100% Stock Portfolio?

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jbranx
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Re: 100% Stock Portfolio?

Post by jbranx » Thu Jun 08, 2017 2:35 pm

Economist and Nobel laureate Paul Samuelson, who had a great influence on Bogle's decision to go with the first index fund available to retail investors, had a good observation on why caution is in order on an all-in conviction that stocks are the best single bet to build and sustain wealth: Quote not exact, but "We have only one 90-year history of modern capitalism, and a sample of one is not sufficient on which to build high confidence statistical models." (Least that is what I think he meant!!). Age 71, many decades 100% stocks, now 65/35, half international, rest intermediate munis.

Here's Jack's credit to Samuelson in his history of the Vanguard 500 Fund:

Nobel Laureate economist Paul Samuelson played a major role in precipitating the index fund 's
creation. While I'd hinted at the idea of an index fund in my senior thesis at Princeton University in 1951
(mutual funds "may make no claim to superiority over the market averages"), Dr. Samuelson was much
more forceful, strengthening my backbone for the hard task ahead: taking on the industry establishment.

His lead article, "Challenge to Judgment," caught me at the perfect moment. Published in the
inaugural edition of the Journal of Portfolio Management in the autumn of 1974, he pleaded "that, at the
least, some large foundation set up an in-house portfolio that tracks the S&P 500 Index-if only for the
purpose of setting up a naive model against which their in-house gunslingers can measure their prowess.

The American Economic Association might contemplate setting up for its members a no-load, no-management-fee,
virtually no-transaction-turnover fund," noting, however, the perhaps insurmountable
difficulty that "there may be less supernumerary wealth to be found among 20,000 economists than
among 20,000 chiropractors." He laid down an express challenge for somebody, somewhere to start an
index fund."

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HomerJ
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Re: 100% Stock Portfolio?

Post by HomerJ » Thu Jun 08, 2017 3:14 pm

BeBH65 wrote:In other threads on this forum we discuss net-wealth.
In those threads, there is always a sub-thread discussing what should be included or not:
* equity
* bonds
* emergency fund
* savings accounts for specific goals), CDs, ibonds, EEbonds and similar
* human capital and the yearly cashflow it generates
* house with/without mortgage
* business
* pension
* ss

In discussions like the current one, I always wonder how the posters, that state to be 100% equity and 0% bonds, score on the other categories and wonder how much these contribute to the net wealth of the posters.

The danger with threads like the current is that readers who do not score high on the other categories, compare themselves to people who are secure on those categories.
Excellent points.

Someone who has a pension covering 90% of their expenses, or has so much saved that they are using a 1% withdrawal rate can certainly be 100% stocks with very little risk. Those kind of details matter.

dbr
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Re: 100% Stock Portfolio?

Post by dbr » Thu Jun 08, 2017 3:16 pm

HomerJ wrote:
BeBH65 wrote:In other threads on this forum we discuss net-wealth.
In those threads, there is always a sub-thread discussing what should be included or not:
* equity
* bonds
* emergency fund
* savings accounts for specific goals), CDs, ibonds, EEbonds and similar
* human capital and the yearly cashflow it generates
* house with/without mortgage
* business
* pension
* ss

In discussions like the current one, I always wonder how the posters, that state to be 100% equity and 0% bonds, score on the other categories and wonder how much these contribute to the net wealth of the posters.

The danger with threads like the current is that readers who do not score high on the other categories, compare themselves to people who are secure on those categories.
Excellent points.

Someone who has a pension covering 90% of their expenses, or has so much saved that they are using a 1% withdrawal rate can certainly be 100% stocks with very little risk. Those kind of details matter.
The assumption would be that someone who really wants to be a 100% gunslinging cowboy certainly has no other assets present or in future estimate, including income streams. Otherwise, as several have pointed out, the 100% claim is pointless.

NiceUnparticularMan
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Re: 100% Stock Portfolio?

Post by NiceUnparticularMan » Thu Jun 08, 2017 3:21 pm

TomCat96 wrote:The lines of reasoning we use to actually build our asset allocations is generally speaking, 100% stocks will outperform
1. 99% stock 1% bonds,
2. 80% stock, 20% bonds
3. 60% stock 40% bonds

It should. After all the 100% stock portfolio takes on more risk.
I'm just going to note again if you model variable contributions/withdrawals with possible correlations to asset returns, this is not necessarily true anymore.

NiceUnparticularMan
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Re: 100% Stock Portfolio?

Post by NiceUnparticularMan » Thu Jun 08, 2017 3:26 pm

knpstr wrote:
NiceUnparticularMan wrote:
knpstr wrote:
NiceUnparticularMan wrote:Things can happen...
Yes, I'd say they can.
Ah yes, the misleading editing of quotes again!

Or, as you would edit it:

yes, quotes!
Misleading? No.

