Save me from myself. 100% equity position.

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brown3218
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Save me from myself. 100% equity position.

Post by brown3218 »

*edit- Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index

I'd like to hear why my way of thinking is wrong. I'm 26 and plan on retiring at age 65. I have a high risk tolerance and would like to invest 100% in equities. My oberservation (which may be wrong) is that bonds are typically suggested for your portfolio because it reduces the volatility. If I am confident that I will not react negatively in a poor market, is it acceptable to be in 100% equities? I view down markets as a buying opportunity.

After convincing myself that 100% equity is ok, I am then lead to believe that I might as well invest In historically higher returning growth stocks (midcap rather than larger cap). I'm tempted to go 100% into the fund below:

FSVEX: Spartan Extended Market Index Fund- Advantage Class. Expense ratio is .07%

Am I dumb?
Last edited by brown3218 on Thu Dec 19, 2013 12:10 am, edited 2 times in total.
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G-Money
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Re: Save me from myself. 100% equity position.

Post by G-Money »

Even if you wanted 100% equities, why limit yourself to the Extended Market fund? You're missing US large caps and international. The extended market covers approximately 20% of all U.S. equities, which are roughly 50% of global equities. So you'll be investing exclusively in approximately 10% of the global equity market. If the idea is to capture the small (but not the value?) premium, why use a mid cap fund (which is what extended market is).

The simple fact that you propose putting 100% of your money in that fund strongly suggests to me that you're relatively new to and have quite a bit to learn about investing. Which means 100% in equities probably is NOT a good idea for you right now. Go read some books from the reading list: http://www.bogleheads.org/readbooks.htm, and then figure out what you want to do.

Good luck.
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JMacDonald
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Re: Save me from myself. 100% equity position.

Post by JMacDonald »

brown3218 wrote: I have a high risk tolerance and would like to invest 100% in equities.
Am I dumb?
No, I don't think you are dumb. I wonder how you would have reacted in 2008 if you had a 6 figure portfolio then?
Here is the Morningstar chart on that fund: http://quotes.morningstar.com/fund/fsevx/f?t=FSEVX
It lost about 50% then. Is your risk tolerance that high?
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Re: Save me from myself. 100% equity position.

Post by pkcrafter »

No, not dumb, just uneducated and inexperienced. But you're here and that's a good thing. :happy

Never do anything to excess. Bonds are suggested because they are a major asset class and necessary for proper diversification. Your chosen fund omits other major equity asset classes as well.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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kenyan
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Re: Save me from myself. 100% equity position.

Post by kenyan »

How do you know you have a high risk tolerance? It is much easier to say that when investments are rising every year, as they likely have been for every year of your investing career (I could be wrong). Will you still think they are a buying opportunity when your portfolio has shrunk from $400k to $200k, and everyone is crowing about how this could be the end of the economy as we know it, and the bottom is likely S&P 300, and so on...Maybe you'll be fine, but most people think they have high risk tolerance until their hard-earned cash disappears. "Buying opportunity" is likewise easy to say analytically, but when you keep throwing money into the market, and it keeps dropping another 10% every time you put money in, it might be more difficult to stomach. There's no guarantee that the next crash will turn out as rosy as the most recent one has.

Growth stocks are not higher returning historically than value stocks. You've got it backwards. Beaten-down stocks that most people don't want (a.k.a. value) are those that have returned more. Mid-caps have returned more than large-caps, but small-caps have a higher expected premium.

I wouldn't recommend what you're considering, but it's your money. You will not be diversified, and a single asset class can lag the market for decades, even one with higher expected returns. One thing you should address, even if you decide to do this, is how you will eventually dial down your risk. Though 100% stocks is an option for someone with 35-40 years to go, it's not a safe option for someone with 10 years to go. You need a plan, or you might end up doing exactly what you think you won't - selling low to get safer assets when that's what everyone is saying you should do.
Retirement investing is a marathon.
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brown3218
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Re: Save me from myself. 100% equity position.

