What is the best investment to have for 50 years?

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samsamat
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What is the best investment to have for 50 years?

Post by samsamat »

Hello Bogleheads! I am wondering what would be the best passive investment to have for 50 years? What would have highest expected return assuming that I will never withdraw any money until 50 years from now.

I am new to investing and am likely to be wrong, but please don't hate me and point to the right direction - I would love to learn. I am a fun of research based conclusions.

I think that over such long period of time of 50 years any volatility and risks will not be the determining factor. So I would think that the best expected return would be from maximizing undiversifiable risks to gain those risk premiums. Therefore I would suggest:
  • 100% equity in ETF
  • Maximizing small-cap, value, and other factors that are likely to have higher expected return.
  • Investing in emerging markets such as China and India since they are perceived riskier and therefore should have a risk premium.
Also my understanding is that diversifying to something less volatile would also reduce the expected returns. I understand that closer to the end of 50 years it would be a good idea to reduce volatility, but let's talk about first of these 50 years. Diversifying diversifiable risks is good.

Therefore, my question would become "Which ETF has highest expected return over long-term"?

Following the above reasoning I would pick some or all of the following ETFs:
  • VFMF - Vanguard U.S. Multifactor ETF
  • VWO - Vanguard FTSE Emerging Markets ETF
  • GSSC - Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF
  • GEM - Goldman Sachs ActiveBeta Emerging Markets Equity ETF
Vanguard ETFs have lower expense ratio but include less of the aforementioned characteristics. I didn't find an ETF that is multifactor, emerging markets, and small cap - but even if there would be one it would probably be very expensive and not perfectly managed.
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LadyGeek
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Re: What is the best investment to have for 50 years?

Post by LadyGeek »

Welcome! I moved your thread to the Personal Investments forum because you are asking what to do for your investments.

Search no more. Years of research has already been done. The best investment for 50 years can be found in the wiki. See: Getting started

When you're ready, post your portfolio information in this thread using the Asking Portfolio Questions format. It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them here.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
BackToSchoolDad
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Re: What is the best investment to have for 50 years?

Post by BackToSchoolDad »

My suggestion, and how I'm investing for the next 50 years, is a big chunk of Market Beta with some factor diversification overlay. I'm aiming for international close to market weight but you can adjust per your taste.

Something like 40% Total Stock Market VTI, 15% Small Cap Value SLYV, 15% Total International VXUS, 15% International Small VSS, and 15% Emerging Markets VWO. You could simplify further with 70% Total World and 15% each of US small value and international small/emerging markets.

Your suggested portfolio could turn out to have massive growth, but it seems like you'd be giving up a lot of traditional diversification.
Living Free
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Re: What is the best investment to have for 50 years?

Post by Living Free »

Where will this be held? In a taxable account or in a tax advantaged account?
wootwoot
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Re: What is the best investment to have for 50 years?

Post by wootwoot »

Bitcoin
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greg24
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Re: What is the best investment to have for 50 years?

Post by greg24 »

VTSMX
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Re: What is the best investment to have for 50 years?

Post by Cycle »

Vtwax, ie total world, aka the haystack
Never look back unless you are planning to go that way
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geerhardusvos
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Re: What is the best investment to have for 50 years?

Post by geerhardusvos »

samsamat wrote: Wed Jul 01, 2020 6:57 pm Hello Bogleheads! I am wondering what would be the best passive investment to have for 50 years? What would have highest expected return assuming that I will never withdraw any money until 50 years from now.

I am new to investing and am likely to be wrong, but please don't hate me and point to the right direction - I would love to learn. I am a fun of research based conclusions.

I think that over such long period of time of 50 years any volatility and risks will not be the determining factor. So I would think that the best expected return would be from maximizing undiversifiable risks to gain those risk premiums. Therefore I would suggest:
  • 100% equity in ETF
  • Maximizing small-cap, value, and other factors that are likely to have higher expected return.
  • Investing in emerging markets such as China and India since they are perceived riskier and therefore should have a risk premium.
Also my understanding is that diversifying to something less volatile would also reduce the expected returns. I understand that closer to the end of 50 years it would be a good idea to reduce volatility, but let's talk about first of these 50 years. Diversifying diversifiable risks is good.

Therefore, my question would become "Which ETF has highest expected return over long-term"?

Following the above reasoning I would pick some or all of the following ETFs:
  • VFMF - Vanguard U.S. Multifactor ETF
  • VWO - Vanguard FTSE Emerging Markets ETF
  • GSSC - Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF
  • GEM - Goldman Sachs ActiveBeta Emerging Markets Equity ETF
Vanguard ETFs have lower expense ratio but include less of the aforementioned characteristics. I didn't find an ETF that is multifactor, emerging markets, and small cap - but even if there would be one it would probably be very expensive and not perfectly managed.
If you like research, you will appreciate that we don’t know anything about the future and research says even the professionals can’t know what will happen next year, let alone 50 years from now. Stick with the three fund portfolio with your desired asset allocation and stay the course
VTSAX and chill
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dogagility
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Re: What is the best investment to have for 50 years?

