100% total stock index funds until I retire?

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masonstone
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100% total stock index funds until I retire?

Post by masonstone »

So JL Collins recommends going 100% VTSAX until you retire and then move some percentage into bonds. This approach makes sense to me. What do the bogleheads think? Also assume I’ll have greater than $5 million invested (in today’s dollars) when I retire.
Last edited by masonstone on Sun Jan 05, 2020 10:41 am, edited 1 time in total.
runner3081
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Re: 100% total stock index funds until I retire?

Post by runner3081 »

Assuming you are at 5 million invested assets (not net worth, value of house means very little, if anything in this situation) and the year or month before you retire they take a 25% haircut down to 3.75 million. Are you completely okay with that?

If so, keep it in 100%.

If that causes pause or concern, diversity with some bonds or similar.
Stormbringer
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Re: 100% total stock index funds until I retire?

Post by Stormbringer »

You might want to back test that approach with dates in the 2007-2009 range and see if you are comfortable with the results.
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dbr
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Re: 100% total stock index funds until I retire?

Post by dbr »

https://www.google.com/search?sitesearc ... %25+stocks 28,600 hits.

You will find Bogleheads think just about anything about that. The forum no longer permits use of a survey tool so we don't have a vote. Probably a consensus is that for most people staying 100% stocks until retirement is foolish, but there are arguments for why it could work, even staying 100% stocks through retirement.

Better advice would be for you to decide if the consequences of staying 100% stocks until retirement are a good decision for you. You can look at forecasting models like FireCalc and others to see what the consequences look like and you can contemplate what the impact would be for you if things like a 50% decline in wealth within a year with uncertain prospects for recovery should occur. You can also contemplate with some planning tools if there is any useful need to be 100% stocks. These things are not an opinion but an analysis applied to your needs and wants.
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JoMoney
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Re: 100% total stock index funds until I retire?

Post by JoMoney »

That's essentially what I have done, although I do keep a small percentage of cash/short-term bonds as an "emergency fund".
I also spent a period playing some silly games with my equity portfolio before settling into simply following the advice from John Bogle and Warren Buffett about just using a low-cost index fund (I use a S&P 500 fund / VFIAX).
One does have to understand the potentially crushing down-turns that periodically come in the stock market though, you may find yourself in a predicament of not knowing how much further it will fall. Many people wind up selling at (what later turns out to be) the worst time to sell. It's very difficult to assess what someones "risk tolerance" is or what their allocation should be. Even Warren Buffett's 90/10 allocation suggested for his wifes bequest seems to be too risky for many vocal critics on here. My rough feeling seems that anything more than 80/20 seems to garner lots of talk about being "too risky", but you need to figure out what you're comfortable with.
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cheese_breath
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Re: 100% total stock index funds until I retire?

Post by cheese_breath »

Will you still be able to retire if the market crashes two months before your projected retirement date?
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lazyday
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Re: 100% total stock index funds until I retire?

Post by lazyday »

I think 100% stocks is quite risky, but maybe appropriate for some people who could stand a 50% or 75% drop that takes decades to recover from.

In my opinion, 100% US stock is appropriate for noone, like 100% tech stocks is appropriate for noone. You could diversify globally, such as with Total World Stock.
BalancedJCB19
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Re: 100% total stock index funds until I retire?

Post by BalancedJCB19 »

I like JL Collins and he is definitely a Boglehead in his investing approach. The problem with this approach is that you may feel like you can handle 100% stocks in theory and at the current age you are, but as we get older, we tend to get more fearful and you may want to add some bonds much sooner than retirement time. Is it a bad idea? I don't think so, but is it prudent, probably not. Nothing wrong with being 10 or 20% in bonds at all times, in fact, many of those allocations have done just as good and in some cases better than 100% stocks.

J.L. Collins is the real deal, and you really can't go wrong taking his advice. Just know yourself!

I personally am a fan of the balanced fund idea and have all my retirement money in the Vanguard Balanced Index Fund and I will keep it there until I die. It is 60/40 Stocks/bonds.
staustin
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Re: 100% total stock index funds until I retire?