I'd agree with what you said, things can happen to disrupt planned WR.
So why not quote that part of what I said?
Further, I'd say a near infinite amount of "things can happen" to disrupt any plans, which is what my response intended to imply.
That is then you adding a new thought, which is not the same thing as quoting and agreeing with something I said.

You don't have to quote me at all. But if you do want to quote me, you should include as much of my quote as necessary to preserve what I was originally saying. When you cut out relevant bits, you are no longer truly quoting me.

ray333
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Re: 100% Stock Portfolio?

Post by ray333 » Thu Jun 08, 2017 3:44 pm

Why bother arguing? It seems to me bonds are more for mental stability / sanity than actual returns

If they help you sleep better, use them. If you're nearing retirement, use them to "save" what you've grown.

If your young, I have no idea why you'd bother with bonds, but again - if it helps you invest/sleep at night, use them

I plan on being 100% equity with my investments until I'm 40 at least.

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knpstr
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Re: 100% Stock Portfolio?

Post by knpstr » Thu Jun 08, 2017 3:49 pm

NiceUnparticularMan wrote:You don't have to quote me at all.
I am aware of that.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

NiceUnparticularMan
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Re: 100% Stock Portfolio?

Post by NiceUnparticularMan » Thu Jun 08, 2017 4:18 pm

knpstr wrote:
NiceUnparticularMan wrote:You don't have to quote me at all.
I am aware of that.
Again, it is the part you just omitted that I am not sure you are aware of.

KlangFool
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Re: 100% Stock Portfolio?

Post by KlangFool » Thu Jun 08, 2017 4:27 pm

Folks,

100% stock has higher expected return. Real world does not have to meet expectation.

KlangFool

rattlenap
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Re: 100% Stock Portfolio?

Post by rattlenap » Thu Jun 08, 2017 6:08 pm

Hard to believe my simple little post caused a bit of a firestorm.

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knpstr
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Re: 100% Stock Portfolio?

Post by knpstr » Thu Jun 08, 2017 6:41 pm

NiceUnparticularMan wrote:Again, it is the part you just omitted that I am not sure you are aware of.
Thanks.
:beer
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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InvestorNewb
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Re: 100% Stock Portfolio?

Post by InvestorNewb » Thu Jun 08, 2017 6:58 pm

rattlenap wrote:
InvestorNewb wrote:I've been more or less 100% stocks since 2012. I plan on staying 100% stocks until I hit my number. At that point I will reassess what I want to do with my portfolio. The number is $2m. Currently more than half way there.
Just curios, but what % do you allocate to each fund?
US - 50%
US REIT - 15%
International - 25%
Canada - 10%
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

TomCat96
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Re: 100% Stock Portfolio?

Post by TomCat96 » Thu Jun 08, 2017 7:13 pm

NiceUnparticularMan wrote:
TomCat96 wrote:The lines of reasoning we use to actually build our asset allocations is generally speaking, 100% stocks will outperform
1. 99% stock 1% bonds,
2. 80% stock, 20% bonds
3. 60% stock 40% bonds

It should. After all the 100% stock portfolio takes on more risk.
I'm just going to note again if you model variable contributions/withdrawals with possible correlations to asset returns, this is not necessarily true anymore.

I'm always open to achieving the same results while taking on less risk. As I wrote before I would be crazy not to.
If someone can point me out wrong, even if they make me look like a fool on a webforum (not saying you're doing that), then I will certainly readjust my strategy.

As far as I know, any non-zero allocation of bonds will lower the risk of being 100% stocks. .0001%, 1% , 100%...any degree save for junk bonds. You're telling me something here that I don't know about. I've never heard of variable contributions withdrawals with possible correlations to asset yielding returns in excess of 100% stock portfolio.

But if you're suggesting a new alternative strategy that can reap the same expected returns as 100% while not being in 100% stock, I'd love to learn more.


To answer a few other questions to other posters.

I've been 100% stocks since I started investing in 2003. I was there through the 2008 crash, but I did not have enough exposure to the market to really care. (Had about 10k left in Roth) I liquidated my entire 401k to pay for law school just prior to the crash. I figured what the hey, my annual income is zero. I may as well withdraw it now since my tax rate is so low. At least some of my student loans were a very unfortunate 8.25%, which was another reason I liquidated. I reasoned I'm not going to do better than 8.25% zero risk.

I do believe I have less risk than others in matters unrelated to my portfolio.
1. Gov't worker. Have about 12 years of FERS saved up.
2. Emergency Fund: At this point 2 months. :D I won't be contributing to taxable for a little while.
3. by my extrapolation. Social Security (Assuming it will still be there) and pension will alone be enough to cover my expenses at retirement.
4. Viewed from one angle, point 3 makes any additional gains from my 401k completely superfluous.
5. I have no particularly expensive hobbies or tastes. Knowledge is dirt cheap. I could be happy with rice, beans, exercise and books...maybe with the occasional steak.
6. I however, do not own a home. I rent.

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Tyler9000
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Re: 100% Stock Portfolio?