Post by brown3218 »

JMacDonald wrote:
brown3218 wrote: I have a high risk tolerance and would like to invest 100% in equities.
Am I dumb?
No, I don't think you are dumb. I wonder how you would have reacted in 2008 if you had a 6 figure portfolio then?
Here is the Morningstar chart on that fund: http://quotes.morningstar.com/fund/fsevx/f?t=FSEVX
It lost about 50% then. Is your risk tolerance that high?
Yes, it is that high. If my risk tolerance is this high, is it acceptable to be investing in such a relatively narrow portion of the global market?
bayview
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Re: Save me from myself. 100% equity position.

Post by bayview »

I can see the point in being 100% equity while a long way out from retirement. Bill Bernstein recommends it in theory, although with the caveat that most young investors don't have the experience to be able to tough it out when their portfolio drops 30%, 40%, or 50%.

One point to consider is that when (not if) stocks go back down, it's handy to have some investments in bonds that you can sell off to buy stocks cheap. The phrase I see is "dry powder", especially when using Treasuries. The idea is that you can sell them easily to generate funds to increase your shares of stocks/ stock funds. Depending on the size of your portfolio, you might consider having 5-10% of the total in the investment version of mad money.
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freebeer
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Re: Save me from myself. 100% equity position.

Post by freebeer »

pkcrafter wrote:Bonds are suggested because they are ... necessary for proper diversification
"proper diversification"... sheesh, what the heck does that mean and why should a new Boglehead give a hoot about being "proper"?

*all* that matters in investing is reasonable expectation (based mainly on history because that's what we've got to work with) about risk-adjusted total return. And there are a lot of allocations that sit on or near the efficient frontier of that expectation including 100% equity. The reason that bonds are suggested is that a portfolio that includes bonds should provide nearly as much return as 100% equity but with a lot less risk (volatility).
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brown3218
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Re: Save me from myself. 100% equity position.

Post by brown3218 »

freebeer wrote:
pkcrafter wrote:Bonds are suggested because they are ... necessary for proper diversification
"proper diversification"... sheesh, what the heck does that mean and why should a new Boglehead give a hoot about being "proper"?

*all* that matters in investing is reasonable expectation (based mainly on history because that's what we've got to work with) about risk-adjusted total return. And there are a lot of allocations that sit on or near the efficient frontier of that expectation including 100% equity. The reason that bonds are suggested is that a portfolio that includes bonds should provide nearly as much return as 100% equity but with a lot less risk (volatility).

Why should a risk tolerant investor be worried about volatility?
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VictoriaF
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Re: Save me from myself. 100% equity position.

Post by VictoriaF »

Generally, having 100% in stocks is not recommended. First, there is no certainty that the stocks will (eventually) rise above the current level (look at Japan). Second, when all your money is in stocks, you cannot rebalance. Third, you don't really know what your risk tolerance is (hint: it's not the same as the ability to hold alcohol). Forth, you may lose your job and need money at the time when the markets are very low, and so you would be forced to sell low.

Still, consider the total amount of your assets. If at the age of 26, your assets are relatively low, and you take a high equity risk, and lose some--it may turn into an inexpensive learning experience.

Victoria
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sambb
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Re: Save me from myself. 100% equity position.

Post by sambb »

do something like lifestrategy growth (80/20) for a few years, and save. It will all work out. Simplify.
JW-Retired
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Re: Save me from myself. 100% equity position.

Post by JW-Retired »

brown3218 wrote: I'm 26 and plan on retiring at age 65. I have a high risk tolerance and would like to invest 100% in equities.

If I am confident that I will not react negatively in a poor market, is it acceptable to be in 100% equities? I view down markets as a buying opportunity.

After convincing myself that 100% equity is ok, I am then lead to believe that I might as well invest In historically higher returning growth stocks (midcap rather than larger cap). I'm tempted to go 100% into the fund below:

FSVEX: Spartan Extended Market Index Fund- Advantage Class. Expense ratio is .07%

Am I dumb?
I have a high risk tolerance. Are you sure? What facts or experience can you cite that support this?

I am confident that I will not react negatively in a poor market.... Same question?

