Does 100% stocks make sense for very high net worth individuals

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randomguy
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Re: Does 100% stocks make sense for very high net worth individuals

Post by randomguy » Mon Apr 15, 2019 4:55 pm

Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. I believe it is something like 80/20. I think that is because there are stretches of time when bonds out perform equities and maybe because it allows for using some fixed income for buying equities when they are depressed.
I am pretty sure this is incorrect in general. Since 1926, 100% has returned 10.3% while 80/20 has returned 9.6%. Sure you buy assets low sometimes. You also sell high performing assets to buy low performing ones also. It isn't a win.

Where things like 90/10 or 80/20 can beat 100% stocks is in risk adjusted returns.

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Re: Does 100% stocks make sense for very high net worth individuals

Post by Thesaints » Mon Apr 15, 2019 5:13 pm

KlangFool wrote:
Tue Nov 27, 2018 10:34 am
If the person is spending 2 million a year, that person is not very net worth as compared to his annual expense. So, you need to qualify your statement as in very high net worth as compared to annual expense -> 100X or more. Or, 1000X

What is the multiple that you would consider as very high net worth? 100X? 1,000X?
The proper definition of an extremely high net worth individual is that person for whom annual expenses, either actual or possible, are absolutely insignificant. Therefore, their multiplier is kinda in the ∞X range.

For such a person, asset allocation could either be 100% in cash/cash-like/TIPS, or any other ultra safe investment, in case they think they have got enough money, or 100% stocks (maybe even more, on leverage) if they want a lot more.
The aspect that has to be recognized is that choosing between maximizing returns at any risk, or minimizing risk at any return is exclusively up to their personal preference.
Last edited by Thesaints on Mon Apr 15, 2019 5:16 pm, edited 1 time in total.

Crushtheturtle
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Re: Does 100% stocks make sense for very high net worth individuals

Post by Crushtheturtle » Mon Apr 15, 2019 5:14 pm

J G Bankerton wrote:
Mon Apr 15, 2019 1:01 pm
squirm wrote:
Mon Apr 15, 2019 10:29 am
I don't know, I think most people have forgotten what a decades long bear market can do. Everyone that's has been long for the past 30 years have been very lucky that it's been a huge ride up, even on severe down years, the market ends up snapping right back.
One day there will probably be a pivot point, and a multi generation bear begins. All those gains could be wiped out.

Probably best to keep a diversified portfolio.
All in all of the time.

Here is the split between “up” and “down” time periods for the S&P 500:
•Days: 53% “up” and 47% “down.”
•Months: 58% up, 42% down.
•Quarters: 63% up, 37% down.
•Years: 72% up, 28% down.
•5 Year Rolling Time Periods: 76% up, 24% down.
•10 Year Rolling Time Periods: 88% up, 12% down.
Great stats.

Reminds me of the info presented in one of my favorite articles:
"How much of your nest egg to put into stocks? All of it."

https://www.google.com/amp/s/www.nytime ... t.amp.html

Dandy
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Re: Does 100% stocks make sense for very high net worth individuals

Post by Dandy » Mon Apr 15, 2019 5:40 pm

J G Bankerton wrote:
Mon Apr 15, 2019 3:42 pm
Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. ...using some fixed income for buying equities when they are depressed.
I doubt a market timer can beat the S&P 500 over a ten year period.

What market timer - I'm talking about rebalancing which occurs when equities are down - not timing.

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Re: Does 100% stocks make sense for very high net worth individuals

Post by WhiteMaxima » Mon Apr 15, 2019 6:43 pm

Thinking of owning a business not a trading card. If you are not leverage out with the potential wipe out during 40-50% down, I think there are many reason to own 100% of stock. But you would still have your living expense covered (if 100% equity give your enough dividend). Go for if you can.

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J G Bankerton
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Re: Does 100% stocks make sense for very high net worth individuals

Post by J G Bankerton » Mon Apr 15, 2019 6:48 pm

Crushtheturtle wrote:
Mon Apr 15, 2019 5:14 pm
J G Bankerton wrote:
Mon Apr 15, 2019 1:01 pm
squirm wrote:
Mon Apr 15, 2019 10:29 am
I don't know, I think most people have forgotten what a decades long bear market can do. Everyone that's has been long for the past 30 years have been very lucky that it's been a huge ride up, even on severe down years, the market ends up snapping right back.
One day there will probably be a pivot point, and a multi generation bear begins. All those gains could be wiped out.