Post by Tyler9000 » Thu Jun 08, 2017 9:55 pm

I wrote a long reply only to realize I was rehashing too much from the link I posted earlier. :oops: Sorry about that! It's best just to read the more thorough original.
Last edited by Tyler9000 on Fri Jun 09, 2017 12:31 am, edited 2 times in total.

itstoomuch
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Re: 100% Stock Portfolio?

Post by itstoomuch » Thu Jun 08, 2017 11:32 pm

rattlenap wrote:What are your thoughts on someone having a 100% stock portfolio for the rest of their lives?

Lets say you're a 40 year old single person with no children. You keep a few years worth of savings in iBonds, are unafraid of the volatility in the stock market and therefore put all of your money into simple S&P 500 fund(s) via your 401k & IRA.

Note: I am not referring to the Warren Buffet 90/10 portfolio nor am I including international stocks.
I think it would be very difficult for someone to be 100% equity until and thru their old age. UNLESS their wealth and standard of living are such that -50% fall in their assets would not greatly affect their standard of living. Basically being wealthy/rich, or being able to acquire when everyone is selling or sold-out.
IOW, "the Rich get Richer" and "the Wealthy stay Wealthy."
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

TomCat96
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Re: 100% Stock Portfolio?

Post by TomCat96 » Fri Jun 09, 2017 8:28 am

Tyler9000 wrote:I wrote a long reply only to realize I was rehashing too much from the link I posted earlier. :oops: Sorry about that! It's best just to read the more thorough original.
I took a look at your website. It's thought-provoking, but I believe the central premise of the argument being made is a graphical representation of risk, in this case quite literally standard deviation.

Anyone who takes a 100% stock portfolio should not expect to get 7% a year in any given year. They should expect something like +15%, -30%, +20%, +3%, -10%, +33% etc. something that looks like this
I agree that if a person is the type to greatly desire the ability to say "I'm up 5-7% this year" in any given year, at the expense of potentially greater gains over very long term periods, a 100% stock allocation is not for them.

There is nothing wrong with desirability stability over growth, particularly for those where the marginal utility of money itself diminishes for the person.

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HomerJ
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Re: 100% Stock Portfolio?

Post by HomerJ » Fri Jun 09, 2017 8:35 am

TomCat96 wrote:To answer a few other questions to other posters.

I've been 100% stocks since I started investing in 2003. I was there through the 2008 crash, but I did not have enough exposure to the market to really care. (Had about 10k left in Roth) I liquidated my entire 401k to pay for law school just prior to the crash. I figured what the hey, my annual income is zero. I may as well withdraw it now since my tax rate is so low. At least some of my student loans were a very unfortunate 8.25%, which was another reason I liquidated. I reasoned I'm not going to do better than 8.25% zero risk.

I do believe I have less risk than others in matters unrelated to my portfolio.
1. Gov't worker. Have about 12 years of FERS saved up.
2. Emergency Fund: At this point 2 months. :D I won't be contributing to taxable for a little while.
3. by my extrapolation. Social Security (Assuming it will still be there) and pension will alone be enough to cover my expenses at retirement.
4. Viewed from one angle, point 3 makes any additional gains from my 401k completely superfluous.
5. I have no particularly expensive hobbies or tastes. Knowledge is dirt cheap. I could be happy with rice, beans, exercise and books...maybe with the occasional steak.
6. I however, do not own a home. I rent.
100% stocks is perfectly appropriate for you. Thank you for the clarification.

I would suggest that you try not to feel superior to the rest of us who are closer to retirement, have families, no pensions, and therefore are "emotional" about holding 100% stocks.
TomCat96 wrote:There is nothing wrong with desirability stability over growth, particularly for those where the marginal utility of money itself diminishes for the person.
Excellent post. I think we agree more than we disagree.

KlangFool
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Re: 100% Stock Portfolio?

Post by KlangFool » Fri Jun 09, 2017 8:39 am

TomCat96 wrote:
NiceUnparticularMan wrote:
TomCat96 wrote:The lines of reasoning we use to actually build our asset allocations is generally speaking, 100% stocks will outperform
1. 99% stock 1% bonds,
2. 80% stock, 20% bonds
3. 60% stock 40% bonds

It should. After all the 100% stock portfolio takes on more risk.
I'm just going to note again if you model variable contributions/withdrawals with possible correlations to asset returns, this is not necessarily true anymore.

I'm always open to achieving the same results while taking on less risk. As I wrote before I would be crazy not to.
If someone can point me out wrong, even if they make me look like a fool on a webforum (not saying you're doing that), then I will certainly readjust my strategy.

As far as I know, any non-zero allocation of bonds will lower the risk of being 100% stocks. .0001%, 1% , 100%...any degree save for junk bonds. You're telling me something here that I don't know about. I've never heard of variable contributions withdrawals with possible correlations to asset yielding returns in excess of 100% stock portfolio.