Post by staustin »

masonstone wrote: Sun Jan 05, 2020 10:34 am So JL Collins recommends going 100% VTSAX until you retire and then move some percentage into bonds. This approach makes sense to me. What do the bogleheads think? Also assume I’ll have greater than $5 million invested (in today’s dollars) when I retire.
In a certain sense I admire someone such as yourself who can essentially 'bet it all on red'. The idea of 30 - 50% losses with multiple years to recover would keep me up at night in a 100% equity scenario. Perhaps i should stop reading economic books.
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Re: 100% total stock index funds until I retire?

Post by dbr »

A person should be 100% stocks before and in retirement if their objective is to try for maximum wealth at death, or along the way, and they have assessed they can tolerate things going badly, perhaps very badly. No one here can tell someone else what they want. It is probably true that most people here don't have that kind of goal.
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cheese_breath
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Re: 100% total stock index funds until I retire?

Post by cheese_breath »

dbr wrote: Sun Jan 05, 2020 11:06 am A person should be 100% stocks before and in retirement if their objective is to try for maximum wealth at death, or along the way, and they have assessed they can tolerate things going badly, perhaps very badly. No one here can tell someone else what they want. It is probably true that most people here don't have that kind of goal.
Im guessing it's also probably true than many people don't understand the risks that come with that approach. They read an article written by some 'expert' and so think it should be OK.
The surest way to know the future is when it becomes the past.
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Re: 100% total stock index funds until I retire?

Post by dbr »

cheese_breath wrote: Sun Jan 05, 2020 11:17 am
dbr wrote: Sun Jan 05, 2020 11:06 am A person should be 100% stocks before and in retirement if their objective is to try for maximum wealth at death, or along the way, and they have assessed they can tolerate things going badly, perhaps very badly. No one here can tell someone else what they want. It is probably true that most people here don't have that kind of goal.
Im guessing it's also probably true than many people don't understand the risks that come with that approach. They read an article written by some 'expert' and so think it should be OK.
Larry Swedroe has argued that no need to take risk should trump high ability to take risk because the marginal utility of wealth is a diminishing function and because people underestimate the true magnitude of risk.
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masonstone
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Re: 100% total stock index funds until I retire?

Post by masonstone »

So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
dbr
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Re: 100% total stock index funds until I retire?

Post by dbr »

masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
We don't know. You would have to figure that out. How much are you depending on your portfolio for income? How much would it matter to you to be $2.5M poorer, at least for awhile? Are you likely to panic and sell out in fear of losing even more. The loss in 1929-1934 was more like 90%. There is no law that says when the market has fallen 50% it can't keep going down, and you won't know while it is happening. On the other hand, that is an extreme event that almost certainly will not happen to you.

A different question is what is your motivation for accepting all that risk? What objective do you have for your wealth that would motivate being 100% stocks?
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anon_investor
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Re: 100% total stock index funds until I retire?

Post by anon_investor »

Why not utilize the bucket approach recommended by Christine Benz or Morningstar? Slowly build up the equivalent of 1 to 2 years of expenses in cash and a few years of expenses in bonds. So if there is a market crash right before retirement you can leave your equities alone to recover.

The issue with 100% equities once you need to withdraw is if the dropped 50% and you are withdrawing it may never recover to previous levels, in fact if could be like the 2000s, where you had 2 crashes. If you are okay with that then go ahead, but a better question is why take the risk?
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Re: 100% total stock index funds until I retire?

Post by rascott »

dbr wrote: Sun Jan 05, 2020 11:37 am
masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
We don't know. You would have to figure that out. How much are you depending on your portfolio for income? How much would it matter to you to be $2.5M poorer, at least for awhile? Are you likely to panic and sell out in fear of losing even more. The loss in 1929-1934 was more like 90%. There is no law that says when the market has fallen 50% it can't keep going down, and you won't know while it is happening. On the other hand, that is an extreme event that almost certainly will not happen to you.

