Why not 100% stocks?
Why not 100% stocks?
Hello!
When I first setup my investment accounts after getting my first big job out of college I went with a more simplistic approach and picked the best funds I could for my 401K and target data funds for my HSA/ROTH IRA. Ill be starting out 2022 with a sizable bump in pay and am thinking its time to revisit my strategy and also look at rebalancing my 401K funds.
My risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
Age: 29
Risk Tolerance: High
Yearly Salary 80k
Current Allocations
Fidelity Health Savings Account: $8677.70
FFLEX - 100%
Empower-Retirement 401K: $41830.71
FSKAX - 77%
VTIAX - 22%
WFBIX - 1%
Schwab ROTH IRA: 3061.14
SWYNX - 100%
Future Allocations
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Really just looking for a gut check here before I plan any changes. Thanks to all that view and reply!
When I first setup my investment accounts after getting my first big job out of college I went with a more simplistic approach and picked the best funds I could for my 401K and target data funds for my HSA/ROTH IRA. Ill be starting out 2022 with a sizable bump in pay and am thinking its time to revisit my strategy and also look at rebalancing my 401K funds.
My risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
Age: 29
Risk Tolerance: High
Yearly Salary 80k
Current Allocations
Fidelity Health Savings Account: $8677.70
FFLEX - 100%
Empower-Retirement 401K: $41830.71
FSKAX - 77%
VTIAX - 22%
WFBIX - 1%
Schwab ROTH IRA: 3061.14
SWYNX - 100%
Future Allocations
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Really just looking for a gut check here before I plan any changes. Thanks to all that view and reply!
Last edited by hod928 on Mon Dec 06, 2021 4:34 pm, edited 2 times in total.
Re: Switch from target date funds to individual funds?
Are you looking to exit your mixed target-date funds entirely, and move all of your existing money into the individual funds you outline here? I don't believe doing so will trigger a taxable event, so give that move some thought. Simplicity--that is, holding as few funds as is possible--is key to long-term investment success.
I initially misread your post and thought you were suggesting a 60%/40% stock/bond portfolio, but you appear to be suggesting a 60%/40% US equities/international equities portfolio. There's a ton of debate on this board about how much--if any--international exposure an investor should have. To my mind, 40% seems a little high; if I were you, I'd consider going with something like 25%. One last question: are you sure you'll be able to stomach a drop--and perhaps a sustained recession--in the equities market while holding no bonds? Many all-equities investors here like to flaunt that they're impervious to market movements. Do a gut check as to how you think you'd react, and invest accordingly.
Oh--and congrats on saving so much at such a young age. At 29, my net worth was negative. Good luck!
I initially misread your post and thought you were suggesting a 60%/40% stock/bond portfolio, but you appear to be suggesting a 60%/40% US equities/international equities portfolio. There's a ton of debate on this board about how much--if any--international exposure an investor should have. To my mind, 40% seems a little high; if I were you, I'd consider going with something like 25%. One last question: are you sure you'll be able to stomach a drop--and perhaps a sustained recession--in the equities market while holding no bonds? Many all-equities investors here like to flaunt that they're impervious to market movements. Do a gut check as to how you think you'd react, and invest accordingly.
Oh--and congrats on saving so much at such a young age. At 29, my net worth was negative. Good luck!
Last edited by mikejuss on Sun Dec 05, 2021 11:38 am, edited 2 times in total.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Re: Switch from target date funds to individual funds?
Everyone risks tolerance is different but as young as you are, I’d suggest being more aggressive. Transition to a more conservative portfolio in 20 years.
Re: Switch from target date funds to individual funds?
My thought is moving to a 2 fund 60/40 approach for at-least the next 5-7 years and then starting to bring in bonds.
Usually, 60/40 refers to 60% stocks and 40% bonds.
So what do you mean with this shorthand? Large cap/small cap? USA/international?
Usually, 60/40 refers to 60% stocks and 40% bonds.
So what do you mean with this shorthand? Large cap/small cap? USA/international?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Switch from target date funds to individual funds?
I personally am an advocate in general that TD funds are actually more complicated and harder to understand than buying individual funds. For money in taxable accounts TD funds are not recommended. For money in tax protected accounts keeping rebalanced is not much of a chore. One might want to have some care at not going overboard with all kinds of different individual funds, however. Then again, it seems many TD funds include things one might not even include in a simpler array of funds. That could include international bonds, TIPS (unless you explicitly want them), and debatable choices in international equities.