After convincing myself that 100% equity is ok, I am then lead to believe that I might as well invest In historically higher returning growth stocks (midcap rather than larger cap). I'm tempted to go 100% into (Spartan Extended Market Index Fund). We always recommend investing in the market, not the latest hot sector of the market. What's hot varies from year to year and nobody can predict what's next hot. See the Callen periodic table http://www.callan.com/research/download ... %2F655.pdf

Am I dumb? Well, lots of young investors get these all in urges about the time stocks are making new historic highs, like now. If it works out really badly, more than a few get totally soured on the stock market and quit investing in equities all together. I don't think you ought to be confident enough in your high risk tolerance to risk that.

IMO, invest in the broader market and have a little bit of bonds even at age 26.
JW
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longinvest
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Re: Save me from myself. 100% equity position.

Post by longinvest »

brown3218 wrote:
freebeer wrote:
pkcrafter wrote:Bonds are suggested because they are ... necessary for proper diversification
"proper diversification"... sheesh, what the heck does that mean and why should a new Boglehead give a hoot about being "proper"?

*all* that matters in investing is reasonable expectation (based mainly on history because that's what we've got to work with) about risk-adjusted total return. And there are a lot of allocations that sit on or near the efficient frontier of that expectation including 100% equity. The reason that bonds are suggested is that a portfolio that includes bonds should provide nearly as much return as 100% equity but with a lot less risk (volatility).

Why should a risk tolerant investor be worried about volatility?
brown3218, you are asking good questions. I used to think like you. You might be interested to read the following thread: http://www.bogleheads.org/forum/viewtop ... st=1889712

Volatility is only one type of risk.

Have you thought about what would happen if your investing time-frame happens to be the worst-ever, for stocks? Theoretically, stocks should better reward investors than bonds, but history shows us that it's not always the case. There is a possibility that you might end up with less money, with a 100% equity portfolio, than with a more balanced portfolio. That's a risk.

Bonds have had rough patches in the twentieth century. They didn't always hold up to inflation. But, you must account for some unique related event that might have influenced that: the gold standard was abandoned (parity of the dollar to a specific amount of gold), causing an unprecedented impact on bond holders (bonds were expressed in nominal dollar values and interest rates). So, maybe bond holders didn't anticipate inflation and require appropriate interest rates.

I encourage you to read investment books recommended on this site. I have learned a lot about how uncertain our knowledge of the future is. So, in the doubt, many Bogleheads build diversified portfolios.

Welcome to the Bogleheads forum!
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: Save me from myself. 100% equity position.

Post by john94549 »

Having a bit in bond funds, even with a very long investing horizon, makes a bit of sense. Should Mr. Market take a nose-dive, will you have the ability to re-balance? If you are 100% in equities, I suspect the answer is self-evident. By definition, you can't. Even with a hardy tolerance for risk, you might well want to buy up more equities "on sale", as it were. You could do that with your fixed-income.

I'd consider a bit more conservative AA, perhaps 75% (equities)/25% (fixed-income).

Been up-and-down the ladder several times (age 66).

Just my $.02.
Last edited by john94549 on Wed Dec 18, 2013 10:09 pm, edited 1 time in total.
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baw703916
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Re: Save me from myself. 100% equity position.

Post by baw703916 »

brown3218,

I think the fund is good, but you should have some international stocks, too. Sometimes they do significantly better, or significantly worse, than U.S. stocks (so they provide diversification)

I had a nearly 100% equity portfolio in 2008. I didn't sell, or even seriously consider it. But it did annoy me that I didn't have any more money to buy stocks while they were cheap. So I learned to put some in bonds (Treasuries are particularly useful because they actually tend to go up significantly when there's a financial panic and stocks are crashing.

So there's a reason to hold bonds even if you can psychologically tolerate the volatility that goes with a 100% equities position.

Is this a retirement account? If so, what are the other funds you have available?

Brad
Most of my posts assume no behavioral errors.
john94549
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Re: Save me from myself. 100% equity position.

Post by john94549 »

baw703916 wrote:
I had a nearly 100% equity portfolio in 2008. I didn't sell, or even seriously consider it. But it did annoy me that I didn't have any more money to buy stocks while they were cheap.
Exactly. Bought all the way down, much to the wife's chagrin. Now she thinks I'm a genius. I shall never disabuse her of the notion.
Last edited by john94549 on Wed Dec 18, 2013 10:17 pm, edited 1 time in total.
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brown3218
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Re: Save me from myself. 100% equity position.