A different question is what is your motivation for accepting all that risk? What objective do you have for your wealth that would motivate being 100% stocks?


Generational wealth?
dbr
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Re: 100% total stock index funds until I retire?

Post by dbr »

rascott wrote: Sun Jan 05, 2020 11:54 am
dbr wrote: Sun Jan 05, 2020 11:37 am
masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
We don't know. You would have to figure that out. How much are you depending on your portfolio for income? How much would it matter to you to be $2.5M poorer, at least for awhile? Are you likely to panic and sell out in fear of losing even more. The loss in 1929-1934 was more like 90%. There is no law that says when the market has fallen 50% it can't keep going down, and you won't know while it is happening. On the other hand, that is an extreme event that almost certainly will not happen to you.

A different question is what is your motivation for accepting all that risk? What objective do you have for your wealth that would motivate being 100% stocks?


Generational wealth?
Sure, but the question is for the OP, not for us.
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masonstone
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Re: 100% total stock index funds until I retire?

Post by masonstone »

dbr wrote: Sun Jan 05, 2020 11:56 am
rascott wrote: Sun Jan 05, 2020 11:54 am
dbr wrote: Sun Jan 05, 2020 11:37 am
masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
We don't know. You would have to figure that out. How much are you depending on your portfolio for income? How much would it matter to you to be $2.5M poorer, at least for awhile? Are you likely to panic and sell out in fear of losing even more. The loss in 1929-1934 was more like 90%. There is no law that says when the market has fallen 50% it can't keep going down, and you won't know while it is happening. On the other hand, that is an extreme event that almost certainly will not happen to you.

A different question is what is your motivation for accepting all that risk? What objective do you have for your wealth that would motivate being 100% stocks?


Generational wealth?
Sure, but the question is for the OP, not for us.
The goal is to maximize net worth.
lazyday
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Re: 100% total stock index funds until I retire?

Post by lazyday »

masonstone wrote: Sun Jan 05, 2020 12:46 pmThe goal is to maximize net worth.
A few things to keep in mind:

People tend to get interested in 100% stocks when stocks are high priced, and interested in cash or bonds when stocks are cheap. US stocks are expensive today.

Stocks recovered relatively quickly after 08-09, but that doesn’t always happen. If you invested in the S&P 500 in March of 2000, 9 years later you still wouldn’t have yet recovered from the fall. In fact, after reinvesting dividends and adjusting for inflation, in March 2009 you would be down by more than 50% according to https://dqydj.com/sp-500-return-calculator/

To be clear, the total real return from 3/00 to 3/09 was -50.538%, and at no time during those years was total real return above 0.

Or if you invested in Japan 12/1989, as of the latest Yen data on https://dqydj.com/nikkei-return-calcula ... nvestment/ in 2019 you were still down more than 30% after reinvesting and adjusting for inflation.

If you weren’t invested in 2008-09, it might be hard to understand how scary it can be. Even those who invested in those times might have forgotten how painful it was. It might help to look back at old threads from that time.
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Re: 100% total stock index funds until I retire?

Post by Carol88888 »

How much do you think you will get from social security? Do you have any kind of a pension?

Figure how exactly how much you need to withdraw from your assets to make up any short fall in your monthly expenses.

Then figure out what your assets invested in stocks will probably give you in dividends. Let's say you bought the S&P when the yield was 2% , so $100,000 a year in dividends.

Now, according to William Bernstein you need to reduce that $100,000 to $50,000 in the worst case scenario. Can you still meet your numbers on $50,000?

Then ask yourself what you did when the market fell in 2008-2009.

I'm a risk taker myself because I started off taking enormous risk and it paid off. It's easier to take the risk when young and I think you shouldn't squander that opportunity but this is purely a personal matter and I don't know your psychology.
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Re: 100% total stock index funds until I retire?

Post by Dandy »

To me the goal was to have enough assets at retirement to assure a fully funded retirement and hopefully leave some assets to my 2 children. I reached that goal with a high rate of savings coupled with a moderate investment allocation -- and luck.