Re: Switch from target date funds to individual funds?
60% total market and 40% international. Specifically this would be my allocations moving forward.
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Re: Switch from target date funds to individual funds?
Thanks! It does feel good and is a good reminder when I talk to my peers and realizing just how much further ahead I am then most!!mikejuss wrote: ↑Sun Dec 05, 2021 11:24 am Are you looking to exit your mixed target-date funds entirely, and move all of your existing money into the individual funds you outline here? I don't believe doing so will trigger a taxable event, so give that move some thought. Simplicity--that is, holding as few funds as is possible--is key to long-term investment success.
I initially misread your post and thought you were suggesting a 60%/40% stock/bond portfolio, but you appear to be suggesting a 60%/40% US equities/international equities portfolio. There's a ton of debate on this board about how much--if any--international exposure an investor should have. To my mind, 40% seems a little high; if I were you, I'd consider going with something like 25%. One last question: are you sure you'll be able to stomach a drop--and perhaps a sustained recession--in the equities market while holding no bonds? Many all-equities investors here like to flaunt that they're impervious to market movements. Do a gut check as to how you think you'd react, and invest accordingly.
Oh--and congrats on saving so much at such a young age. At 29, my net worth was negative. Good luck!
Re: Switch from target date funds to individual funds?
I really do like the one fund approach that a target date fund brings to the table. One of the reasons I am thinking of switching is how most target dates remain at 10% bonds for the first 15-20 years before starting to be more aggressive in terms of switching over to bonds. This is where I think I can handle the extra risk by removing bonds totally from my portfolio.dbr wrote: ↑Sun Dec 05, 2021 11:58 am I personally am an advocate in general that TD funds are actually more complicated and harder to understand than buying individual funds. For money in taxable accounts TD funds are not recommended. For money in tax protected accounts keeping rebalanced is not much of a chore. One might want to have some care at not going overboard with all kinds of different individual funds, however. Then again, it seems many TD funds include things one might not even include in a simpler array of funds. That could include international bonds, TIPS (unless you explicitly want them), and debatable choices in international equities.
I believe all my accounts are tax protected right? Work place provided 401K, HSA and Roth IRA. So I should be good if I were to leave my Target Date funds in the Roth IRA and HSA?
Re: Switch from target date funds to individual funds?
You'll probably end up with more money at the end if you just leave it in target date funds.
Oh. Maybe retitle the thread to "Why not 100% stocks?".hod928 wrote: ↑Sun Dec 05, 2021 3:48 pm One of the reasons I am thinking of switching is how most target dates remain at 10% bonds for the first 15-20 years before starting to be more aggressive in terms of switching over to bonds. This is where I think I can handle the extra risk by removing bonds totally from my portfolio.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: Switch from target date funds to individual funds?
As long as you are all tax advantaged and have no taxable accounts, staying with the TD funds is fine. I like the idea of buying more stocks when they are down and selling stocks when they are up, which you get with the rebalancing of a TD fund.
But perhaps you like tinkering with your investments and rebalancing between US and International will scratch that itch, which is fine too.
But perhaps you like tinkering with your investments and rebalancing between US and International will scratch that itch, which is fine too.
Re: Switch from target date funds to individual funds?
Got it.
Just as a FYI, people reading your posts won’t know which funds/ETFs that most of those tickers represent.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Switch from target date funds to individual funds?
You cannot and should not base risk tolerance on age alone. Until you have been through
a bear market, you don't know what your reaction to seeing a significant portfolio drop will be.
If you have survived a bear market, then you know already. Generally speaking, you don't need bonds until
you are 40, if can tolerate steep drops.
a bear market, you don't know what your reaction to seeing a significant portfolio drop will be.
If you have survived a bear market, then you know already. Generally speaking, you don't need bonds until
you are 40, if can tolerate steep drops.
Re: Switch from target date funds to individual funds?
Indeed.Beensabu wrote: ↑Sun Dec 05, 2021 4:02 pm You'll probably end up with more money at the end if you just leave it in target date funds.