Post by brown3218 »

baw703916 wrote:brown3218,

Is this a retirement account? If so, what are the other funds you have available?

Brad
Yes it is. It has hundreds of funds. All Fidelity funds.
bhsince87
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Re: Save me from myself. 100% equity position.

Post by bhsince87 »

No need to cite data or history here. Common sense should tell you to never be 100% into ANYTHING!
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Re: Save me from myself. 100% equity position.

Post by UliKunkel1953 »

Sounds like you might be under the spell of performance chasing. You should think about your real goals and motivations. Are you trying to build a robust portfolio to secure a good retirement, or are you trying to maximize return for its own sake?

I guess it's sort of a cliche, but I'm gonna say it anyway: once upon a time, I was in your shoes and felt the same way. But eventually I realized I'd rather save more and spend less time worrying about extracting the very highest performance possible. I thought buying bonds would feel like a drag, but now it feels like a nice solid foundation. My returns are still quite good and I feel more confident in my plan.
john94549
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Re: Save me from myself. 100% equity position.

Post by john94549 »

Carey, for years and years, I had basically everything in our retirement funds in VBIAX , or its pre-Admiral fund. Just your stodgy 60/40, set-and-forget. It was the default investment established by my firm's investment partner for our 401K.

I resisted the temptation to "slice-and-dice". Later, I added a tad of international (VTIAX), even later a tad a VEMAX, but nothing too radical.

Smartest thing I ever did.
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baw703916
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Re: Save me from myself. 100% equity position.

Post by baw703916 »

brown3218 wrote:
baw703916 wrote:brown3218,

Is this a retirement account? If so, what are the other funds you have available?

Brad
Yes it is. It has hundreds of funds. All Fidelity funds.
The Spartan (index) Funds are the Fidelity offerings that are preferred on this board. They are in fact quite comparable to Vanguard's index funds, although Vanguard has more index offerings (for instance, value and growth index funds for small, mid, and large caps).

If you want an aggressive portfolio and to tilt to small caps you might consider something like the following:

25% each Total Market Index, Small-Cap index or Extended Market index, Global ex-US Index, and U.S. Bond Index or Intermediate Treasury Index.

Brad
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Riceman
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Re: Save me from myself. 100% equity position.

Post by Riceman »

Does extended market cover emerging markets? Does it cover international markets in general?

Why are you 100% equities? I am because it gives me the highest expected returns, and I have many years until retirement, very high job stability, a pension. I am not 100% equities because I prefer volatility--all things being equal, I would prefer less volatility. And as far as stocks go, what makes U.S. stocks better than equal? Is there a structural reason (U.S. stocks are higher risk?) to expect a better return? Without a convincing reason, and with the opportunity to reduce volatility just by diversifying across equity classes (you could also include REITs), why not take that free lunch?
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FNK
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Re: Save me from myself. 100% equity position.

Post by FNK »

It's very hard to put yourself into the 2008 mindset. Don't trust yourself. Having said that, if you're firmly committed to riding down the next crash and enjoying it, sure, do 100% equities. Draw up a plan for transitioning into something saner when you get closer to retirement (e.g., start adding 2% bonds every year so that you're 50/50 at retirement).

As far as investing exclusively into US mid and small caps... yes, dumb. What makes you believe that US mid and small caps will continue doing better than everything else? Past performance? Gut? That's gambling, not investing. Consider, say, 25% each of US total stock market, international total stock market, US small cap and international small cap. That will be diversified with a solid small-cap tilt. Rebalance once or twice a year.

And remember: all these things are out to hurt you if you don't follow through.
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Watty
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Re: Save me from myself. 100% equity position.

Post by Watty »

The problem with being 100% in stocks is that it really does not buy you very much extra(if any) returned compared to having 10 to 20 percent of your portfolio in bonds.

The reason is that as you rebalance, say once a quarter, you automatically end up “selling high and buying low” more often than not since you will be selling the over performing asset and buying the underperforming one. This will pretty well makes up for the lower expected yield on the bonds, and your portfolio will be dramatically less volatile.