Probably best to keep a diversified portfolio.
All in all of the time.

Here is the split between “up” and “down” time periods for the S&P 500:
•Days: 53% “up” and 47% “down.”
•Months: 58% up, 42% down.
•Quarters: 63% up, 37% down.
•Years: 72% up, 28% down.
•5 Year Rolling Time Periods: 76% up, 24% down.
•10 Year Rolling Time Periods: 88% up, 12% down.
Great stats.

Reminds me of the info presented in one of my favorite articles:
"How much of your nest egg to put into stocks? All of it."

https://www.google.com/amp/s/www.nytime ... t.amp.html
The 12% of the time the S&P is down doesn't mean other investments like foreign bonds will be up. Then there is the tax burden of regular income. I'm in the 51% marginal tax rate , the proof chart is my avatar, so the last thing I need is regular income.
Dandy wrote:
Mon Apr 15, 2019 5:40 pm
J G Bankerton wrote:
Mon Apr 15, 2019 3:42 pm
Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. ...using some fixed income for buying equities when they are depressed.
I doubt a market timer can beat the S&P 500 over a ten year period.

What market timer - I'm talking about rebalancing which occurs when equities are down - not timing.
Oh OK, I do miss being able to rebalance.

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Re: Does 100% stocks make sense for very high net worth individuals

Post by michaeljc70 » Mon Apr 15, 2019 8:50 pm

randomguy wrote:
Mon Apr 15, 2019 4:55 pm
Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. I believe it is something like 80/20. I think that is because there are stretches of time when bonds out perform equities and maybe because it allows for using some fixed income for buying equities when they are depressed.
I am pretty sure this is incorrect in general. Since 1926, 100% has returned 10.3% while 80/20 has returned 9.6%. Sure you buy assets low sometimes. You also sell high performing assets to buy low performing ones also. It isn't a win.

Where things like 90/10 or 80/20 can beat 100% stocks is in risk adjusted returns.
The average return is not what I would look at. It doesn't take into account the order of the returns. If you look at the revised Trinity study, (https://www.forbes.com/sites/wadepfau/2 ... 2472bb6860), for 30 years 4% SWR, 75% stocks and 50% stocks have a higher success rate than 100% stocks.

randomguy
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Re: Does 100% stocks make sense for very high net worth individuals

Post by randomguy » Mon Apr 15, 2019 8:56 pm

michaeljc70 wrote:
Mon Apr 15, 2019 8:50 pm
randomguy wrote:
Mon Apr 15, 2019 4:55 pm
Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. I believe it is something like 80/20. I think that is because there are stretches of time when bonds out perform equities and maybe because it allows for using some fixed income for buying equities when they are depressed.
I am pretty sure this is incorrect in general. Since 1926, 100% has returned 10.3% while 80/20 has returned 9.6%. Sure you buy assets low sometimes. You also sell high performing assets to buy low performing ones also. It isn't a win.

Where things like 90/10 or 80/20 can beat 100% stocks is in risk adjusted returns.
The average return is not what I would look at. It doesn't take into account the order of the returns. If you look at the revised Trinity study, (https://www.forbes.com/sites/wadepfau/2 ... 2472bb6860), for 30 years 4% SWR, 75% stocks and 50% stocks have a higher success rate than 100% stocks.
Sure. But SWR has nothing to do with maximizing portfolio growth.

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birdog
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Re: Does 100% stocks make sense for very high net worth individuals

Post by birdog » Tue Apr 16, 2019 9:01 am

Sure. And so does 0%. Either can be easily defended.

DB2
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Re: Does 100% stocks make sense for very high net worth individuals

Post by DB2 » Tue Apr 16, 2019 2:05 pm

michaeljc70 wrote:
Mon Apr 15, 2019 8:50 pm
randomguy wrote:
Mon Apr 15, 2019 4:55 pm
Dandy wrote:
Mon Apr 15, 2019 1:53 pm
I believe studies have shown that 100% equities isn't the best allocation for maximum long term growth of your portfolio. I believe it is something like 80/20. I think that is because there are stretches of time when bonds out perform equities and maybe because it allows for using some fixed income for buying equities when they are depressed.
I am pretty sure this is incorrect in general. Since 1926, 100% has returned 10.3% while 80/20 has returned 9.6%. Sure you buy assets low sometimes. You also sell high performing assets to buy low performing ones also. It isn't a win.