Oh. Maybe retitle the thread to "Why not 100% stocks?".hod928 wrote: ↑Sun Dec 05, 2021 3:48 pm One of the reasons I am thinking of switching is how most target dates remain at 10% bonds for the first 15-20 years before starting to be more aggressive in terms of switching over to bonds. This is where I think I can handle the extra risk by removing bonds totally from my portfolio.
Below I have compared 100% stocks with VT to Vanguard's 2050 Target Date Fund with 10% bond (VFIFX). Going back to 2009, VFIFX has actually outperformed VT. The benchmark is Vanguard Balanced Investor, which they both beat, but, again, probably not by as much as you'd think.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
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Re: Switch from target date funds to individual funds?
You may also want to try what I do with my TDF focused accounts: add a couple satellite funds to complement your TDF.
For example, I have 80% of my 457 in the TDF, and then 10% each in a small cap and emerging markets fund. This serves to boost the overall equity allocation and provide some factor diversification, raising the risk allocation.
For example, I have 80% of my 457 in the TDF, and then 10% each in a small cap and emerging markets fund. This serves to boost the overall equity allocation and provide some factor diversification, raising the risk allocation.
Re: Switch from target date funds to individual funds?
bgf wrote: ↑Mon Dec 06, 2021 8:23 amIndeed.Beensabu wrote: ↑Sun Dec 05, 2021 4:02 pm You'll probably end up with more money at the end if you just leave it in target date funds.
Oh. Maybe retitle the thread to "Why not 100% stocks?".hod928 wrote: ↑Sun Dec 05, 2021 3:48 pm One of the reasons I am thinking of switching is how most target dates remain at 10% bonds for the first 15-20 years before starting to be more aggressive in terms of switching over to bonds. This is where I think I can handle the extra risk by removing bonds totally from my portfolio.
Below I have compared 100% stocks with VT to Vanguard's 2050 Target Date Fund with 10% bond (VFIFX). Going back to 2009, VFIFX has actually outperformed VT. The benchmark is Vanguard Balanced Investor, which they both beat, but, again, probably not by as much as you'd think.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Wow this is awesome! Thanks for showing me this. This paints a clear picture of why TD funds may just be the best of both worlds after all. Appreciate you showing me that plus thats a cool tool to add to my bookmarks!
Re: Switch from target date funds to individual funds?
If my understanding of the tax advantaged accounts are correct all three of my accounts should be in fact tax advantaged correct?rkhusky wrote: ↑Sun Dec 05, 2021 4:20 pm As long as you are all tax advantaged and have no taxable accounts, staying with the TD funds is fine. I like the idea of buying more stocks when they are down and selling stocks when they are up, which you get with the rebalancing of a TD fund.
But perhaps you like tinkering with your investments and rebalancing between US and International will scratch that itch, which is fine too.
Re: Switch from target date funds to individual funds?
Those results don't show that one of those funds is better than another. Those results shows that those choices are not different from one another. You should probably put about a +/- 2% error bar around the CAGR numbers, maybe more as a projection of future returns. Also the risk in the balanced index fund really is less than in the other two.
Re: Why not 100% stocks?
The truth is that it doesn't really matter what you do at this age as long as you keep working and investing. Anything you can stick to will be fine. When your assets become significant relative to your earning potential (~10 year before earliest retirement) then asset protection becomes important to your financial plan. There are only a couple of routes to financial independence and living below your means and/or investing in your career are the most probable ways to get there.
My advice is generally a single target date fund and forget it. You may have the risk tolerance for 100% stocks or even a bit of leveraged funds, but only you know this for sure.
My advice is generally a single target date fund and forget it. You may have the risk tolerance for 100% stocks or even a bit of leveraged funds, but only you know this for sure.
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Re: Switch from target date funds to individual funds?
Based on the size of their accounts, we can safely assume the OP as already been through the Covid bear market. A 401k invested in those funds could not have grown to $41k by now if the OP just started contributing after April 2020. Clearly, they must have started long before the Covid crashbalbrec2 wrote: ↑Mon Dec 06, 2021 8:13 am You cannot and should not base risk tolerance on age alone. Until you have been through
a bear market, you don't know what your reaction to seeing a significant portfolio drop will be.
If you have survived a bear market, then you know already. Generally speaking, you don't need bonds until
you are 40, if can tolerate steep drops.