It has been a while since I have read it but you might check out the book “Intelligent Asset Allocator” by Bill Bernstein who sometimes posts here.

http://www.amazon.com/Intelligent-Asset ... adswiki-20
john94549
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Re: Save me from myself. 100% equity position.

Post by john94549 »

Should I draw a "consensus" view from all these posts, it would be (a) don't have all one's eggs in one basket, despite how "risk tolerant" one might be, and (b) diversify, both as within an asset class, and as between or among asset classes.
Fallible
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Re: Save me from myself. 100% equity position.

Post by Fallible »

brown3218 wrote:I'd like to hear why my way of thinking is wrong. I'm 26 and plan on retiring at age 65. I have a high risk tolerance and would like to invest 100% in equities. My oberservation (which may be wrong) is that bonds are typically suggested for your portfolio because it reduces the volatility. If I am confident that I will not react negatively in a poor market, is it acceptable to be in 100% equities? I view down markets as a buying opportunity.

After convincing myself that 100% equity is ok, I am then lead to believe that I might as well invest In historically higher returning growth stocks (midcap rather than larger cap). I'm tempted to go 100% into the fund below:

FSVEX: Spartan Extended Market Index Fund- Advantage Class. Expense ratio is .07%

Am I dumb?
You might not be as confident as you think. Your topic line reads, "Save me from myself." You go on to say your observation "may be wrong." Then you say, "IF (all caps mine) I am confident..." And then you ask whether it's "acceptable" to be 100 per cent. Finally, you come to this forum, where you most likely know the overall sentiment about 100 percent anything. So if you're not as confident as you say, that's good! What you really want to be is learning the way to invest wisely, which will give you the best chance to stay the course in the next bear market or market crash.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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brown3218
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Re: Save me from myself. 100% equity position.

Post by brown3218 »

Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
pkcrafter
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Re: Save me from myself. 100% equity position.

Post by pkcrafter »

Fallible wrote:
brown3218 wrote:I'd like to hear why my way of thinking is wrong. I'm 26 and plan on retiring at age 65. I have a high risk tolerance and would like to invest 100% in equities. My oberservation (which may be wrong) is that bonds are typically suggested for your portfolio because it reduces the volatility. If I am confident that I will not react negatively in a poor market, is it acceptable to be in 100% equities? I view down markets as a buying opportunity.

After convincing myself that 100% equity is ok, I am then lead to believe that I might as well invest In historically higher returning growth stocks (midcap rather than larger cap). I'm tempted to go 100% into the fund below:

FSVEX: Spartan Extended Market Index Fund- Advantage Class. Expense ratio is .07%

Am I dumb?
You might not be as confident as you think. Your topic line reads, "Save me from myself." You go on to say your observation "may be wrong." Then you say, "IF (all caps mine) I am confident..." And then you ask whether it's "acceptable" to be 100 per cent. Finally, you come to this forum, where you most likely know the overall sentiment about 100 percent anything. So if you're not as confident as you say, that's good! What you really want to be is learning the way to invest wisely, which will give you the best chance to stay the course in the next bear market or market crash.
+1


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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telemark
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Re: Save me from myself. 100% equity position.

Post by telemark »

Another point to consider: how secure are jobs in your industry? Does your employer do a lot of contract work, with hiring and layoffs based on how much money is coming in, or does it have a fairly reliable cash flow and a stable payroll? A big drop in the stock market can be a great opportunity if you can keep your job and continue buying, or it can be a disaster.
IlliniDave
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Re: Save me from myself. 100% equity position.

Post by IlliniDave »

I was 100% equities up until age 44.5. It's not always an easy ride. But in my mind it's hard to make a case that 100% equities is absolutely a bad strategy for every younger investor. The "risk" you face is getting cold feet and not sticking with the strategy when things get unpleasant. Of course, "target-date" type funds for investors in your age group will probably have you 90-95% equity anyway, so 100% isn't a huge difference.

Diversifying within your equity investments, as others have suggested, would definitely be a good idea in my view, regardless of whether or not you're invested in bonds.
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Chadnudj
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Re: Save me from myself. 100% equity position.