I think it is prudent to take as much risk as you need to reach your goal. That is rarely 100% except maybe for those very early in the accumulation stage. Some people have bigger dreams/goals that's ok. Just be aware that equities have risk and that risk gets more serious as our human capital declines since there is usually little ability to make up large losses.

i'm not familiar with the source the OP cited but we often like sources that line up with our own leanings. I like Dr. Wm Bernstein's advice for those who have "enough" of having 20 or so years worth of drawdown in "safe" products and invest the rest anyway you want. That advice works especially well with those lucky to have more than enough.
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Re: 100% total stock index funds until I retire?

Post by yogesh »

Given 1/3/5/10 year returns show positive there is more than normal 100% US Equity threads popping out. This seems fine as long as folks are comfortable handling 50%+ haircut with long recovery periods. Balanced 60/40 or 70/30 seems to weather storms bit better.
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Re: 100% total stock index funds until I retire?

Post by Dottie57 »

masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
Depends on expenses.....
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whodidntante
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Re: 100% total stock index funds until I retire?

Post by whodidntante »

It's reasonable if you assume complete flexibility on your retirement date. IMO, rational reasons for an accumulator to own bonds include:

1) It allows you to remain fully invested in capital markets, without keeping huge cash emergency funds in taxable that you don't include in your asset allocation because it ruins your 100% stock self-image.
2) While owning bonds does reduce expected returns (at least currently), owning bonds also increases the certainty of your retirement planning by reducing the risk of your portfolio.
3) You may not be able to earn big money for as long as you think. As a result, your accumulation phase may decelerate or go into drawdown sooner than expected. Automation, globalization, and lean manufacturing have already displaced a lot of workers and will displace more still. Even if you evade these risks, you can still fall victim to future developments or experience a personal career-ender such as a disability or ruined reputation.

If you don't care about anything above, 100% stock, baby! Maybe throw in a little leverage, too. :twisted:
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HomerJ
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Re: 100% total stock index funds until I retire?

Post by HomerJ »

masonstone wrote: Sun Jan 05, 2020 10:34 am So JL Collins recommends going 100% VTSAX until you retire and then move some percentage into bonds. This approach makes sense to me. What do the bogleheads think? Also assume I’ll have greater than $5 million invested (in today’s dollars) when I retire.
Right up to the day you retire?

What if you decide you're going to retire in 2009 and $5 million turns into $2.5 million?

I would suggest moving slowly to bonds BEFORE you retire... Like slowly start 10-15 years before. if your plan is to be 60/40 in retirement, then move to 90/10 15 years out, 80/20 10 years out, 70/30 5 years out.
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HomerJ
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Re: 100% total stock index funds until I retire?

Post by HomerJ »

masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
Oh, well if you can handle it, then sure, go ahead.

But then that brings up the question... Why work until you have $5 million if you can retire with just $2.5 million?

Wouldn't it be smarter to retire earlier with $3.5 million and a 60/40 portfolio?
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
visualguy
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Re: 100% total stock index funds until I retire?

Post by visualguy »

yogesh wrote: Sun Jan 05, 2020 3:33 pm Given 1/3/5/10 year returns show positive there is more than normal 100% US Equity threads popping out. This seems fine as long as folks are comfortable handling 50%+ haircut with long recovery periods. Balanced 60/40 or 70/30 seems to weather storms bit better.
I don't think that is correct. At 100% in equities, you're down 50% when the stock market drops in half. With 60/40 or 70/30, you're down somewhat less, but you're most likely down from a lower level than where you would be with all-equities. You're very likely to be worse-off overall with these more "balanced" portfolios, even after a big drop, because the level you reached before the drop matters, of course.
RetireBy55
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Re: 100% total stock index funds until I retire?

Post by RetireBy55 »

Dottie57 wrote: Sun Jan 05, 2020 3:37 pm
masonstone wrote: Sun Jan 05, 2020 11:31 am So if my invested assets are 5 million and have paid off both my house and cars, I should be able to handle an economic downturn of even a 50% loss of investments.
Depends on expenses.....
Beat me to it..we don't have a mortgage and while we do have 2 car leases (average vehicles - nothing fancy), our expenses with H/C, taxes and an average 2-week vacation/yr will easily be ~$80-100K/yr.