But if you're suggesting a new alternative strategy that can reap the same expected returns as 100% while not being in 100% stock, I'd love to learn more.


To answer a few other questions to other posters.

I've been 100% stocks since I started investing in 2003. I was there through the 2008 crash, but I did not have enough exposure to the market to really care. (Had about 10k left in Roth) I liquidated my entire 401k to pay for law school just prior to the crash. I figured what the hey, my annual income is zero. I may as well withdraw it now since my tax rate is so low. At least some of my student loans were a very unfortunate 8.25%, which was another reason I liquidated. I reasoned I'm not going to do better than 8.25% zero risk.

I do believe I have less risk than others in matters unrelated to my portfolio.
1. Gov't worker. Have about 12 years of FERS saved up.
2. Emergency Fund: At this point 2 months. :D I won't be contributing to taxable for a little while.
3. by my extrapolation. Social Security (Assuming it will still be there) and pension will alone be enough to cover my expenses at retirement.
4. Viewed from one angle, point 3 makes any additional gains from my 401k completely superfluous.
5. I have no particularly expensive hobbies or tastes. Knowledge is dirt cheap. I could be happy with rice, beans, exercise and books...maybe with the occasional steak.
6. I however, do not own a home. I rent.
TomCat96,

If you do not need the money and willing to lose 100% of the money, why only 100% stock? You should be 100% small cap value. It has the highest expected return.

KlangFool

TomCat96
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Re: 100% Stock Portfolio?

Post by TomCat96 » Fri Jun 09, 2017 8:55 am

KlangFool wrote:
TomCat96 wrote:
NiceUnparticularMan wrote:
TomCat96 wrote:The lines of reasoning we use to actually build our asset allocations is generally speaking, 100% stocks will outperform
1. 99% stock 1% bonds,
2. 80% stock, 20% bonds
3. 60% stock 40% bonds

It should. After all the 100% stock portfolio takes on more risk.
I'm just going to note again if you model variable contributions/withdrawals with possible correlations to asset returns, this is not necessarily true anymore.

I'm always open to achieving the same results while taking on less risk. As I wrote before I would be crazy not to.
If someone can point me out wrong, even if they make me look like a fool on a webforum (not saying you're doing that), then I will certainly readjust my strategy.

As far as I know, any non-zero allocation of bonds will lower the risk of being 100% stocks. .0001%, 1% , 100%...any degree save for junk bonds. You're telling me something here that I don't know about. I've never heard of variable contributions withdrawals with possible correlations to asset yielding returns in excess of 100% stock portfolio.

But if you're suggesting a new alternative strategy that can reap the same expected returns as 100% while not being in 100% stock, I'd love to learn more.


To answer a few other questions to other posters.

I've been 100% stocks since I started investing in 2003. I was there through the 2008 crash, but I did not have enough exposure to the market to really care. (Had about 10k left in Roth) I liquidated my entire 401k to pay for law school just prior to the crash. I figured what the hey, my annual income is zero. I may as well withdraw it now since my tax rate is so low. At least some of my student loans were a very unfortunate 8.25%, which was another reason I liquidated. I reasoned I'm not going to do better than 8.25% zero risk.

I do believe I have less risk than others in matters unrelated to my portfolio.
1. Gov't worker. Have about 12 years of FERS saved up.
2. Emergency Fund: At this point 2 months. :D I won't be contributing to taxable for a little while.
3. by my extrapolation. Social Security (Assuming it will still be there) and pension will alone be enough to cover my expenses at retirement.
4. Viewed from one angle, point 3 makes any additional gains from my 401k completely superfluous.
5. I have no particularly expensive hobbies or tastes. Knowledge is dirt cheap. I could be happy with rice, beans, exercise and books...maybe with the occasional steak.
6. I however, do not own a home. I rent.
TomCat96,

If you do not need the money and willing to lose 100% of the money, why only 100% stock? You should be 100% small cap value. It has the highest expected return.

KlangFool

It may yet happen. As of this moment, my spreadsheets say I'm 77.64% VXF (Small & Midcap) 6.8% in VO (Midcap). I were to mathematically calculate my exposure the small cap value companies alone, I don't know where I would land but I would expect there to be a good amount of overlap. For now I've held off on selling the rest of my exposure because the shares are in taxable, and it would trigger tax consequences as I made those purchases a while ago.

I'm always open to new ideas. I guess the best answer is that I haven't really given the small cap value enough consideration yet. I do have a more limited selection of funds in my TSP however.

kathyauburn
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Re: 100% Stock Portfolio?

Post by kathyauburn » Fri Jun 09, 2017 9:09 am

rattlenap wrote: are unafraid of the volatility in the stock market
Has that belief been tested? Did you ride out the 2008 50% market decline while adding to your portfolio rather than selling?

lazyday
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Re: 100% Stock Portfolio?