Post by Chadnudj »

brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
This looks reasonably smart to me. I, personally, have no problem with someone who is young being 100% invested in equities, so long as (a) they are funneling money into this account, and basically ignoring its rocky returns; (b) are adamant against selling (other than perhaps to rebalance), so they avoid selling low; and (c) they revisit their approach at some pre-determined point (i.e. you write up an investment policy statement that says "On Month Day of the year I turn 40, I will, regardless of what the market is, rebalance my portfolio to the following asset allocation that includes bonds.....".

Hell, I don't necessarily have a problem with anyone at any age being 100% in stocks (many smart investors are, late into their life....then again, they tend to have more money than they know what to do with, so they can weather the storms of volatility and live off of all or a portion of their dividends alone, never touching the principal).

What I did have a problem with, however, was your suggestion of putting everything into a mid-cap fund. 100% equities is fine by me....but I'd be extremely wary of missing out on the returns of large caps, global diversification, or small caps. If you're gonna go 100% equities, at least own the total market (large, medium, small) both in the US and globally (to some degree).
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swimirvine
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Re: Save me from myself. 100% equity position.

Post by swimirvine »

Chadnudj wrote: Hell, I don't necessarily have a problem with anyone at any age being 100% in stocks (many smart investors are, late into their life....then again, they tend to have more money than they know what to do with, so they can weather the storms of volatility and live off of all or a portion of their dividends alone, never touching the principal).

Very good point.

Calculate what your nest egg would be worth in 40 years with an 8% return at your current rate of contribution. Divide that by 25. Do you need that much annually? Do you need to take that much risk?
Now calculate what your nest egg would be with a -5% return. Divide that by 25. Could you live on that much annually? If you answered all the questions "Yes" then 100% equities is okay for you. Think of bonds as lowering that best case scenario return by just a little but pulling up that worst case scenario return by quite a bit more.

The people Chadnudj are referring to would still be able to pay their bills and put food on the table if the market crashed and stayed down for years or decades.
Last edited by swimirvine on Thu Dec 19, 2013 9:22 am, edited 1 time in total.
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azanon
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Re: Save me from myself. 100% equity position.

Post by azanon »

brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
And thank you for letting us (me) know you're going all stock now. Stocks have been pretty awesome for several years now, right? I'm on the constant lookout for folks switching to all stock, and my officemates (particularly the ones that all-of-a-sudden are stock experts and are going to get rich), as that time that we're getting close to the top. I know I'll certainly never forget all of my "buddy" day-traders in 1997-1999 who could have not cared less about stocks a few years prior. This is the sort of thing that prompts me to lower my stock allocation. I dropped from 70 to 50% equity a couple months back. I'm thinking of going down another 10% soon.

The eventual bear market is basically the market where stocks return to their rightful owners. The stinker portfolio is piling on more and more ST treasuries today, and perhaps maybe a bit of precious metals too. It's definitely tilted foreign stock with a healthy dose of EM for the equity portion.
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Re: Save me from myself. 100% equity position.

Post by gerrym51 »

at your age why not.
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Re: Save me from myself. 100% equity position.

Post by pkcrafter »

Azanon wrote:
The eventual bear market is basically the market where stocks return to their rightful owners.
I like that. :happy
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Save me from myself. 100% equity position.

Post by baw703916 »

brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
brown3218,

You should be aware that the Spartan International Index Fund follows the EAFE Index (Europe, Australasia, Far East), which means that it doesn't include Canada or Emerging Markets. On the other hand, the ex-US Index does include these. Emerging markets are more volatile than the EAFE, and therefore *should* have a higher expected return according to portfolio theory. This year, however, developed markets have done better, so you never know. I just wanted to point this out to make sure you don't inadvertently skip Canada + Emerging Markets if in fact you do want to own them.

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Re: Save me from myself. 100% equity position.

Post by VictoriaF »

pkcrafter wrote:Azanon wrote:
The eventual bear market is basically the market where stocks return to their rightful owners.
I like that. :happy
Are the rightful owners polar bears, grizzly bears, or regular brown bears.

Victoria
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Re: Save me from myself. 100% equity position.

Post by baw703916 »

VictoriaF wrote:
pkcrafter wrote:Azanon wrote:
The eventual bear market is basically the market where stocks return to their rightful owners.
I like that. :happy
Are the rightful owners polar bears, grizzly bears, or regular brown bears.