Pulling that much from a portfolio of even $2.5M (50% of the original $5M) could quickly take a big chunk out of said portfolio if we have another tough bear market like 2008 - or, worse, one that takes 10-15 years to get back from "underwater" like has happened multiple times throughout the past 100 years in the US. And, God help you if we have a situation like Japan that's still underwater 30+ years later.

Having read many posts like this over the years, it seems that there are many who have little if any idea what their expenses are today - or what they will/could be in the near future. It also seems many often do not fully realize that markets don't always come back from underwater as quickly as they did in 2008 and could instead be 10-15 (or more years) until the portfolio value fully recovers. Add in $80+K/yr withdrawals on that $2.5M during that time, and the potential portfolio damage increases exponentially..
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Re: 100% total stock index funds until I retire?

Post by Triple digit golfer »

visualguy wrote: Sun Jan 05, 2020 3:59 pm
yogesh wrote: Sun Jan 05, 2020 3:33 pm Given 1/3/5/10 year returns show positive there is more than normal 100% US Equity threads popping out. This seems fine as long as folks are comfortable handling 50%+ haircut with long recovery periods. Balanced 60/40 or 70/30 seems to weather storms bit better.
I don't think that is correct. At 100% in equities, you're down 50% when the stock market drops in half. With 60/40 or 70/30, you're down somewhat less, but you're most likely down from a lower level than where you would be with all-equities. You're very likely to be worse-off overall with these more "balanced" portfolios, even after a big drop, because the level you reached before the drop matters, of course.
But if you've reached your number, why stay fully in equities? And why keep working? It isn't reality.

Let's say I need $2 million to retire at 60.

Scenario A: 100% equities. At age 55 I have $2.75 million in equities. For some reason I both keep working AND investing 100% equities. After a nice run, at age 60 just as I am set to retire, I have $4 million, am still 100% equities even though I have no need to be, then the market crashes and I'm now at $2 million at age 60 and retired. It all worked out fine.

Scenario B: 100% equities. I've hit my $2 million goal at age 52. I can't retire yet, but I don't need any additional growth in the next several years. I'll go to 60/40. If the market drops, I'll likely recover before I retire, especially because I'm still contributing. If the market increases, I'll likely retire sometime before age 60.

Scenario C: 60/40. At age 60 I have reached my $2 million goal and I retire.

Scenario A is just not realistic.
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sometimesinvestor
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Re: 100% total stock index funds until I retire?

Post by sometimesinvestor »

Stocks often(usually ) recover within 5 years but you will worry less(which has value ) if you switch over from 100% equities at 50.I suggest 2 years of expenditures into CDs at some point in your early 50s if you feel the market is a little high (i.e)ata point when you don't feel you are selling at the low.
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David Jay
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Re: 100% total stock index funds until I retire?

Post by David Jay »

Okay, I haven’t posted this for a year or two, here goes:

Asset Allocation (AA) should be based on your personal need, ability and willingness to take risk. In the end it comes down to a negotiation between your emotions and your intellect.

AA in the accumulation stage of life should be as high as you can comfortably make it, subject to two questions:
1. Can you sleep well at night? Peace of mind is priceless.
2. Can you "stay the course" in the event of a 50% turndown in the market?

Let me give you an illustration from two siblings:
1. I am essentially immune to volatility. I went through the 2008-2009 downturn with 100% stocks and didn't change a thing, other than not opening my quarterly IRA/401K statements (I knew they were down, didn't need to know by how much). I only began to add bonds as I approached retirement (entered retirement about 45/55)
2. On the other hand, my sister and BIL freaked and sold their stock holdings at the bottom in 2008: "We had lost over 1/3 of our investment, so we sold all our stocks".
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
WhiteMaxima
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Re: 100% total stock index funds until I retire?