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Re: Why not 100% stocks?
My wife is early forties and her Vanguard 2045 TDF is 11% bonds. (Even 11% can add up to a substantial bond holding.)
That's about 10 years from now for you, right? So just for your reference.
It looks like the Vanguard ramp for my wife is to move slowly, but increasingly, towards bonds for the next four years to get her to 18.6% Bonds at 20 years out from retirement in her mid 40's.
You can see the whole Vanguard TDF glide path when you scroll down here.
Fwiw, in my experience, a 10% Bond Allocation in a TDF can still result in individual 401(k) contributions that tilt heavily to bonds, and vice versa when markets are down. (I recently had a 60% bond allocation 401(k) contribution, due to rebalancing with new money, even though my AA is 22% bonds!)
That's about 10 years from now for you, right? So just for your reference.
It looks like the Vanguard ramp for my wife is to move slowly, but increasingly, towards bonds for the next four years to get her to 18.6% Bonds at 20 years out from retirement in her mid 40's.
You can see the whole Vanguard TDF glide path when you scroll down here.
Fwiw, in my experience, a 10% Bond Allocation in a TDF can still result in individual 401(k) contributions that tilt heavily to bonds, and vice versa when markets are down. (I recently had a 60% bond allocation 401(k) contribution, due to rebalancing with new money, even though my AA is 22% bonds!)
Re: Why not 100% stocks?
There was a covid crash? Honest to god, I missed it entirely.
Re: Why not 100% stocks?
No reason not to hold 100% stocks if your horizon is perpetuity.
Also you need some liquidity to run your household. So 100% stocks plus cash or cash equivalent.
Also you need some liquidity to run your household. So 100% stocks plus cash or cash equivalent.
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Re: Why not 100% stocks?
100% stocks is fine, so long as you don't panic sell. The problem is this isn't easy to know in advance.
Recently I saw a poster who had practiced passive investing for 19 years...then panicked last March, selling at the bottom.
Recently I saw a poster who had practiced passive investing for 19 years...then panicked last March, selling at the bottom.
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Re: Why not 100% stocks?
If you have access to cash to cover 6 to 12 months' expense needs, are confident of being employed at all times (except short gaps) and can sleep well through market swings, you can have 100% in stocks. Stocks (including reinvested dividends) have typically recovered in 29 months on an average, after a market crash. You may also want to take the investor questionnaire from Vanguard to determine your optimal asset allocation.
Last edited by kissmoneyblog on Mon Dec 06, 2021 7:31 pm, edited 3 times in total.
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Re: Why not 100% stocks?
Always? Is this true?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:15 pmStocks (including reinvested dividends) have always recovered in 4 to 5 years after a market crash.
Re: Why not 100% stocks?
The possibility of a megacrash that never recovers in one's investment horizon is just too high.
If one is going to be 100% stocks I think one ought to adopt the mindset of a trader and have an exit planned if things get rough.
If one is going to be 100% stocks I think one ought to adopt the mindset of a trader and have an exit planned if things get rough.
Last edited by 000 on Mon Dec 06, 2021 7:28 pm, edited 1 time in total.
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Re: Why not 100% stocks?
The time it takes for investors to recover their money - from the top of the market, to the bottom, and back up again - has averaged 29 months, assuming that dividends were reinvested. The longest cycle lasted a little over 5 years (August 2000 to October 2006, after the tech-stock bust). The shortest one, starting in June 1998, took a mere 5 months.Triple digit golfer wrote: ↑Mon Dec 06, 2021 7:19 pmAlways? Is this true?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:15 pmStocks (including reinvested dividends) have always recovered in 4 to 5 years after a market crash.
I have changed my original reply to 29 months on average. Thanks for catching this.
Last edited by kissmoneyblog on Mon Dec 06, 2021 8:20 pm, edited 1 time in total.
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Re: Why not 100% stocks?
How about the 1970s, or Great Depression, or 2008-09 crash?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:27 pmThe time it takes for investors to recover their money - from the top of the market, to the bottom, and back up again - has averaged 29 months, assuming that dividends were reinvested. The longest cycle lasted a little over 5 years (August 2000 to October 2006, after the tech-stock bust). The shorted one, starting in June 1998, took a mere 5 months.Triple digit golfer wrote: ↑Mon Dec 06, 2021 7:19 pmAlways? Is this true?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:15 pmStocks (including reinvested dividends) have always recovered in 4 to 5 years after a market crash.