Victoria
Teddy bears!
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Re: Save me from myself. 100% equity position.

Post by longinvest »

brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
I think that added diversification is a good thing.

Maybe it is a coincidence, but it is somewhat worrisome that you come to the Bogleheads forum and ask about a 100% equity portfolio at this time. There were no such threads during the gloom and doom of the 2008-2009 crisis. I don't know why, but new investors seem to discover the attractiveness of the higher expected returns of stocks just after a run up in stock prices.
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Re: Save me from myself. 100% equity position.

Post by Chadnudj »

longinvest wrote:
brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
I think that added diversification is a good thing.

Maybe it is a coincidence, but it is somewhat worrisome that you come to the Bogleheads forum and ask about a 100% equity portfolio at this time. There were no such threads during the gloom and doom of the 2008-2009 crisis. I don't know why, but new investors seem to discover the attractiveness of the higher expected returns of stocks just after a run up in stock prices.
I'm 34. I've been at 100% equities since I started investing (back in June 2001), up until this year when I started my new firm's 401k, where they had a Vanguard Target Date 2040 fund and I decided to set it and forget it (it's still 90%+ equities).

If you're young, willing to handle the volatility (and lord knows I have), and contribute regularly/steadily to take advantage of dollar-cost averaging, there is nothing "wrong" with being 100% in equities, regardless of where the market is when you start doing so. It's just that not all of us satisfy those criteria.
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Re: Save me from myself. 100% equity position.

Post by baw703916 »

longinvest wrote:
brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
I think that added diversification is a good thing.

Maybe it is a coincidence, but it is somewhat worrisome that you come to the Bogleheads forum and ask about a 100% equity portfolio at this time. There were no such threads during the gloom and doom of the 2008-2009 crisis. I don't know why, but new investors seem to discover the attractiveness of the higher expected returns of stocks just after a run up in stock prices.
For the particular case of the OP, in 2008 he/she was probably still in school and wasn't in a position to invest in anything. It's pretty hard to control the economic picture at the point in your life when it's time to start looking for a job, or investing, etc. You can only decide what to do given things as the currently are.
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Re: Save me from myself. 100% equity position.

Post by Ged »

brown3218 wrote:Thanks for the comments. I'm sticking with 100% equity for now, with a plan on gradually introducing bonds no later than age 40. I have also decided to do:
45% Spartan S&P 500
30% Spartan Extended Market
25% Spartan International Index
This sounds like a very good start. Some suggestions for the next steps - learn about other asset classes such as REITs and emerging markets, and add them when you understand them, and use your contribution plan buy every month. This dollar cost averaging will give you some of the same benefits that rebalancing from bonds would.

You might also want to read "The Great Depression: A Diary" by Benjamin Roth. It should give you some perspective into what can happen in a truly severe economic downturn.

I also found Larry Swedroe's book "The Only Guide to Alternative Investments You'll Ever Need: The Good, the Flawed, the Bad, and the Ugly" extremely useful. It paid me back something like 20,000 times (and still counting) what it cost to buy it.
Last edited by Ged on Thu Dec 19, 2013 10:16 am, edited 1 time in total.
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Re: Save me from myself. 100% equity position.

Post by VictoriaF »

baw703916 wrote:
VictoriaF wrote:
pkcrafter wrote:Azanon wrote:
The eventual bear market is basically the market where stocks return to their rightful owners.
I like that. :happy
Are the rightful owners polar bears, grizzly bears, or regular brown bears.

Victoria
Teddy bears!
[OT comment removed by admin LadyGeek]

Victoria
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Re: Save me from myself. 100% equity position.

Post by smpatel »

swimirvine wrote:And thank you for letting us (me) know you're going all stock now.
Thanks from me too! I am looking forward to see how this turns out.
My colleague got out in 2008 and I kept asking him when he goes back in he should let me know. As he started answering my question that he was slowly getting in, I started slowly getting out. I remember in 2007 one of the CPAs in our company wanted to take afternoon off to renovate the house, I learned he was getting into the flipping houses business and this was his second one though he had no experience. I put a sell order on my REITs on that day! I was dumb enough to not understand a link of real estate bubble with the rest of the economy and regret that I did not put a sell order on all equity!
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Re: Save me from myself. 100% equity position.