Post by WhiteMaxima »

If you have 2-5 years living expense saved in a safe: like CD or Money market, then put the rest in 100% stock.
carminered2019
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Re: 100% total stock index funds until I retire?

Post by carminered2019 »

I was 100% in equities until I retired at the age of 50.
StillGoing
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Re: 100% total stock index funds until I retire?

Post by StillGoing »

masonstone wrote: Sun Jan 05, 2020 10:34 am So JL Collins recommends going 100% VTSAX until you retire and then move some percentage into bonds. This approach makes sense to me. What do the bogleheads think? Also assume I’ll have greater than $5 million invested (in today’s dollars) when I retire.
I know I've posted this before (viewtopic.php?f=10&t=297374&p=4904821#p4904821, but the following graph shows the stock fraction (y-axis) that produces the largest portfolio at the end of given duration accumulation period (x-axis) for different percentile values based on historical performance (Shiller's data). For example, with 5 years to go, there is a 1% probability that a 35/65 portfolio will give the largest portfolio, 5% probability that 45/55 will do so, 25% probability that 80/20 will do so, etc.)

Image

With more than 20 years to go there is historical justification for being 100% stocks, with less than 15 years to go, 100% stocks historically produced the best outcome at least half the time. However, a downward glidepath over the last 10-15 years (as mentioned by several posters above) also may make sense in reducing downside risk (but, typically, at the expense of reducing upside gains). It also may make sense to gradually transition to whatever AA is appropriate for your retirement (and that is a whole other story).

historical: the usual caveats apply (i.e. future 'worst' cases may be different to historical 'worst' cases, etc.)

cheers
StillGoing
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masonstone
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Re: 100% total stock index funds until I retire?

Post by masonstone »

But I do think the AA can be more aggressive if you have a high amount invested in stocks (north of 5 million in today's dollars) and have no significant fixed costs (house and cars are paid off) since you can easily adjust non-fixed costs (ie eat-out less) in case the stock market plummets right before retirement.
Al the Knife
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Re: 100% total stock index funds until I retire?

Post by Al the Knife »

It seems as if many folks assume that stocks are a risk-free investment after say 15 or 20 years (who needs long term treasuries?)

The reality is that many bombs can explode in both markets and your personal life, often simultaneously. I started investing seriously in the late 90s, 100% invested in stocks. I was a “ financial genius” until 2009, when I realized I had lost money on every dollar I had invested in stocks. I stayed the course and recovered my losses, but recently I have shifted to 60/40 portfolio now that I am well into middle age.

Looking back I think I was more lucky than smart. Many things could have gone wrong that didn’t. I would recommend to my younger self to keep a moderate growth portfolio (say 60/40) and plan to save a little more and work a year or two longer.
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Re: 100% total stock index funds until I retire?

Post by carminered2019 »

Al the Knife wrote: Tue Jan 07, 2020 7:55 pm It seems as if many folks assume that stocks are a risk-free investment after say 15 or 20 years (who needs long term treasuries?)

The reality is that many bombs can explode in both markets and your personal life, often simultaneously. I started investing seriously in the late 90s, 100% invested in stocks. I was a “ financial genius” until 2009, when I realized I had lost money on every dollar I had invested in stocks. I stayed the course and recovered my losses, but recently I have shifted to 60/40 portfolio now that I am well into middle age.

Looking back I think I was more lucky than smart. Many things could have gone wrong that didn’t. I would recommend to my younger self to keep a moderate growth portfolio (say 60/40) and plan to save a little more and work a year or two longer.
I was in the same boat as you but my 100% equity portfolio came back with a gain over 375% so no way I tell people in their 20s not to be 100% in equities until their late 40s. There has never been a negative return on the DOW in any 20 year period. Just retired at 50yo and I am now 60/40 but I was 100% in equities from age 28-50.
Last edited by carminered2019 on Tue Jan 07, 2020 8:18 pm, edited 2 times in total.
columbia
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Re: 100% total stock index funds until I retire?

Post by columbia »

If I had the opportunity for a re-do, then...sure for < 40.

My risk tolerance is very low these days, however.
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masonstone
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Re: 100% total stock index funds until I retire?

