Investing - Theory, News & General • At what real risk-free yield would you abandon equities?

I’ve been pondering the relationship between the Equity Risk Premium (ERP) and risk-free real yields, and I wanted to get the community’s perspective on asset allocation thresholds.

Currently, 10-Year TIPS yield around ~2.35% real. With an estimated implied Equity Risk Premium sitting somewhere between 3.8% and 4.4%, expected real stock returns are roughly 6.0% to 6.8%. That ~4% premium feels like a reasonable compensation for equity volatility over a multi-decade horizon.

However, I’m curious about personal hurdle rates:

• The 5% Real Threshold: If a completely risk-free instrument (like TIPS or multi-decade laddered Treasuries) offered a 5.0% guaranteed real return, would you still hold equities?

• ERP Compression: At a guaranteed 5% real return, the expected real equity premium above the risk-free rate narrows to around 1.0% to 1.5% (unless stocks crash to single-digit P/E multiples to restore a higher return target).

• Historical Perspective: We saw real yields near or above 5% during the Volcker era in the mid-1980s and TIPS peak above 4.4% real in early 2000.

For those who are retired or nearing FI: Is there a specific guaranteed real rate of return where you would effectively "call it good" and shift 100% of your portfolio to real risk-free assets? Or does your long-term plan assume you must always maintain equity exposure regardless of how high real rates climb?

Looking forward to hearing how others view this trade-off.

Statistics: Posted by IndexAndExhale — Sun Aug 30, 2026 8:02 am