Post by abuss368 »

If you are aware of the risks involved and be able to stomach a loss of 50% of your equities in a severe downturn (and continue buying more), then go for it.

Most investors should have bonds with the allocation increasing with age. Benjamin Graham (mentor of Warren Buffett) once noted all investors should have at least a 25% of portfolio allocation to bonds. In addition, our investing mentor, Jack Bogle has often recommended "age in bonds". Jack's advice has served us very well.

Bonds will provide safety and income. I found during the downturn of 2008 and 2009, the bond funds present a pool of capital that allowed us to rebalance into equities. In hindsight it was a smart decision. If we did not have the bond fund capital available, we would have been at the mercy of new contributions only. For IRA's that is only $5,500 per year. That downturn required more capital than that amount.

I would strongly consider the Total Bond Market Index fund in your tax advantage account(s) and the Intermediate Term Tax Exempt in your taxable account(s).

Best.
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Re: Save me from myself. 100% equity position.

Post by ofcmetz »

abuss368 wrote:If you are aware of the risks involved and be able to stomach a loss of 50% of your equities in a severe downturn (and continue buying more), then go for it.

Best.
The drop in equities could always be more than 50%.
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Re: Save me from myself. 100% equity position.

Post by VictoriaF »

swimirvine wrote:
Chadnudj wrote: Hell, I don't necessarily have a problem with anyone at any age being 100% in stocks (many smart investors are, late into their life....then again, they tend to have more money than they know what to do with, so they can weather the storms of volatility and live off of all or a portion of their dividends alone, never touching the principal).

Very good point.

Calculate what your nest egg would be worth in 40 years with an 8% return at your current rate of contribution. Divide that by 25. Do you need that much annually? Do you need to take that much risk?
Now calculate what your nest egg would be with a -5% return. Divide that by 25. Could you live on that much annually? If you answered all the questions "Yes" then 100% equities is okay for you. Think of bonds as lowering that best case scenario return by just a little but pulling up that worst case scenario return by quite a bit more.

The people Chadnudj are referring to would still be able to pay their bills and put food on the table if the market crashed and stayed down for years or decades.
Dividing by 25 is too optimistic. The current mainstream thinking is that dividing by 35-40 is more appropriate, and even that is disputed by the economists advocating liability matching.

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Re: Save me from myself. 100% equity position.

Post by abuss368 »

ofcmetz wrote:
abuss368 wrote:If you are aware of the risks involved and be able to stomach a loss of 50% of your equities in a severe downturn (and continue buying more), then go for it.

Best.
The drop in equities could always be more than 50%.
Totally agree. And it could stay there for a few years or more (i.e. Japan over the last 20 years). I have often found when saying that to most folks (i.e. a 50% haircut rather quickly), it makes them pause and reconsider.
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Re: Save me from myself. 100% equity position.

Post by UliKunkel1953 »

abuss368 wrote:
ofcmetz wrote:
abuss368 wrote:If you are aware of the risks involved and be able to stomach a loss of 50% of your equities in a severe downturn (and continue buying more), then go for it.

Best.
The drop in equities could always be more than 50%.
Totally agree. And it could stay there for a few years or more (i.e. Japan over the last 20 years). I have often found when saying that to most folks (i.e. a 50% haircut rather quickly), it makes them pause and reconsider.
Yeah, 50% is enough to get the point across, IMHO. I know it certainly had an impact when I added a "projected value after 50% drop in equities" column to my Asset Allocation spreadsheet.
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Re: Save me from myself. 100% equity position.

Post by Fallible »

If the OP hasn't already, he might be interested in two blogs by Boglehead pro Rick Ferri addressing the youthful among us, in particular "The Flight Path Approach to Age-Based Asset Allocation." The second is "Meet the Young Bogleheads" about savvy investors like Mike Piper. All good background info.

Here are the links, including the forum thread on the first as it contains some very good posts:

http://www.rickferri.com/blog/strategy/ ... llocation/
http://www.bogleheads.org/forum/viewtop ... 0&t=104934

http://www.rickferri.com/blog/strategy/ ... ogleheads/
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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