I have changed my original reply to 29 months on average. Thanks for catching this.
I don't know, that's why I'm asking.
Re: Switch from target date funds to individual funds?
Yes.hod928 wrote: ↑Mon Dec 06, 2021 4:36 pmIf my understanding of the tax advantaged accounts are correct all three of my accounts should be in fact tax advantaged correct?rkhusky wrote: ↑Sun Dec 05, 2021 4:20 pm As long as you are all tax advantaged and have no taxable accounts, staying with the TD funds is fine. I like the idea of buying more stocks when they are down and selling stocks when they are up, which you get with the rebalancing of a TD fund.
But perhaps you like tinkering with your investments and rebalancing between US and International will scratch that itch, which is fine too.
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Re: Why not 100% stocks?
After 2008-9 crash, it took less than 5 years (including dividends). I do not know how long it took after 1970s crash. You may want to look it up and post your findings here. Thanks!Triple digit golfer wrote: ↑Mon Dec 06, 2021 7:34 pmHow about the 1970s, or Great Depression, or 2008-09 crash?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:27 pmThe time it takes for investors to recover their money - from the top of the market, to the bottom, and back up again - has averaged 29 months, assuming that dividends were reinvested. The longest cycle lasted a little over 5 years (August 2000 to October 2006, after the tech-stock bust). The shorted one, starting in June 1998, took a mere 5 months.Triple digit golfer wrote: ↑Mon Dec 06, 2021 7:19 pmAlways? Is this true?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:15 pmStocks (including reinvested dividends) have always recovered in 4 to 5 years after a market crash.
I have changed my original reply to 29 months on average. Thanks for catching this.
I don't know, that's why I'm asking.
Re: Why not 100% stocks?
Is that real or nominal?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:27 pmThe time it takes for investors to recover their money - from the top of the market, to the bottom, and back up again - has averaged 29 months, assuming that dividends were reinvested. The longest cycle lasted a little over 5 years (August 2000 to October 2006, after the tech-stock bust). The shorted one, starting in June 1998, took a mere 5 months.Triple digit golfer wrote: ↑Mon Dec 06, 2021 7:19 pmAlways? Is this true?kissmoneyblog wrote: ↑Mon Dec 06, 2021 7:15 pmStocks (including reinvested dividends) have always recovered in 4 to 5 years after a market crash.
I have changed my original reply to 29 months on average. Thanks for catching this.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Why not 100% stocks?
At 29, there is nothing wrong with 100% stocks, just make sure you don't bail in a 50% drop.
We were nearly 100% stocks for decades.
I had to open the statements during 2008/09 because my wife couldn't stomach the losses.
She is actually more aggressive than me now, but nearing 64 is not the same as 29.
We were nearly 100% stocks for decades.
I had to open the statements during 2008/09 because my wife couldn't stomach the losses.
She is actually more aggressive than me now, but nearing 64 is not the same as 29.
Re: Why not 100% stocks?
OP,
1) What is your annual expense?
2) What is the size of your emergency fund?
3) How do you know that you would not be unemployed in the coming recession?
4) How do you know how long your future unemployment would last?
5) If the stock market drops 50% in the coming recession and you are unemployed, how long can you last?
"Why not 100% stock?"
6) " Man plan, God laugh!"
- Yiddish proverb
KlangFool
1) What is your annual expense?
2) What is the size of your emergency fund?
3) How do you know that you would not be unemployed in the coming recession?
4) How do you know how long your future unemployment would last?
5) If the stock market drops 50% in the coming recession and you are unemployed, how long can you last?
"Why not 100% stock?"
6) " Man plan, God laugh!"
- Yiddish proverb
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Why not 100% stocks?
100% stocks perfectly fine at your age - as long as you keep investing weekly/monthly/whatever frequency you choose. If u never touch that till 60+yrs age then its perfectly fine.hod928 wrote: ↑Sun Dec 05, 2021 11:11 am Hello!
When I first setup my investment accounts after getting my first big job out of college I went with a more simplistic approach and picked the best funds I could for my 401K and target data funds for my HSA/ROTH IRA. Ill be starting out 2022 with a sizable bump in pay and am thinking its time to revisit my strategy and also look at rebalancing my 401K funds.
My risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
Age: 29
Risk Tolerance: High
Yearly Salary 80k
Current Allocations
Fidelity Health Savings Account: $8677.70
FFLEX - 100%
Empower-Retirement 401K: $41830.71
FSKAX - 77%
VTIAX - 22%
WFBIX - 1%
Schwab ROTH IRA: 3061.14
SWYNX - 100%
Future Allocations
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Really just looking for a gut check here before I plan any changes. Thanks to all that view and reply!
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Re: Why not 100% stocks?
at your age there is nothing wrong with 100% in stocks. From my first W-2 paycheck to my last W-2 paycheck at the age of 50 I was 100% in stocks. My daughter is currently 25 and 100% in stocks.
Re: Why not 100% stocks?
Great questions! Here are my answersKlangFool wrote: ↑Mon Dec 06, 2021 8:05 pm OP,
1) What is your annual expense?
2) What is the size of your emergency fund?
3) How do you know that you would not be unemployed in the coming recession?
4) How do you know how long your future unemployment would last?
5) If the stock market drops 50% in the coming recession and you are unemployed, how long can you last?
"Why not 100% stock?"
6) " Man plan, God laugh!"
- Yiddish proverb
KlangFool
1. 18000$ in yearly expenses if I look at just my monthly reoccurring bills
2. I have 10k in a HYSA
3. My company is pretty recession proof. We had better years in both 2008-2009 aswell as 2020-2021. I work for a third party hardware data center maintenance company. People come to us to save money.
4. I could make it about 7 months on emergency fund without cutting things
5. same as above!
Re: Switch from target date funds to individual funds?
Correct have been chipping away since 2016moneyflowin wrote: ↑Mon Dec 06, 2021 5:28 pmBased on the size of their accounts, we can safely assume the OP as already been through the Covid bear market. A 401k invested in those funds could not have grown to $41k by now if the OP just started contributing after April 2020. Clearly, they must have started long before the Covid crashbalbrec2 wrote: ↑Mon Dec 06, 2021 8:13 am You cannot and should not base risk tolerance on age alone. Until you have been through
a bear market, you don't know what your reaction to seeing a significant portfolio drop will be.
If you have survived a bear market, then you know already. Generally speaking, you don't need bonds until
you are 40, if can tolerate steep drops.
Re: Why not 100% stocks?
hod928,hod928 wrote: ↑Wed Dec 08, 2021 2:05 pmGreat questions! Here are my answersKlangFool wrote: ↑Mon Dec 06, 2021 8:05 pm OP,
1) What is your annual expense?
2) What is the size of your emergency fund?
3) How do you know that you would not be unemployed in the coming recession?
4) How do you know how long your future unemployment would last?
5) If the stock market drops 50% in the coming recession and you are unemployed, how long can you last?
"Why not 100% stock?"
6) " Man plan, God laugh!"
- Yiddish proverb
KlangFool
1. 18000$ in yearly expenses if I look at just my monthly reoccurring bills
2. I have 10k in a HYSA
3. My company is pretty recession proof. We had better years in both 2008-2009 aswell as 2020-2021. I work for a third party hardware data center maintenance company. People come to us to save money.
4. I could make it about 7 months on emergency fund without cutting things
5. same as above!
1) What if you are wrong, then what?
Telecom was a 100+ years old industry. It was one of the most stable industry until Telecom Bust. How old is your industry? Can you "Sleep Well At Night" (SWAN) with 100% stock if your employer start laying off people in the coming recession? Can you SWAN if you know that you can only last 7 months with your EF until you have to sell your stock at a huge loss?
<< 1. 18000$ in yearly expenses if I look at just my monthly recurring bills>>
2) What is your actual annual expense? It should be more than 18K per year.
3) What is your annual savings/investment?
KlangFool
Last edited by KlangFool on Wed Dec 08, 2021 3:18 pm, edited 2 times in total.
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Why not 100% stocks?
I don't recall seeing any guarantees that the US stock market won't experience a crash like Japan where even after 30 years their stock markets have not regained the level it had December 1989 - 38957. Today 28,860. The US has had an exceptional run being the dominant world power for over 70 years. I hope it continues but as I said, no guarantees. So I don't hold 100% stocks.