Post by lazyday » Fri Jun 09, 2017 10:40 am

KlangFool wrote:If you do not need the money and willing to lose 100% of the money, why only 100% stock? You should be 100% small cap value.
OP asks about 40, but if I were 30 years old today with a secure job, I'd probably have a year's expenses in Ibonds and 100% of the rest in EM value, such as FNDE.

No way I'd choose 100% S&P 500.

To each their own.

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gunn_show
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Re: 100% Stock Portfolio?

Post by gunn_show » Fri Jun 09, 2017 8:00 pm

ray333 wrote:Why bother arguing? It seems to me bonds are more for mental stability / sanity than actual returns

If they help you sleep better, use them. If you're nearing retirement, use them to "save" what you've grown.

If your young, I have no idea why you'd bother with bonds, but again - if it helps you invest/sleep at night, use them

I plan on being 100% equity with my investments until I'm 40 at least.
Agree, the arguments seem odd to me. While I am not 100% stock because of EF and other small cash funds (travel, home remodel), I fall into similar thinking as ray333 and knpstr in terms of my "invest-able money". I plan to be heavy equities into my 40s, and at least until the FI and early retirement veranda comes into view (unknown, I enjoy what I do). I follow Jim Collins' Simple Path to Wealth strategy - "the wealth acquisition stage is when you are working and have earned income to save and invest. For this stage I favor 100% stocks and VTSAX" and have the stomach to sit on it during the accumulation stage. I watched my early years' investments dip in 07'08 and wish I had gone all-in on VTSAX back then and not had the "2040 fund" I was in at the time. Also wish I had dumped all my extra cash and EF into VTSAX at the time, but you learn for the next one when it comes. Similar reason why I favor the early all-in strategy (I believe WCI does this) of getting my 401k bucket filled as quickly as possible for rest-of-year growth. To each their own strategy.
rattlenap wrote:.... are unafraid of the volatility in the stock market ....
I'm still unsure what the OP was looking for with this post, if you have the stomach for it, what's the question? Peer validation? Spur debate? As many have pointed out, this is mostly psychological and personal viewpoints, to me not much different than saying "all my buddies want to stay at employer X because it is safe megacorp, but I want to jump to startup Y because it looks cool but has risk" .. everyone has different viewpoints, investing included, do what you want. Some want to stay at IBM their whole lives, others want to jump to Uber...
"The best life hack of all is to just put the work in and never give up." Bas Rutten

rattlenap
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100% Stocks For A Late Starter?

Post by rattlenap » Sat Jun 10, 2017 1:40 am

[Thread merged into here, see below. --admin LadyGeek]

If you're 40, a late starter to investing, but can handle volatility and want to be 100% in stocks for the rest of you life? What are your thoughts for someone in this situation? Do you think it is a bad idea? Or hey, if they can handle the volatility, they'll do just fine in the long run?

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catdude
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Re: 100% Stocks For A Late Starter?

Post by catdude » Sat Jun 10, 2017 2:27 am

They may think they can handle the volatility, but when the stock market takes one of its periodic nosedives, they find out that they can't. They panic and sell at the bottom and lock in their losses.

Lots of folks on this forum know more about investing than I do, and we'll see what they have to say, but personally I think being 100% in stocks for the rest of your life is a bad idea.
catdude | | All generalizations are false, including this one.

selters
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Re: 100% Stocks For A Late Starter?

Post by selters » Sat Jun 10, 2017 2:36 am

deleted
Last edited by selters on Sat Jun 10, 2017 2:42 am, edited 1 time in total.

Longtermgrowth
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Re: 100% Stocks For A Late Starter?

Post by Longtermgrowth » Sat Jun 10, 2017 2:41 am

Guess it depends on the job situation along with current portfolio balance and expenses at forty something. Does the job offer a pension? Are you close to being 100% vested in pension? Does it cover a good chunk of living expenses if you were to retire tomorrow? If not, a decent percentage in bonds with a glide path to larger percentage as age increases probably isn't a bad idea, even if planning on working for decades longer; especially if job security isn't high.

Karamatsu
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Re: 100% Stocks For A Late Starter?

Post by Karamatsu » Sat Jun 10, 2017 3:21 am

Do you think it is a bad idea?
Yes, assuming that 100% really means 100% of assets, then I think it's a bad idea.. Better to choose a more balanced portfolio.

The Wizard
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Re: 100% Stocks For A Late Starter?

Post by The Wizard » Sat Jun 10, 2017 3:32 am

At age 40, I wouldn't be over 80-85% stocks, with the rest in bonds for rebalancing when the crash comes.
What matters more is your savings rate. Try to get 30%+ of gross income into long term investments...
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GoldenFinch
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Re: 100% Stocks For A Late Starter?

Post by GoldenFinch » Sat Jun 10, 2017 3:38 am

I think it's a bad idea. At 40 years old 90-10 or 85-15 offers plenty of risk with the option of rebalancing.

jbranx
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Re: 100% Stocks For A Late Starter?