Where things like 90/10 or 80/20 can beat 100% stocks is in risk adjusted returns.
The average return is not what I would look at. It doesn't take into account the order of the returns. If you look at the revised Trinity study, (https://www.forbes.com/sites/wadepfau/2 ... 2472bb6860), for 30 years 4% SWR, 75% stocks and 50% stocks have a higher success rate than 100% stocks.
Thanks for posting. I always dread clicking on Forbes as the spam and ads are out of control.

randomguy
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Re: Does 100% stocks make sense for very high net worth individuals

Post by randomguy » Tue Apr 16, 2019 2:35 pm

birdog wrote:
Tue Apr 16, 2019 9:01 am
Sure. And so does 0%. Either can be easily defended.
Both tend to be pretty stupid except for extreme cases. Lets say your at 100x and are 50 years old. What is the point of going 100% bonds. Why not build a 50 year bond ladder (or buy annuities if your older), and then invest the rest in some reasonable growth portfolio( 60%+ stocks). Whats the point of holding more bonds than what you expect to need? Similiar at the other end, why go 100% stocks? Why not go 85/15 (i.e. enough bonds to last through most bad cases, enough stocks to benefit from the upside). Sure as you get to say 1000x, you approach 100% stocks you will probably never quite get there.

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J G Bankerton
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Re: Does 100% stocks make sense for very high net worth individuals

Post by J G Bankerton » Tue Apr 16, 2019 5:01 pm

birdog wrote:
Tue Apr 16, 2019 9:01 am
Sure. And so does 0%. Either can be easily defended.
The smartest money can't beat the S&P 500 over a 10 year period. That is all one needs to know, just keep rolling one 10 year's profit into the next 10 year run.

This only works if one never intends to sell, and I mean never. One should have enough cash laying around for incidentals of course.

One gets 2% in dividends a year, taxed as a long term gain, so one has some pocket money if one wants. 0% stock is OK too but the returns will suffer.

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birdog
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Re: Does 100% stocks make sense for very high net worth individuals

Post by birdog » Wed Apr 17, 2019 3:25 pm

randomguy wrote:
Tue Apr 16, 2019 2:35 pm
birdog wrote:
Tue Apr 16, 2019 9:01 am
Sure. And so does 0%. Either can be easily defended.
Both tend to be pretty stupid except for extreme cases. Lets say your at 100x and are 50 years old. What is the point of going 100% bonds. Why not build a 50 year bond ladder (or buy annuities if your older), and then invest the rest in some reasonable growth portfolio( 60%+ stocks). Whats the point of holding more bonds than what you expect to need? Similiar at the other end, why go 100% stocks? Why not go 85/15 (i.e. enough bonds to last through most bad cases, enough stocks to benefit from the upside). Sure as you get to say 1000x, you approach 100% stocks you will probably never quite get there.
Nisiprius put it nicely:

"As wealth increases, the range of choices that "make sense" widen. Eventually it includes the entire range 0% to 100%. It becomes a completely personal matter. It depends on whether you, personally, have "increasing relative risk aversion" or "decreasing relative risk aversion."

Individuals who have increasing relative risk aversion say "I've already won the game, why keep playing?" They move to a very conservative portfolio because they don't need more.

Individuals who have decreasing relative risk aversion say "Why not grab for the brass ring? I can afford to take chances now."

Fools say "There is an objectively correct allocation. Your degree of risk aversion should be the same as mine. You should also like the same kind of coffee and the same kind of car that I like." Just because 96% bonds make sense for Suze Orman doesn't mean it makes sense for you. Just because 90% stocks makes sense for Warren Buffett's wife doesn't mean it makes sense for you."