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Re: Why not 100% stocks?
OP, looks like you have a very high saving rate, and secure job so going 100% in stock is a good move. The important thing is to stay the course and just keep adding to the account regardless of the markets up or down.
Re: Why not 100% stocks?
I think 100% stock is just fine, especially if you were in the market in 2020 and weren't tempted to do anything stupid (sell stuff) when the market stumbled in the spring. That's what I did with my kids' educational IRAs which were started 15-18 years ahead of college . . . Still have them at 100% stock now that our last kid is in college. To me, it's a no brainer that long term funds that you aren't terribly dependent on should be all stocks, AS LONG AS your stomach can handle it.
Personally, our own portfolio was 100% stock until we were 45 & 50 years old. Then we moved to 80/20. Six years later, we're at 75/25 (and nudging down 1% a year until we retire (probably 4-8 years from now) when we'll go 60/40 -- with the first $3M, any extra beyond that will probably be all stocks, because that "extra" will be "fun money," not money we'd rely on to support ourselves.
Personally, our own portfolio was 100% stock until we were 45 & 50 years old. Then we moved to 80/20. Six years later, we're at 75/25 (and nudging down 1% a year until we retire (probably 4-8 years from now) when we'll go 60/40 -- with the first $3M, any extra beyond that will probably be all stocks, because that "extra" will be "fun money," not money we'd rely on to support ourselves.
Re: Why not 100% stocks?
carminered2019,
Why do you think that to be true?
In fact, looking at the actual numbers, the saving rate has to be very low.
<< Age: 29
Yearly Salary 80k
EF = 10K
Portfolio = 52K to 53K>>
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
- ruralavalon
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- Location: Illinois
Re: Why not 100% stocks?
You probably didn't have large (or any) investments during the last prolonged market crash which started in 2008, when you were just 16 years old old.
So you have no actual experience to know the level of your risk tolerance.
It's easy to say you can tolerate a huge drop in your investments without selling in a panic, it's harder to do.
I suggest that you read Your Money and Your Brain, by Jason Zweig.
Using an allocation fund seems to inoculate the investor against behavioral errors, and so produce higher investor returns. Morningstar (8/15/2019), "Mind the Gap 2019".hod928 wrote: ↑Sun Dec 05, 2021 11:11 amMy risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
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Re: Why not 100% stocks?
Expenses is 18K making 80K per year is pretty darn good if you ask me.
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- Joined: Tue Jun 25, 2019 10:52 pm
Re: Why not 100% stocks?
I acknowledge I have not read the whole thread. Why not 100% stocks ? Because the temptation to sell in the middle of a devastatingly sharp market crash (or a deep, slower market meltdown) will rear its head. And of course panic selling is about the worst thing you can do. And most of all, you really don't know how you will behave until you are actually suffering through it. Those little risk tolerance quizzes are pretty meaningless. How high, really, is your risk tolerance ? It's a question of what you will actually do when Sept 2008 comes around, then Oct 2008, and Nov 2008 and you are 45 and your $1M+ nest egg has been halved and your spouse is really nervous. Can you stomach it ? How do you know you will be able to stomach it ?hod928 wrote: ↑Sun Dec 05, 2021 11:11 am Hello!
When I first setup my investment accounts after getting my first big job out of college I went with a more simplistic approach and picked the best funds I could for my 401K and target data funds for my HSA/ROTH IRA. Ill be starting out 2022 with a sizable bump in pay and am thinking its time to revisit my strategy and also look at rebalancing my 401K funds.
My risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
Age: 29
Risk Tolerance: High
Yearly Salary 80k
Current Allocations
Fidelity Health Savings Account: $8677.70
FFLEX - 100%
Empower-Retirement 401K: $41830.71
FSKAX - 77%
VTIAX - 22%
WFBIX - 1%
Schwab ROTH IRA: 3061.14
SWYNX - 100%
Future Allocations
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Really just looking for a gut check here before I plan any changes. Thanks to all that view and reply!
An important key to investing is having a well-calibrated sense of your future regret.
Re: Why not 100% stocks?
carminered2019,carminered2019 wrote: ↑Wed Dec 08, 2021 3:31 pmExpenses is 18K making 80K per year is pretty darn good if you ask me.