Post by jbranx » Sat Jun 10, 2017 5:29 am

Warren Buffet has suggested 90% index fund and 10% treasuries to his executor. He keeps about 20% of Berkshire's assets in cash. I guess hundred minus age in stocks is the neutral allocation. Just watching investors over a lifetime of investing, I've seen lots of people who thought they could handle volatility sell out a the bottom or try to time the market. No reason you can't do it if you prefer, however. Regular investing, living frugally, following the advice here could do a lot to catch you up for sure. It's just that some of us have lived through very long periods of the market doing pretty much nothing that leads us to be less than highly confident in 100% stocks. Mid sixties to early seventies, simple 5-year treasuries outperformed the 500, and the market didn't really recover well from the sixties crash until Aug. 1982. Stocks have gone from unloved, toxic instruments in my investing timeline to very cherished items. Old saying applies: "Wise person who learns from their own experience; wiser one still who learns from the experience of others."
Regardless, I certainly wish you well and hope you stay the course!

magneto
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Re: 100% Stocks For A Late Starter?

Post by magneto » Sat Jun 10, 2017 5:41 am

A sage (don't remember who) has opined :-

If increased risk guaranteed increased returns, then risk would not be risky :!:
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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StevieG72
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Re: 100% Stocks For A Late Starter?

Post by StevieG72 » Sat Jun 10, 2017 6:33 am

If it is a small portfolio I would invest 100% stocks.

Small being less than $100,000.
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LadyGeek
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Re: 100% Stock Portfolio?

Post by LadyGeek » Sat Jun 10, 2017 7:16 am

I merged rattlenap's thread back into the original, which is a similar discussion.

rattlenap - Are you asking about this for yourself? If so, it might help if you could post additional info using the Asking Portfolio Questions format.
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Re: 100% Stock Portfolio?

Post by GoldenFinch » Sat Jun 10, 2017 10:47 am

David Jay wrote:I was 100% stocks well into my 50s, but that was before I discovered BH. I now would recommend that everyone holds at least 10% bonds, the risk-adjusted return is better and funds are available for rebalancing when the market has a pull-back.
Similar thoughts here, I was 100% stocks until 40s. Glad I found Bogleheads or I would still be 100% and that was no fun between 2000-2013, especially when we lost 53% of penny-pinched money and had a house full of little kids. At least I reacted by not watching the money anymore instead of selling like everyone I knew was suggesting. Had I owned bonds, I would have lost less and could have rebalanced.

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Re: 100% Stocks For A Late Starter?

Post by KlangFool » Sat Jun 10, 2017 11:38 am

rattlenap wrote:[Thread merged into here, see below. --admin LadyGeek]

If you're 40, a late starter to investing, but can handle volatility and want to be 100% in stocks for the rest of you life? What are your thoughts for someone in this situation? Do you think it is a bad idea? Or hey, if they can handle the volatility, they'll do just fine in the long run?
rattlenap,

How do you know that you have the ability to take the risk? No, I do not mean emotionally. I mean your job/income is secured over the next 20 years and you will not be forced into long-term under-employment and/or unemployment.

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rattlenap
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Re: 100% Stock Portfolio?

Post by rattlenap » Sat Jun 10, 2017 3:28 pm

LadyGeek wrote:I merged rattlenap's thread back into the original, which is a similar discussion.

rattlenap - Are you asking about this for yourself? If so, it might help if you could post additional info using the Asking Portfolio Questions format.
Hi, no I am not. I am just curios to get other people opinions on this is all.

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LadyGeek
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Re: 100% Stock Portfolio?

Post by LadyGeek » Sat Jun 10, 2017 3:36 pm

^^^No problem, your intention wasn't clear. This thread is now in the Investing - Theory, News & General forum (general discussion).

This is a very important point:
KlangFool wrote:rattlenap,

How do you know that you have the ability to take the risk? No, I do not mean emotionally. I mean your job/income is secured over the next 20 years and you will not be forced into long-term under-employment and/or unemployment.

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Re: 100% Stock Portfolio?

Post by Avo » Sat Jun 10, 2017 3:55 pm

Here is an article from 2016 by William Baldwin:

https://www.forbes.com/sites/baldwin/20 ... o-disaster

With various assumptions (fully detailed), he calculates the probability of an all-stock portfolio returning less than zero over a 35-year window of continuous constant annual investment at 7%.

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Re: 100% Stock Portfolio?

Post by danaht » Sat Jun 10, 2017 4:02 pm

It's unwise (and also difficult) to be 100% stock - because you should always have some small cash buffer (a checking account, for every day expenses) and a small emergency fund. You can easily get an FDIC insured emergency fund of about $10,000 that pays 5% interest if your willing to deal with the "pay as you go" account requirements of some of the pre-paid debit cards. (that's what I do for my emergency fund). I also have some level of cash that is required in my business checking account, and HSA account to avoid the account maintenance fees. I choose to keep these cash balances and also treat this as part of my emergency savings. Otherwise, I would be 100% equities as well.

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Re: 100% Stock Portfolio?

