Notice the general pattern here. Risk was rewarded. But not as much as you might have thought at times. Most of the time, the four funds are in just the order you'd expect, most aggressive on top, least aggressive on the bottom. (Unfortunately, endpoints, endpoints, it's always endpoints--the picture look different if you start at a different place). And while I really do believe stocks do well in the long run, there is a serious danger of false optimism when stocks have had a good run; you mustn't fooled into thinking, say around the year 2000, that your retirement is in such good shape that you can ease off on your savings; and you mustn't hold so much in stocks that you'll do something foolish when the market plunges.
jeffersonkim wrote:I have about $24,000 in cash that I'd like to invest for approximately 5 years in a fully taxable account. I'm okay to wait longer if necessary. I don't really know what I'll need it for in the next 5 years, but if the opportunity arises, I guess I'd like to have it relatively ready.
I'm liking Vanguard's Admiral Shares as a potential option or their ETF equivelants.
Is there some kind of online calculator that helps me determine what my stock/bond mix should be that shows potential risks?
I'm looking at a combination of three main funds to keep it simple from Vanguard:
- Total Bond Market (BND)
- Total Stock Market Index (VTI)
- Total INternational Stuck Index (VXUS)
Indeed. I started at 1994 for the someone neutral reason that it was the inception date of the LifeStrategy funds.bertilak wrote:Nice chart.
A quick look might lead one to the following conclusion:
Sure, those risky stocks can take a tumble but when they do they only fall back to about where a safer investment has plodded along to. So why not go for the more aggressive fund -- you are almost always ahead and when you are not you are even.
Now look at the same thing starting at 12/31/2000....
With this view you might reach a different conclusion:
Boy, those risky funds do take a tumble. Even when they recover they just barely make it up to where the safer funds are. Why take all that risk if there is no reward? Slow and steady wins the race!
I think this is a very serious question. The chaotic long-term behavior of the stock market reflects the chaotic behavior of society itself. People are assigning importance to long-term performance differences measured in basis points. Yet off the top of my head I can reel of half a dozen "revolutions" in the stock market that might have changed the MPT parameters by that much. You refer to the end of fixed commissions, and it is my recollection that I once paid Merrill Lynch something like $120 commission to buy $4,000 worth of stock, and that was on top of a hidden fee for buying an odd lot. But besides before and after fixed commissions, how about:Scooter57 wrote:Personally, I wonder if any pre-internet numbers have much relevance as trading now is so entirely different from what it was in those ancient days when we saw prices in the paper or phoned brokers who charged big fees for trades.
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