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Why bother diversified? Why not all in Index SP500?
05-26-2023, 11:49 PM
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#1
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Recycles dryer sheets
Join Date: Oct 2005
Posts: 476
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Why bother diversified? Why not all in Index SP500?
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
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05-27-2023, 12:56 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 20,271
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No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 40% bonds / 10% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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05-27-2023, 04:29 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 16,017
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Quote:
Originally Posted by Enuff2Eat
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
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I'm sure you could do worse, but why not a wider spectrum of stock - say Vanguard Total World Stock.
What about a balance with bonds?
How about Scott Burns Couch Potato investing? Simple and easy to balance.
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Anything which can be used can be misused. Anything which can be misused will be.
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05-27-2023, 04:37 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Nov 2014
Location: Austin
Posts: 1,292
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Quote:
Originally Posted by Enuff2Eat
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
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Very good friend is pretty much 100% SP500 and retired in his early 50's.
Why would he do so?
- He has more than enough.
- He's using a withdrawal method that results withdrawals that are variable and can live with the variability
- He dislikes insurance of any form and considers bonds to be insurance
- He's more of a "free market" type philosophically when it comes to investments
Everybody has a different need, willingness, and ability to take risk.
Cheers
Big-Papa
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05-27-2023, 04:52 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,478
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Much of my equity portion is in SPX or equivalents, plus some VTI.
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"The mountains are calling, and I must go." John Muir
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05-27-2023, 05:09 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 10,709
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Most of my equity allocation is in the S&P 500, but the total equity allocation is only 43%.
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TGIM
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05-27-2023, 05:12 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Feb 2019
Location: St Pete
Posts: 1,038
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Other than cash I'm all in equities. I have a long WD period so equities have the best shot against inflation for a ~50 year retirement. SORR isn't fun but my WD is low enough I sleep well at night and, if history is a reliable guide, I'll be BTD in a few years. If not, I'm perfectly content at my current standard of living! If that happens I might skim off living expenses and invest some more conservatively and let the rest ride as I get older but for now equities work for me.
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FIREd 7/2021 at age 47
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05-27-2023, 05:28 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Morton
Posts: 2,451
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If you have a taxable account and qualified account, you will need different stock funds in each one if you want to tax loss harvest. That would look like VTSAX in taxable and VFIAX in qualified. That is the reason all of my equity allocation is not in one S&P 500 fund. You could stick with 31 days and no reinvestment, but that is a hassle.
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Retired May 13th(Friday) 2016 at age 61.
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05-27-2023, 05:55 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,087
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Its not the worst strategy in the world, but if you look at the 2000s for example, having some exposure to small caps helped your portfolio tremendously.
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Retired 1/6/2017 at 50 years old
Immensely grateful
“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
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05-27-2023, 06:15 AM
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#10
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Full time employment: Posting here.
Join Date: Oct 2020
Posts: 776
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100% stocks has had a lower SWR than more balanced portfolios. So you should only consider it if you have more than enough. SP500 has been great for years vs. other stock choices but no way to know if that continues.
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05-27-2023, 06:27 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 34,715
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Quote:
Originally Posted by Enuff2Eat
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
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I think that would be fine. Link below compares Vanguard's Total Stock and S&P 500 results since 1994... they are similiar enough to me and the less diversified index fund actually outperformed.
| | Vanguard Total Stock Mkt Idx Inv | | Vanguard 500 Index Investor | | Year | Inflation | Return | Balance | Return | Balance | 1993 | 2.75% | 10.62% | $11,062 | 9.89% | $10,989 | 1994 | 2.67% | -0.17% | $11,044 | 1.18% | $11,118 | 1995 | 2.54% | 35.79% | $14,996 | 37.45% | $15,282 | 1996 | 3.32% | 20.96% | $18,139 | 22.88% | $18,778 | 1997 | 1.70% | 30.99% | $23,761 | 33.19% | $25,010 | 1998 | 1.61% | 23.26% | $29,289 | 28.62% | $32,168 | 1999 | 2.68% | 23.81% | $36,264 | 21.07% | $38,945 | 2000 | 3.39% | -10.57% | $32,429 | -9.06% | $35,418 | 2001 | 1.55% | -10.97% | $28,873 | -12.02% | $31,160 | 2002 | 2.38% | -20.96% | $22,821 | -22.15% | $24,259 | 2003 | 1.88% | 31.35% | $29,976 | 28.50% | $31,174 | 2004 | 3.26% | 12.51% | $33,728 | 10.74% | $34,522 | 2005 | 3.42% | 5.98% | $35,745 | 4.77% | $36,170 | 2006 | 2.54% | 15.51% | $41,289 | 15.64% | $41,827 | 2007 | 4.08% | 5.49% | $43,556 | 5.39% | $44,081 | 2008 | 0.09% | -37.04% | $27,424 | -37.02% | $27,762 | 2009 | 2.72% | 28.70% | $35,294 | 26.49% | $35,114 | 2010 | 1.50% | 17.09% | $41,327 | 14.91% | $40,351 | 2011 | 2.96% | 0.96% | $41,724 | 1.97% | $41,145 | 2012 | 1.74% | 16.25% | $48,506 | 15.82% | $47,656 | 2013 | 1.50% | 33.35% | $64,682 | 32.18% | $62,989 | 2014 | 0.76% | 12.43% | $72,721 | 13.51% | $71,498 | 2015 | 0.73% | 0.29% | $72,935 | 1.25% | $72,391 | 2016 | 2.07% | 12.53% | $82,076 | 11.82% | $80,945 | 2017 | 2.11% | 21.05% | $99,355 | 21.67% | $98,484 | 2018 | 1.91% | -5.26% | $94,132 | -4.52% | $94,028 | 2019 | 2.29% | 30.65% | $122,983 | 31.33% | $123,485 | 2020 | 1.36% | 20.87% | $148,649 | 18.25% | $146,018 | 2021 | 7.04% | 25.59% | $186,685 | 28.53% | $187,680 | 2022 | 6.45% | -19.60% | $150,090 | -18.23% | $153,468 | 2023 | 1.70% | 8.25% | $162,467 | 9.12% | $167,468 |
https://www.portfoliovisualizer.com/...ocation2_2=100
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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05-27-2023, 06:31 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jun 2016
Posts: 1,843
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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:
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05-27-2023, 06:55 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,087
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I think Ray Dalio is very smart, but I'm just dubious of the % correlation of different assets. I just don't think it's that clear. 2022 was a perfect example. My sense is consensus was very clear on stock v bond correlation , yet owning a portfolio of 20-30% bonds did very little to offset the poor returns of stocks. I saw that in my moms account.
