Why bother diversified? Why not all in Index SP500?

[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

[Midpack]

Just do a search…

https://www.sarwa.co/blog/invest-sp-500

https://www.fool.com/investing/2022/...a-millionaire/

https://blog.nbkcapitalsmartwealth.c...in-the-sp-500/

[Koolau]

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

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.

[big-papa]

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

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

[DrRoy]

Much of my equity portion is in SPX or equivalents, plus some VTI.

[Dtail]

Most of my equity allocation is in the S&P 500, but the total equity allocation is only 43%.

[FLSUnFIRE]

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.

[VanWinkle]

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.

[FREE866]

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.

[Exchme]

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.

[pb4uski]

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

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

[Spock]

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:

https://www.youtube.com/watch?v=Nu4lHaSh7D4

[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.

[enjoyinglife102]

Your choice - follow Warren Buffet's advice or random strangers on the internet.

[rwdflynavy]

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.

[Spock]

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.

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...

[FREE866]

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...

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.

[target2019]

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.

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.

[RetiredAt49]

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…

[marko]

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.