Dandy
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Re: Does 100% stocks make sense for very high net worth individuals

Post by Dandy » Wed Apr 17, 2019 7:43 pm

Almost no one recommends 100% fixed income or 100% equities. Not that it is all that meaningful to this discussion but Buffet's allocation for his wife was "only" 90/10 and he is pretty wealthy and a person who is bullish on equities. But maybe his wife is not as big a risk taker. :happy

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Re: Does 100% stocks make sense for very high net worth individuals

Post by goodenyou » Wed Apr 17, 2019 10:21 pm

Dandy wrote:
Wed Apr 17, 2019 7:43 pm
Almost no one recommends 100% fixed income or 100% equities. Not that it is all that meaningful to this discussion but Buffet's allocation for his wife was "only" 90/10 and he is pretty wealthy and a person who is bullish on equities. But maybe his wife is not as big a risk taker. :happy
Buffet's quote about 90/10 for his wife is oversold. I am pretty certain that "investment" would not be the entirety of her "inheritance". I would imagine there would be a few other investments in her portfolio.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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jainn
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Re: Does 100% stocks make sense for very high net worth individuals

Post by jainn » Thu Apr 18, 2019 8:40 am

Two articles/opinion posts in response to the David Levine article.

“Why a 100% stock portfolio can ruin your retirement”

https://www.marketwatch.com/story/why-a ... 2016-03-22

https://thereformedbroker.com/2016/02/1 ... ng-stocks/

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J G Bankerton
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Re: Does 100% stocks make sense for very high net worth individuals

Post by J G Bankerton » Thu Apr 18, 2019 12:07 pm

jainn wrote:
Thu Apr 18, 2019 8:40 am
Two articles/opinion posts in response to the David Levine article.

“Why a 100% stock portfolio can ruin your retirement”

https://www.marketwatch.com/story/why-a ... 2016-03-22

https://thereformedbroker.com/2016/02/1 ... ng-stocks/
Levine said:
"I used the so-called 4% Rule, whereby a retiree withdraws 4% of his portfolio in the first year of retirement — $20,000 in this case — and increases that amount by 4% each year."

Of course 100% stock is folly if one is going to sell. 100% stock is only for those who will never sell. If endowment type investors did 100% stock, they wouldn't be lagging the market year after year.

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Re: Does 100% stocks make sense for very high net worth individuals

Post by Crushtheturtle » Thu Apr 18, 2019 2:50 pm

J G Bankerton wrote:
Thu Apr 18, 2019 12:07 pm

Of course 100% stock is folly if one is going to sell. 100% stock is only for those who will never sell. If endowment type investors did 100% stock, they wouldn't be lagging the market year after year.
100% stock is folly if one is ever going to sell in the future, or only folly if one has plans to sell in the near term?

If the former, that would seem to eliminate a lot of investors.

Edit: Per the historical data that Mr Levine and you have cited, stocks have outperformed bonds over holding periods as short as 12 months. If past is prologue, it seems as though one could safely purchase stocks with the intention of selling them later for a profit.

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J G Bankerton
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Re: Does 100% stocks make sense for very high net worth individuals

Post by J G Bankerton » Thu Apr 18, 2019 4:33 pm

Crushtheturtle wrote:
Thu Apr 18, 2019 2:50 pm
J G Bankerton wrote:
Thu Apr 18, 2019 12:07 pm

Of course 100% stock is folly if one is going to sell. 100% stock is only for those who will never sell. If endowment type investors did 100% stock, they wouldn't be lagging the market year after year.
100% stock is folly if one is ever going to sell in the future, or only folly if one has plans to sell in the near term?

If the former, that would seem to eliminate a lot of investors.
100% stock is for the few very high net worth types. If I was one or ran a endowment for a university I would buy individual stocks and make my own S&P 500 index and then margin the stock. I guarantied I will do better than 815 endowment funds, funds who pay no taxes and still lost money. A brand-new study of 815 college endowments finds they had an average investment return in fiscal year 2016 of negative 1.9%

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Re: Does 100% stocks make sense for very high net worth individuals

Post by bertilak » Thu Apr 18, 2019 4:50 pm

"Does 100% stocks make sense for very high net worth individuals?"

I say "Don't bet the farm even, or especially, if its a very large farm."
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

afan
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Re: Does 100% stocks make sense for very high net worth individuals

Post by afan » Thu Apr 18, 2019 4:52 pm

For this question I would define "very high net worth" as meaning "would remain very high networth if their assets dropped by 90%". If $30M is "very high" then that would mean $300 M to remain there after a big drop. I would probably not include those with only $300M in this group, but we can go with that figure.
Should a billionaire be 100% in stock? It would be "safe" but stupid.