Post by mikeyzito22 » Tue May 08, 2018 8:57 pm

why3not wrote:
Thu Jun 08, 2017 8:37 am
TomCat96 wrote: Is there proof that such a strategy performs worse than 100% stocks?
I haven't found it yet. Play with the portfoliovisualizer tool with rebalancing. Can you find a rebalancing strategy that holds bonds that would outperform 100% stocks?

If you can, let me know. I'm looking for outperformance. If I can achieve that outperformance while taking on less risk, then I will certainly do that. I'd be crazy not to
Here you go.
This is roughly my 401k investment "career". 1990 through 2015, roughly $1000 per month on average invested (in reality it was smaller in the beginning and larger in the end but I don't know how to do that in portfolio visualizer).
60/40 with 5% rebalance bands outperformed 100% stocks
Go look at that portfolio. Basically, if you are throwing that kind of money every month into it, 2000 and 2008 look like mere blips. Good work!

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Re: 100% Stock Portfolio?

Post by WanderingDoc » Wed May 09, 2018 3:02 pm

mikeyzito22 wrote:
Tue May 08, 2018 8:57 pm
why3not wrote:
Thu Jun 08, 2017 8:37 am
TomCat96 wrote: Is there proof that such a strategy performs worse than 100% stocks?
I haven't found it yet. Play with the portfoliovisualizer tool with rebalancing. Can you find a rebalancing strategy that holds bonds that would outperform 100% stocks?

If you can, let me know. I'm looking for outperformance. If I can achieve that outperformance while taking on less risk, then I will certainly do that. I'd be crazy not to
Here you go.
This is roughly my 401k investment "career". 1990 through 2015, roughly $1000 per month on average invested (in reality it was smaller in the beginning and larger in the end but I don't know how to do that in portfolio visualizer).
60/40 with 5% rebalance bands outperformed 100% stocks
Go look at that portfolio. Basically, if you are throwing that kind of money every month into it, 2000 and 2008 look like mere blips. Good work!
What are 5% rebalance bands? Is it hard to do this consistently.
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Re: 100% Stock Portfolio?

Post by tonyc » Wed May 09, 2018 4:10 pm

WanderingDoc wrote:
Wed May 09, 2018 3:02 pm
What are 5% rebalance bands? Is it hard to do this consistently.
https://www.bogleheads.org/wiki/Rebalancing:

When asset classes deviate from their target by a certain absolute percentage. For example, if your target asset allocation is 60% equities and 40% fixed income and your (absolute) rebalancing threshold is +/- 5%, you would rebalance your portfolio when your portfolio reaches (65% equities / 35% fixed income) or (55% equities / 45% fixed income).

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Re: 100% Stock Portfolio?

Post by WanderingDoc » Wed May 09, 2018 4:46 pm

tonyc wrote:
Wed May 09, 2018 4:10 pm
WanderingDoc wrote:
Wed May 09, 2018 3:02 pm
What are 5% rebalance bands? Is it hard to do this consistently.
https://www.bogleheads.org/wiki/Rebalancing:

When asset classes deviate from their target by a certain absolute percentage. For example, if your target asset allocation is 60% equities and 40% fixed income and your (absolute) rebalancing threshold is +/- 5%, you would rebalance your portfolio when your portfolio reaches (65% equities / 35% fixed income) or (55% equities / 45% fixed income).
Got it. I think my taxable account just has U.S. equities (VTSAX). Whereas my Roth IRA and TSP has mix of everything - U.S. and international equities, and G-fund (bonds). Do you think I am still able to rebalance with this setup?
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

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Re: 100% Stock Portfolio?

Post by NoRegret » Wed May 09, 2018 5:01 pm

aj76er wrote:
Wed Jun 07, 2017 9:40 pm
lapuce wrote:To the advocates of the 100% stock portfolio: I usually only hear the argument against a lower allocation. But why do you stop there? You can go beyond by leveraging your investment. So, what makes 100% not only better than 80% but also better than 120%?
There is extra cost to borrowing on margin; so not quite the same.

But one could theoretically go riskier than the total stock market by holding 100% small-cap value. I don't see many (any?) people recommending that, but it follows the same logic
I've been leveraged long since Jun'17 using synthetic stock (long call short put), risk reversal and variants. Initial positions were put on with net credit. Don't pay any margin interest. Portfolio margin helps. You'll need a high level of trading authority to sell naked puts.

I use LEAPs and the plan is to get LTCG on the call. I also move up the strike price on the put over time (buy back put and sell new one at higher strike). The account is at IB for its low commissions. Current effective exposure to equities is over 150% of portfolio value (not beta adjusted).

My total portfolio is between 1.5-2x as volatile as $SPX, so this is not for the faint of heart.

Cheers, NR
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade

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Re: 100% Stock Portfolio?