1) 18K is not the total annual expense. It is ONLY the recurring expense.
2) If the annual expense is 18K per year, OP would not be having a portfolio of 52K to 53K plus EF of 10K with a gross income of 80K at 29 years old. The numbers do not add up.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Why not 100% stocks?
OP i am 29 and i do not own any bonds.
when march 2020 happened did you:
1) get scared and contemplate selling your equities?
2) get excited and try to save as much as possible?
if you are closer to camp #2, you shouldn't own bonds at your age.
once you realize that the fed's third mandate is supporting the equities market, which in turn supports all of the retirement accounts, pensions of our entire country, as well as the overwhelming majority of the wealth of the most powerful people in this nation, then you won't have an issue with 50% corrections. the only problem is waiting them out, which older folks and retirees don't have the luxury of doing. you are 29 w/ a job so you can buy during a correction.
if you were older and closer to retirement it would be a different story and different advice.
when march 2020 happened did you:
1) get scared and contemplate selling your equities?
2) get excited and try to save as much as possible?
if you are closer to camp #2, you shouldn't own bonds at your age.
once you realize that the fed's third mandate is supporting the equities market, which in turn supports all of the retirement accounts, pensions of our entire country, as well as the overwhelming majority of the wealth of the most powerful people in this nation, then you won't have an issue with 50% corrections. the only problem is waiting them out, which older folks and retirees don't have the luxury of doing. you are 29 w/ a job so you can buy during a correction.
if you were older and closer to retirement it would be a different story and different advice.
S&P 500 + Bitcoin
Re: Why not 100% stocks?
Great post. Interesting idea about the third Fed mandate... Wealthy people around the world are invested in US equities, so the argument holds water in my view.novolog wrote: ↑Wed Dec 08, 2021 4:10 pm OP i am 29 and i do not own any bonds.
when march 2020 happened did you:
1) get scared and contemplate selling your equities?
2) get excited and try to save as much as possible?
if you are closer to camp #2, you shouldn't own bonds at your age.
once you realize that the fed's third mandate is supporting the equities market, which in turn supports all of the retirement accounts, pensions of our entire country, as well as the overwhelming majority of the wealth of the most powerful people in this nation, then you won't have an issue with 50% corrections. the only problem is waiting them out, which older folks and retirees don't have the luxury of doing. you are 29 w/ a job so you can buy during a correction.
if you were older and closer to retirement it would be a different story and different advice.
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- Joined: Fri Apr 10, 2015 12:29 am
Re: Why not 100% stocks?
I would strongly prefer FSKAX to FZROX for the greater transparency of tracking an index managed by a 3rd party, but that's my preference.hod928 wrote: ↑Sun Dec 05, 2021 11:11 am Hello!
When I first setup my investment accounts after getting my first big job out of college I went with a more simplistic approach and picked the best funds I could for my 401K and target data funds for my HSA/ROTH IRA. Ill be starting out 2022 with a sizable bump in pay and am thinking its time to revisit my strategy and also look at rebalancing my 401K funds.
My risk tolerance is high as I still am young so part of my reason for wanting to split up the target date funds would be to lower my bond ratio (both funds around 10% currently). My thought is moving to a 2 fund 60% total market/40% international approach for at-least the next 5-7 years and then starting to bring in bonds. While my goal is to retire early I like to plan that I would be working until I am at-least 65. This is one of the reasons why I believe my risk tolerance is higher as I will have more time in the market to weather a down turn.
Age: 29
Risk Tolerance: High
Yearly Salary 80k
Current Allocations
Fidelity Health Savings Account: $8677.70
FFLEX - 100%
Empower-Retirement 401K: $41830.71
FSKAX - 77%
VTIAX - 22%
WFBIX - 1%
Schwab ROTH IRA: 3061.14
SWYNX - 100%
Future Allocations
Fidelity Health Savings Account
FZROX - 60%
FZILX - 40%
Empower-Retirement 401K
FSKAX - 60%
VTIAX - 40%
Schwab ROTH IRA
SWTSX - 60%
SWISX - 40%
Really just looking for a gut check here before I plan any changes. Thanks to all that view and reply!
It's all fine as long as you have the nerve to stay the course with 100% equities.