table.” In practice, that means once you’ve hit your CoastFI number (or as you get within a decade of FI), shift to a more moderate allocation to safeguard it. Or as one investor quipped: “I can always coast a bit longer… I’ll still be 100% stocks when I hit it, but will likely go 60/40 when I begin drawdown – probably the best way to go”www.reddit.com www.reddit.com.
Always maintain an emergency fund or cash reserve outside the portfolio (or as part of the allocation) to handle surprises and avoid forced sales. This is non-negotiable irrespective of being 100% stocks or not.
Consider personal temperament: if the thought of a 50% drop is terrifying, that’s a sign to include some bonds now, not later. Conversely, if one is very comfortable with volatility and has fallback plans, a higher equity allocation can be justified longer. In conclusion, both approaches have merit. A sensible plan is dynamic: harness near-100% equities for growth when you’re young and contributions (and time) are on your side, then diversify as you transition into financial independence to protect what you’ve built and ensure a stable retirement. By combining the strengths of each strategy – aggressive growth early and prudent risk management later – the CoastFIRE investor can maximize their chance of a successful and worry-free early retirement. Always remember the adage: the only valid portfolio is one you can hold through any storm. Tailor your stock vs bond mix so that you’ll remain confident and stick to the plan, come what may in the markets. That, ultimately, will determine your long-term success more than squeezing out the last bit of return.Sources: References to historical data, research, and examples have been provided throughoutcurvo.eu www.reddit.com curvo.eu, highlighting the key points of performance, risk, and strategy from both global market studies and practical CoastFIRE experiences.