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Retired 1/6/2017 at 50 years old
Immensely grateful
“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
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05-27-2023, 06:58 AM
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#14
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Recycles dryer sheets
Join Date: Jan 2013
Posts: 157
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Your choice - follow Warren Buffet's advice or random strangers on the internet.
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05-27-2023, 07:29 AM
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#15
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Recycles dryer sheets
Join Date: Aug 2013
Location: Roanoke
Posts: 146
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Other than cash, which is about 3% of our portfolio, we are all equities. We are also in a fairly unique situation compared to most here.
I'm retired military and we comfortably live off my pension and VA disability. I retired 5 years ago at 49 and still do a little part time work, mostly so I can still add to retirement accounts.
I view both my pension and VA disability as the equivalent of a large portfolio of government bonds. Very safe and adjusted for inflation. So I don't feel a need to have a big chunk in bonds at this point.
We don't anticipate any significant withdrawals from our retirement accounts for at least another decade or so and even then, our SWR plan is 2-3%, so not too worried about SORR.
My MIL passed away and my wife received a good chunk in inheritance which has served to increase our savings that much more.
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05-27-2023, 07:39 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Jun 2016
Posts: 1,843
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Quote:
Originally Posted by FREE866
I think Ray Dalio is very smart, but I'm just dubious of the % correlation of different assets. I just don't think it's that clear. 2022 was a perfect example. My sense is consensus was very clear on stock v bond correlation , yet owning a portfolio of 20-30% bonds did very little to offset the poor returns of stocks. I saw that in my moms account.
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I'm not defending Dalio. I chose to post his vid because it was one of the shorter ones discussing the point.
I think the logic and math of risk reduction with uncorrelated assets is sound which means that the old consensus that stocks-zig when bonds-zag has broken down some what. When bottomless pocketed buyers (central banks with "printers") buy bonds with a goal to control rates, the market is no longer functioning the way it did when the stocks+bonds=diversification consensus was formed and the correlation is no longer an inverse relationship... at least not to the degree it was 40 years ago.
So the trick becomes finding 10 truly uncorrelated assets. I only looked into it for about 5 minutes a couple of weeks ago and the suggested assets were non-starters like fine art and wine. The wine might work except I buy cheap stuff and I'd drink my assets skewing my portfolio allocation...
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05-27-2023, 07:45 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,087
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Quote:
Originally Posted by Spock
I'm not defending Dalio. I chose to post his vid because it was one of the shorter ones discussing the point.
I think the logic and math of risk reduction with uncorrelated assets is sound which means that the old consensus that stocks-zig when bonds-zag has broken down some what. When bottomless pocketed buyers (central banks with "printers") buy bonds with a goal to control rates, the market is no longer functioning the way it did when the stocks+bonds=diversification consensus was formed and the correlation is no longer an inverse relationship... at least not to the degree it was 40 years ago.
So the trick becomes finding 10 truly uncorrelated assets. I only looked into it for about 5 minutes a couple of weeks ago and the suggested assets were non-starters like fine art and wine. The wine might work except I buy cheap stuff and I'd drink my assets skewing my portfolio allocation... 
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Nothing wrong with cheap wine ha!
I am all stock, but diversified with S and P, IWM, SCHG and international
I just cant get into bonds , I know they mitigate the volatility, but I view that as just the price I pay for market returns...and to reach my goal all I need are market returns...and actually now almost 6.5 years into retirement I need much less, so barring something cataclysmic happening I'll be fine.
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Retired 1/6/2017 at 50 years old
Immensely grateful
“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
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05-27-2023, 08:01 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,076
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There's a chart below this quote that helps explain "most investors". If you're not in that bunch, it's your choice.
Quote:
The chart in this article shows hypothetical portfolios with different asset allocations: The most aggressive portfolio shown comprises 60% US stocks, 25% international stocks, and 15% bonds: it had an average annual return of 9.77%. Its best 12-month return was 136%, while its worst 12-month return would have lost nearly 61%. That's probably too much volatility for most investors to endure.
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https://www.fidelity.com/learning-ce...iversification
So, you've made a decision to accept the results of an index with 500 companies. If that's ok with you, fine. But I'd advise a friend to look further at what diversification consists of.
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05-27-2023, 08:13 AM
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#19
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Recycles dryer sheets
Join Date: Oct 2021
Posts: 432
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Excluding rentals, my AA = 100% equities. My largest portfolio is a taxable non retirement account and thus I use VOO and VTI as TLH partners otherwise I’d be mostly in the S&P 500. The only other index fund I strongly believe in is QQQ (which has been extremely profitable especially lately). YMMW but yes I believe in couch potato portfolios…
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05-27-2023, 10:11 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 7,896
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As a dividend investor a ~2% annual dividend from the S&P index is not very attractive. Having said that, I do hold about 13% of it in the portfolio solely for growth purposes.
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