Post by dogagility »

100% stock index fund. World index sounds about right to me.
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Topic Author
samsamat
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Re: What is the best investment to have for 50 years?

Post by samsamat »

geerhardusvos wrote: Wed Jul 01, 2020 9:04 pm If you like research, you will appreciate that we don’t know anything about the future and research says even the professionals can’t know what will happen next year, let alone 50 years from now. Stick with the three fund portfolio with your desired asset allocation and stay the course
I would agree that that we don't know what will happen next year.

However, I would disagree with "we don’t know anything about the future". I think we pretty much know that stocks will outperform bonds over 50 years. Similarly there are other very compelling arguments that stocks with certain characteristics will likely outperform (Fama and French Three Factor Model).

If we don't know anything about the future, why would you buy riskier VTSAX over bonds? So I believe we do know something.
HIMcDunnough
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Re: What is the best investment to have for 50 years?

Post by HIMcDunnough »

A spouse you'll stay married to, who has similar ideas about money as you do.

EDIT: Doesn't meet the "passive investment" qualification.
Robert20
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Re: What is the best investment to have for 50 years?

Post by Robert20 »

dogagility wrote: Wed Jul 01, 2020 9:42 pm 100% stock index fund. World index sounds about right to me.
Will it be there next 50 years?. How sure we will VT/VTWAX be there for next 50 years?
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1789
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Re: What is the best investment to have for 50 years?

Post by 1789 »

Is this a question about your own situation or is it for a theoretical discussion?
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samsamat
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Re: What is the best investment to have for 50 years?

Post by samsamat »

1789 wrote: Wed Jul 01, 2020 11:40 pm Is this a question about your own situation or is it for a theoretical discussion?
I would say a theoretical discussion. I would then want to use this conclusion in my personal situation. :happy
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LadyGeek
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Re: What is the best investment to have for 50 years?

Post by LadyGeek »

^^^ You need to consider your portfolio in its entirety. It's a matter of managing your level of risk (asset allocation), which is comprised of both stocks and bonds.

Please see my previous post. The intent is to understand what you have now so we can pick the best fund that matches your situation.
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whereskyle
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Re: What is the best investment to have for 50 years?

Post by whereskyle »

samsamat wrote: Wed Jul 01, 2020 6:57 pm Hello Bogleheads! I am wondering what would be the best passive investment to have for 50 years? What would have highest expected return assuming that I will never withdraw any money until 50 years from now.

I am new to investing and am likely to be wrong, but please don't hate me and point to the right direction - I would love to learn. I am a fun of research based conclusions.

I think that over such long period of time of 50 years any volatility and risks will not be the determining factor. So I would think that the best expected return would be from maximizing undiversifiable risks to gain those risk premiums. Therefore I would suggest:
  • 100% equity in ETF
  • Maximizing small-cap, value, and other factors that are likely to have higher expected return.
  • Investing in emerging markets such as China and India since they are perceived riskier and therefore should have a risk premium.
Also my understanding is that diversifying to something less volatile would also reduce the expected returns. I understand that closer to the end of 50 years it would be a good idea to reduce volatility, but let's talk about first of these 50 years. Diversifying diversifiable risks is good.

Therefore, my question would become "Which ETF has highest expected return over long-term"?

Following the above reasoning I would pick some or all of the following ETFs:
  • VFMF - Vanguard U.S. Multifactor ETF
  • VWO - Vanguard FTSE Emerging Markets ETF
  • GSSC - Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF
  • GEM - Goldman Sachs ActiveBeta Emerging Markets Equity ETF
Vanguard ETFs have lower expense ratio but include less of the aforementioned characteristics. I didn't find an ETF that is multifactor, emerging markets, and small cap - but even if there would be one it would probably be very expensive and not perfectly managed.
VT (Vanguard Total World ETF, ER .08) is a multifactor fund that includes emerging markets and small caps, and, yep, absolutely everything else. If you have 50 years, the most important thing you need to do is pick a portfolio you'll stick with. In my opinion, the best way to do that is to pick a single fund that has everything and is virtually guaranteed to have at least some of its holdings do well at all times. In my opinion, the more funds you add, the more difficult it becomes to stay the course when you see something like small cap value go nowhere for 15 years.

You will not be disappointed if you buy VT and then do nothing but add to the position for 50 years. I think your proposed funds are unnecessarily overcomplicated. Are we even going to be calling China an emerging market in 20 years? Why take the risk that the fund will sell all its Chinese equities because it is now buying Congolese equities? With that much time on my side, I'd keep it simple, buy everything, and let time work its magic.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
adestefan
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Re: What is the best investment to have for 50 years?

Post by adestefan »

HIMcDunnough wrote: Wed Jul 01, 2020 10:35 pm A spouse you'll stay married to, who has similar ideas about money as you do.

EDIT: Doesn't meet the "passive investment" qualification.
That and any education you accumulate along the way.
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