Someone with that much would be crazy to be 100% in stocks. At that asset level it is possible to effectively diversify into illiquid investments that are not practical for people with only tens of millions of dollars. They can also diversify well outside of the US, real estate, businesses, a place to move to if things go horribly wrong in the US (and life would be better in Switzerland).

I think Warren Buffet was only leaving his wife about a billion, so his 90% stock reflected his attitude toward risk at that level of wealth. He preaches about the value of owning US stocks, so I suppose that is why he is not telling the trustee to invest more broadly.
Note that Buffett's money is in no way all in stock. Much of BRK is invested in businesses, but not in stock. Also a lot of derivatives.

Unfortunately, I have been completely unsuccessful in my efforts to convince him to leave a couple billion to me. Until then, I am not going to worry about a problem I would love to have.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

staythecourse
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Re: Does 100% stocks make sense for very high net worth individuals

Post by staythecourse » Thu Apr 18, 2019 5:09 pm

I would have no problem going 100% stocks if one is really high net worth. The issue is more why? Do you really want to give a bunch of money to your kids and think that is going to turn out well? I don't think (nor does anyone else of respect advocate) dropping a bunch of zeroes to your kids and assuming they will somehow have some innate drive irregardless to the fact they already have a pot of gold sitting at home.

I think the bigger question has NOTHING to do with 100% equity and all to do with are you helping or hurting your kids with a move like this.

Personally, I want to have some money for the kids ahead of time so they have the opportunity to make a reach in their professional life knowing if they don't succeed they won't be poor and NOT a reason not to even try making a reach. It will be a fine line, but think it is a mistake to to try to generate so much wealth that your kid doesn't have to work.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Does 100% stocks make sense for very high net worth individuals

Post by willthrill81 » Thu Apr 18, 2019 11:16 pm

staythecourse wrote:
Thu Apr 18, 2019 5:09 pm
I would have no problem going 100% stocks if one is really high net worth. The issue is more why? Do you really want to give a bunch of money to your kids and think that is going to turn out well? I don't think (nor does anyone else of respect advocate) dropping a bunch of zeroes to your kids and assuming they will somehow have some innate drive irregardless to the fact they already have a pot of gold sitting at home.

I think the bigger question has NOTHING to do with 100% equity and all to do with are you helping or hurting your kids with a move like this.

Personally, I want to have some money for the kids ahead of time so they have the opportunity to make a reach in their professional life knowing if they don't succeed they won't be poor and NOT a reason not to even try making a reach. It will be a fine line, but think it is a mistake to to try to generate so much wealth that your kid doesn't have to work.

Good luck.
You don't have to leave anything to your children, assuming you have them. IIRC, Buffett and his wife are planning to leave nearly all of their wealth to charity.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does 100% stocks make sense for very high net worth individuals

Post by JackoC » Fri Apr 19, 2019 2:27 pm

afan wrote:
Thu Apr 18, 2019 4:52 pm
For this question I would define "very high net worth" as meaning "would remain very high networth if their assets dropped by 90%". If $30M is "very high" then that would mean $300 M to remain there after a big drop. I would probably not include those with only $300M in this group, but we can go with that figure.
Should a billionaire be 100% in stock? It would be "safe" but stupid.

Someone with that much would be crazy to be 100% in stocks. At that asset level it is possible to effectively diversify into illiquid investments that are not practical for people with only tens of millions of dollars. They can also diversify well outside of the US, real estate, businesses, a place to move to if things go horribly wrong in the US (and life would be better in Switzerland).

I think Warren Buffet was only leaving his wife about a billion, so his 90% stock reflected his attitude toward risk at that level of wealth. He preaches about the value of owning US stocks, so I suppose that is why he is not telling the trustee to invest more broadly.
Note that Buffett's money is in no way all in stock. Much of BRK is invested in businesses, but not in stock. Also a lot of derivatives.
I don't know about continually increasing the threshold for who is 'very high net worth', but I don't think the answer changes that much. In the real world I would guess a tiny % of people over the 'VHNW' threshold, whether it's much less than $30mil*, $30mil or $300mil are 100% in stock BH style like broad MF/ETF. One reason is as you say is that other diversifying risk assets become more practical to own as your scale increases, some of them even well below $300mil. For example investing in property overseas. That's a real diversifier against socio-political problems in the US. It's just hard to do economically at small scale. At larger scale the relative hassle and cost decreases and once it reaches a certain threshold the diversification benefit outweighs the extra cost even if it's still higher cost than a stock MF/ETF.