Post by masonstone »

I agree, also worst case scenario you work for a couple of years longer. I'm a physician so I can re-enter the workforce if necessary at retirement.
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David Jay
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Re: 100% total stock index funds until I retire?

Post by David Jay »

masonstone wrote: Wed Jan 08, 2020 9:57 am I agree, also worst case scenario you work for a couple of years longer. I'm a physician so I can re-enter the workforce if necessary at retirement.
And this is huge. The combination of additional contributions towards retirement and no withdrawals for living expenses have a cumulative effect.

I wasn’t even close to the numbers to retire at 58 but could do so comfortably at age 62. The largest part of that improvement was the 4 year reduction in living expenses.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: 100% total stock index funds until I retire?

Post by michaeljc70 »

cheese_breath wrote: Sun Jan 05, 2020 10:53 am Will you still be able to retire if the market crashes two months before your projected retirement date?
+1

I was 100% stocks and started adding bonds in the ~5 years before retirement. I still have 70% stocks.
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Re: 100% total stock index funds until I retire?

Post by jrbdmb »

I don't have a quote or graph handy to post, but I have read several sources that based on historical results a bond allocation of up to 20% greatly reduces the volatility of a portfolio without significantly affecting the total return. Of course if your portfolio is large enough that a potential 50% haircut is not a concern then you can pick whatever asset allocation you wish. :)

In my case I was at 80% equities for a while, but I am now on a gradual glidepath that will get me to 40% equities a few years after I retire.
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masonstone
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Re: 100% total stock index funds until I retire?

Post by masonstone »

jrbdmb wrote: Wed Jan 08, 2020 10:56 am I don't have a quote or graph handy to post, but I have read several sources that based on historical results a bond allocation of up to 20% greatly reduces the volatility of a portfolio without significantly affecting the total return. Of course if your portfolio is large enough that a potential 50% haircut is not a concern then you can pick whatever asset allocation you wish. :)

In my case I was at 80% equities for a while, but I am now on a gradual glidepath that will get me to 40% equities a few years after I retire.
I've heard the same, does anyone have the graphs that can back this up?
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Re: 100% total stock index funds until I retire?

Post by michaeljc70 »

jrbdmb wrote: Wed Jan 08, 2020 10:56 am I don't have a quote or graph handy to post, but I have read several sources that based on historical results a bond allocation of up to 20% greatly reduces the volatility of a portfolio without significantly affecting the total return. Of course if your portfolio is large enough that a potential 50% haircut is not a concern then you can pick whatever asset allocation you wish. :)

In my case I was at 80% equities for a while, but I am now on a gradual glidepath that will get me to 40% equities a few years after I retire.
If you aren't pulling the money out, why does the volatility matter?

According to Vanguard, 80/20 instead of 100/0 historically costs .7% per year (https://personal.vanguard.com/us/insigh ... llocations). That may not seem like a lot, but over 30-40 years of accumulation with compounding it adds up.
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Re: 100% total stock index funds until I retire?

Post by geerhardusvos »

masonstone wrote: Wed Jan 08, 2020 4:41 pm
jrbdmb wrote: Wed Jan 08, 2020 10:56 am I don't have a quote or graph handy to post, but I have read several sources that based on historical results a bond allocation of up to 20% greatly reduces the volatility of a portfolio without significantly affecting the total return. Of course if your portfolio is large enough that a potential 50% haircut is not a concern then you can pick whatever asset allocation you wish. :)

In my case I was at 80% equities for a while, but I am now on a gradual glidepath that will get me to 40% equities a few years after I retire.
I've heard the same, does anyone have the graphs that can back this up?
Scroll down midway to see chart Success Rates for different SWRs, by equity share and retirement horizon (1871-2015): https://earlyretirementnow.com/2016/12/ ... t-1-intro/

Vanguard baked the data into their nest egg calculator:
https://retirementplans.vanguard.com/VG ... ggCalc.jsf

I personally think no one needs to be more conservative than an 80/20 stock/bond mix. You are giving up a lot of returns the more you increase bonds... having some is good, but I will be comfortable with a 90/10 until I’m 60 then I’ll be 80/20, and I’ll be retiring at age 45 hopefully. If you can do a 3% or less SWR, 100% equities is not reasonable at all
Last edited by geerhardusvos on Wed Jan 08, 2020 5:12 pm, edited 2 times in total.
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Re: 100% total stock index funds until I retire?

