Digger1000
Recycles dryer sheets
- Joined
- May 10, 2017
- Messages
- 121
I'm 57 and retired since age 51 and I have 98% of my money in the S&P 500.
I think it really depends how much is your 2% which are not S&P. If you can sustain a long recession and 40% market drop with these money without selling low then it is fine.I'm 57 and retired since age 51 and I have 98% of my money in the S&P 500.
I think it really depends how much is your 2% which are not S&P. If you can sustain a long recession and 40% market drop with these money without selling low then it is fine.
I'm almost 57 and retired just a couple of months ago. My plan is to live on cash/CD ladder I have till FRA. It effectively reduces the dependency on equities which are still ~50% of invested assets.
100% in the S&P500 may work for those with enough money that they can live very well even if the market tanks 50% and stays there for a while. But, if one needs that investment income (dividends plus capital gains), it could be a problem.
Keep in mind that the market crash of the early 80’s took well over a decade to get back to where it was before the crash in REAL terms. But, if one bough a few of those 10 years double digit treasuries that were available, things were not quite so grim.
I will remain diversified though I think as I age I will work stocks down to 50/50 from 60/40. I can’t see myself being anywhere near 100% or 0%. But, never say never.
Disclaimer: I don't care to be a financial wizard. During my working years, I believed in the 60/40 AA. In actuality, I never did any balancing. I did try to select certain sectors and a couple of individual stocks, none of it beat the SP500 or the DJI. That is when I realized that beating either of them was beyond my capabilities. The best thing was to simply buy the SP500.
Early on, I tasked my Fido advisor to prove that annual balancing, over the long haul, beat simply buying and reinvesting in the SP500. He was surprised to see that my strategy beat the commonly followed annual AA balancing. Yes it did have more risk of loss, but over the long haul, balancing did not maximize the nest egg. That did tilt the AA higher and higher.
Currently I am 86% equities. I am in SP500, total market, growth and am in the process of moving all of that to SP500. SS covers 90% of our living expenses. I do have an outside income also. I don't include that income in our planning as I don't know how long it will last It does easily cover the rest of our needs and then some. The nest egg is not at all relied upon for our expenses. It wasn't always this way, but it has been for the last couple of years and for the foreseeable future. Our savings are there for our self-funded LTC and for our children when we go.
My current annual spending is 1.2% of my invested money. So if the market drops 67% my spending would then be 3.6% of my invested money.
And I am very poor compared to the vast majority of the early retirees on this forum.
You might be surprised. My guess is you are above average on the this forum, and way above average people.
Anyone here all in S&P500? Boring but seems like a "set it and forget it" strategy?
Would anyone dare to keep it after retired? Vanguard much lower percentage, more like 40% or so.
Your thought please
Enuff
Depends on which index (weighted or equal weight). Just 10 stocks make up ~30% of the S&P by weight so it's not that diversified.
Also depends what you are looking for in diversification. To manage risk the assets need to be uncorrelated. You could own thousands of stocks but if they are all correlated you haven't gotten any diversification and haven't reduced risk.
This is a bit of a stumbling explanation:
Warren Buffet has made a great case.
Of course, those of us with less risk tolerance and less knowledge are better off diversifying.
For 40 years I have been trying to beat the SP 500 and have failed.....I give up. My equity exposure from now on is SP 500. I'll bet I beat 97% of the rest. If you add in International I will beat 99.9%.
Backtest me 20 years and prove me wrong. Its' too simple to to understand.
Disclaimer: I don't care to be a financial wizard. During my working years, I believed in the 60/40 AA. In actuality, I never did any balancing. I did try to select certain sectors and a couple of individual stocks, none of it beat the SP500 or the DJI. That is when I realized that beating either of them was beyond my capabilities. The best thing was to simply buy the SP500.
Early on, I tasked my Fido advisor to prove that annual balancing, over the long haul, beat simply buying and reinvesting in the SP500. He was surprised to see that my strategy beat the commonly followed annual AA balancing. Yes it did have more risk of loss, but over the long haul, balancing did not maximize the nest egg. That did tilt the AA higher and higher.
Currently I am 86% equities. I am in SP500, total market, growth and am in the process of moving all of that to SP500. SS covers 90% of our living expenses. I do have an outside income also. I don't include that income in our planning as I don't know how long it will last It does easily cover the rest of our needs and then some. The nest egg is not at all relied upon for our expenses. It wasn't always this way, but it has been for the last couple of years and for the foreseeable future. Our savings are there for our self-funded LTC and for our children when we go.
Anyone here all in S&P500? Boring but seems like a "set it and forget it" strategy?
Would anyone dare to keep it after retired? Vanguard much lower percentage, more like 40% or so.
Your thought please
Enuff
The blogger Jim Collins at https://jlcollinsnh.com addressed this idea. The simplest path to wealth for a young person, he said, was to work hard, live well beneath your means, and save 50-70% or more of your income into the total stock market index fund VGSAX. At some point in your 30s, the dividend yield would cover your already low expenses, at which point you retire, while your portfolio value explodes upward for the rest of your life, allowing you to increase lifestyle as it does.
I was such a novice early on that I just let my 401(K) ride. It was the bulk of my holdings. It became concentrated in my Megacorp's stock (that's how we were paid our match - in Megacorp stock.) There were times when Megacorp stock took off and I was literally 90% concentrated in Megacorp stock.
I finally woke up and said "Self! This is dangerous to be so concentrated in one stock." So I got rid of most of my Megacorp stock and diversified the proceeds. Today Megacorp stock is on a another tear and, had I kept all of it in my 401(K) and stock options, I wouldn't be an average FIRE participant here (low, single digit millions.) I'd be in the 10s of millions.
I guess I would say "I did the wrong thing for the right reasons." No real regrets. I have "enough."
Oh, and I DID keep a nice chunk of Megacorp stock which is now rewarding me handsomely. But no double digit millions for me, I guess.
Rebalancing controls risk and is not meant to increase returns for most of us.
Talk about risk.....! Retirement nest egg and job lost if bankruptcy happened. Glad it didn't happen to you.
Yeah, for many years, Megacorp would NOT allow empl*yees to trade their Megacorp stock in the 401(k) for other investments within the plan. FINALLY, that changed. Before that decision by Megacorp, empl*yess began to transfer from the 401(k) to tIRAs outside the plan. Megacorp couldn't stop that so finally gave up and "did the right thing."
100% stocks is all well and good until your portfolio drops 50% and smart people on tv explain how it could fall another 50%. Then it’s, “Oh, I wish I owned other things too.”
As I often point out, these big market drops scenarios are totally misleading, they are looking at it in a vacuum.
A drop like that is measured from the earlier peak. Well, well, well - the low AA portfolio never reached those peaks, so in many cases, the high AA is STILL higher than the low AA portfolio, even after the drop.
It's a "too convenient" argument.
Dinner time, maybe later I'll post a chart to illustrate.
-ERD50