This is even aside from the more basic issue of risk asset v 'safe' asset. But I think as on every other thread on which this comes up there is simply no consistent function for everyone that says more wealth makes them more/less inclined to take investing risk. It purely depends on the person. Again I think in the practical world very wealthy people who put all their money in their residence(s) plus safe bonds are rare, even if that type of person used to have the nickname 'coupon clipper' for rich people just living off bond coupons. Almost everyone of significant means with interest and access to modern financial knowledge will conclude *some* exposure to risk assets is appropriate and almost always including diversified holdings in publicly traded stock. But very people are really 100% in stocks, usually that's only claimed after making major exclusions (home, pension, SS, 'emergency fund' etc) and where future labor income is a major asset also. It's not to get into the debate what to count in typical discussions here except to say that if a person has and is living off say $30mil, and has a pretty modest home for that wealth (say 1mil) virtually nobody is really going to put $29mil in the stock market. Maybe the interesting meta-question is why people with a lot less than that think they might do that if they reached that position. Virtually gteed they would not do that if they actually reached $30mil. Lots of people of that worth have a lot of risk, often in a business they own, but not nearly 100% unless the business is in trouble maybe. :happy

*AFAIK a somewhat standard definition of 'VHNW' is $5mil, $30mil is 'ultra'.

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Re: Does 100% stocks make sense for very high net worth individuals

Post by staythecourse » Fri Apr 19, 2019 4:07 pm

willthrill81 wrote:
Thu Apr 18, 2019 11:16 pm
staythecourse wrote:
Thu Apr 18, 2019 5:09 pm
I would have no problem going 100% stocks if one is really high net worth. The issue is more why? Do you really want to give a bunch of money to your kids and think that is going to turn out well? I don't think (nor does anyone else of respect advocate) dropping a bunch of zeroes to your kids and assuming they will somehow have some innate drive irregardless to the fact they already have a pot of gold sitting at home.

I think the bigger question has NOTHING to do with 100% equity and all to do with are you helping or hurting your kids with a move like this.

Personally, I want to have some money for the kids ahead of time so they have the opportunity to make a reach in their professional life knowing if they don't succeed they won't be poor and NOT a reason not to even try making a reach. It will be a fine line, but think it is a mistake to to try to generate so much wealth that your kid doesn't have to work.

Good luck.
You don't have to leave anything to your children, assuming you have them. IIRC, Buffett and his wife are planning to leave nearly all of their wealth to charity.
Agreed, but the OP asked about doing this to pass down generations. This would refer to his progeny.

I'm not against giving money to heirs, but don't see how it could be a good idea to give so much they may get complacent being productive members of society.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Does 100% stocks make sense for very high net worth individuals

Post by Artsdoctor » Sat Apr 20, 2019 1:27 pm

The question is vague and cannot be answered unless you want to answer it as "sometimes."

You're going to have to define "very high net worth individuals." If you the Investopedia definition, that would be between $5M and $30M. There's a very big difference between those numbers. And I would think you might want to clarify what's included in that "net worth" since there's a big difference between a $5M investment portfolio and $5M net worth where the person's house is worth $2M.

Then, you'd have to define what the expenses of the very high net worth individual might be. If you have an investment portfolio worth $5M and you are more than comfortable withdrawing 1.5% annually, you're going to be in a very different position than someone who has a $30M portfolio wanting with withdraw 7% annually.

But for the sake of argument, if you have an investment portfolio of $30M and you're withdrawing $250,000 per year, by definition you're investment horizon is far longer than your lifespan. Although it wouldn't be consistent with my own philosophy, you can easily justify investing all of your money in equities since even the dividends on those stocks would be far more than you'd spend.

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J G Bankerton
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Re: Does 100% stocks make sense for very high net worth individuals

Post by J G Bankerton » Sat Apr 20, 2019 2:38 pm

Artsdoctor wrote:
Sat Apr 20, 2019 1:27 pm
You're going to have to define "very high net worth individuals."
That would be anyone who will never have to sell stock.

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