Post by ohai »

100% stocks is fine if you are very rich and will leave money behind. If you have a lot of excess wealth, more than you will spend on yourself, then the money is for long term purposes that will outlive you; it actually has a long investment time horizon and you can tolerate a lot of risk.

However, if you are like most people and have a high sensitivity of retirement lifestyle to wealth, then I don't think you want to have that sort of risk.
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Re: 100% total stock index funds until I retire?

Post by brad.clarkston »

lazyday wrote: Sun Jan 05, 2020 10:57 am I think 100% stocks is quite risky, but maybe appropriate for some people who could stand a 50% or 75% drop that takes decades to recover from.

In my opinion, 100% US stock is appropriate for noone, like 100% tech stocks is appropriate for noone. You could diversify globally, such as with Total World Stock.
I wouldn't bet on VT being any more diversified than VTSAX/VTI. Look at there top 10, same list just a bit different on weights.
If you want to go global you need to go with a ex-us type of fund without the overloaded tech sector but that takes a lot more home work.
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Re: 100% total stock index funds until I retire?

Post by brad.clarkston »

cheese_breath wrote: Sun Jan 05, 2020 11:17 am
dbr wrote: Sun Jan 05, 2020 11:06 am A person should be 100% stocks before and in retirement if their objective is to try for maximum wealth at death, or along the way, and they have assessed they can tolerate things going badly, perhaps very badly. No one here can tell someone else what they want. It is probably true that most people here don't have that kind of goal.
Im guessing it's also probably true than many people don't understand the risks that come with that approach. They read an article written by some 'expert' and so think it should be OK.
+1 this, that was me before 2008.
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Re: 100% total stock index funds until I retire?

Post by ljford7 »

geerhardusvos wrote: Wed Jan 08, 2020 5:06 pm Scroll down midway to see chart Success Rates for different SWRs, by equity share and retirement horizon (1871-2015): https://earlyretirementnow.com/2016/12/ ... t-1-intro/

Vanguard baked the data into their nest egg calculator:
https://retirementplans.vanguard.com/VG ... ggCalc.jsf

I personally think no one needs to be more conservative than an 80/20 stock/bond mix. You are giving up a lot of returns the more you increase bonds... having some is good, but I will be comfortable with a 90/10 until I’m 60 then I’ll be 80/20, and I’ll be retiring at age 45 hopefully. If you can do a 3% or less SWR, 100% equities is not reasonable at all
Wait until you end up taking a 50% drawdown on your money and your comfort level will change. What happens if the drawdown happens at 44 and you have to delay retirement 5+ years?

With a small nest egg it is really easy to say I am going to do xyz, wait until it is larger and xyz has huge dollar repercussions.
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Re: 100% total stock index funds until I retire?

Post by J295 »

I don’t think it’s prudent and I don’t think it’s good advice. Having said that, if OP goes into it with his/her eyes wide open it’s no problem.

Personally, I started investing in college (1979) and was 100% stocks for my full-time working career (u to 2013). However, due to the meltdown in 2007 -2009, my early retirement transition date got pushed back by a couple of years (went to part time at age 53 in 2013 then subsequently no time). It has all worked out fine, but not without some consternation. If I had to do it over again, I would start cutting back my equity allocation a few years prior to transitioning away from full-time work.

One data point I remember is a professional very excited about retiring in 2000, only to then work 10 more years because he was heavily invested in tech stocks (as many of us were at the time) and he was severely hurt financially with the tech crash in 2000 - 2002. Those of us who were investing during that time may recall some pretty astounding appreciation, followed by declines of 39%, 21%, and 31% in 2000-2002.

Best of luck OP.
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