Post by 22twain » Wed May 09, 2018 5:31 pm

WanderingDoc wrote:
Wed May 09, 2018 4:46 pm
tonyc wrote:
Wed May 09, 2018 4:10 pm
WanderingDoc wrote:
Wed May 09, 2018 3:02 pm
What are 5% rebalance bands? Is it hard to do this consistently.
https://www.bogleheads.org/wiki/Rebalancing:

When asset classes deviate from their target by a certain absolute percentage. For example, if your target asset allocation is 60% equities and 40% fixed income and your (absolute) rebalancing threshold is +/- 5%, you would rebalance your portfolio when your portfolio reaches (65% equities / 35% fixed income) or (55% equities / 45% fixed income).
Got it. I think my taxable account just has U.S. equities (VTSAX). Whereas my Roth IRA and TSP has mix of everything - U.S. and international equities, and G-fund (bonds). Do you think I am still able to rebalance with this setup?
If you can buy / sell / exchange funds within each account, you can rebalance. If you want specific advice on how to go about it, you should start a new thread, so as not to continue piggybacking on this one, where many people might not see it. Describe your current allocation among accounts and funds, giving dollar values and/or percentages, and tell us your desired new overall allocation (60% stock / 40% "bonds" or whatever).
My investing princiPLEs do not include absolutely preserving princiPAL.

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Re: 100% Stock Portfolio?

Post by Hyperborea » Thu May 10, 2018 10:34 am

rai wrote:
Thu Jun 08, 2017 12:18 pm
rattlenap wrote:C'mon now! You know the general consensus amongst bogleheads is to not consider your emergency fund/cash reserve as apart of your portfolio.
this is not the general consensus.

I consider all my investible assets as a whole.

That means my taxable, my 401K, IRAs, HSA, bank accounts, cash on hand (etc.) just so happens that my cash on hand and bank accounts are negligible so I can safely ignore them. I'm talking less than 1% of my accounts.

But if I carved out 2 years living expenses and put that in bonds, that would be like 10% (seriously) so I would not say that doesn't exist or is not counted as part of my portfolio.

It sounds as if you want to say you are Joe cool because you don't have any bonds or cash, but if you (I can't recall who has 2 years in bonds) then it's totally not 100% cash.
The difference with an emergency fund is that it is separate from the invested assets and will not be rebalanced into them. If your equities are down will you use your emergency fund to buy more equities? I wouldn't. In my case the emergency fund was a fixed amount based on my living costs needed for a set amount of time (~6 months basic living costs while working). The investment portfolio was then 100% invested in equities.

Now, somebody trying to score internet points could always claim that I had a real estate investment too because I owned a house or that I had cash-like things in my emergency fund but neither of those were part of the investment portfolio. I'd be really interested to hear if you or others trying to score internet points actually do rebalance their emergency fund into their investments.
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Re: 100% Stock Portfolio?

Post by BeBH65 » Fri May 11, 2018 10:42 am

This is what we have in our wiki on emergency fund.
Having 2 years expenses seems a lot. Investing ome's emergency fund in bond is also not typical. Both of these would make me think that this is not an emergency fund but a stable investment.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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Re: 100% Stock Portfolio?

Post by Prospero » Sun May 13, 2018 6:10 am

rattlenap wrote:
Wed Jun 07, 2017 6:32 pm
What are your thoughts on someone having a 100% stock portfolio for the rest of their lives?
I think it's up to you. What should my asset allocation be has been one of the most difficult and important questions I've had to answer in this game. It is totally dependent on your objectives and your emotional well-being.

Peter Bernstein The 60/40 Solution:
I emphasize this psychological aspect of the matter, be-cause those wonderful statistics on long-term returns arewhat the marketdid, not what any single individual or funddid, or would do, if history replayed itself. In my real-world experience, investors with smaller allocations to stocks and with some anchors to windward have been the ones most likely to be the winners over the long haul. The crucial ele-ment of success is the ability to make decisions without freez-ing up or slamming the panic button. In bear markets, the muted volatility and the contractual safety of bonds providethe most congenial environment for arriving at rational deci-sions about stocks. In bull markets, the balanced portfolio may not make for lively cocktail-party conversation, but with 60 percent in stocks, your wealth will still be participating and growing.

I cannot overemphasize the importance of this last point. Few decisions in life motivated by greed ever have happy out-comes. Unless you are that rarest of birds, someone who is cool under the rapid-fire, high-pressure decision making re-quired to maximize your returns, let others take such risks, and allow your portfolio to plug along at a slower speed. In investing, tortoises tend to win far more often than hares overthe turns of the market cycle (and, as we have recently been reminded, markets still do have cycles).
No prizes for guessing my allocation is 60/40.

P

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Re: 100% Stock Portfolio?

Post by rgs92 » Fri May 25, 2018 11:37 am

Is the current flight-to-quality bond rally a good example of why a retirement portfolio should always have a decent bond allocation?
And is this recent short bond rally a flight-to-quality phenomenon or just random volatility or something else?
(I guess I should not presume the cause of the rally.)

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