Anybody else 100% stocks, no bonds?

[RetiredHappy]

Yes I have been 100% stocks for the past 8 years (since I was about 32).

Here are my results of that past 8 yrs:

33.42% (2014)
45.01% (2015)
12.04% (2016)
26.67% (2017)
-4.43% (2018)
37.91% (2019)
37.15% (2020)
23.68% (2021)

On a side note, my ol man who is 70 is also 100% stocks *But we own some real-estate as well, not sure if that is noteworthy. What are bonds? *kidding

If we have many more days like today's stock market and the start of a bear market, those percentages are going to be a distant memory.

 

[aja8888]

If we have many more days like today's stock market and the start of a bear market, those percentages are going to be a distant memory.

We have the Fed "put" in place......

 

[FREE866]

If we have many more days like today's stock market and the start of a bear market, those percentages are going to be a distant memory.

Market is off 1.5% off of the all time high and you're already talking about "the start of a bear market"




“If You’re Worried About What Things Are Going to Be Worth Next Week…You’re Going to Make Yourself Way Poorer 20 Years from Now”

 

[FREE866]

Yes I have been 100% stocks for the past 8 years (since I was about 32).

Here are my results of that past 8 yrs:

33.42% (2014)
45.01% (2015)
12.04% (2016)
26.67% (2017)
-4.43% (2018)
37.91% (2019)
37.15% (2020)
23.68% (2021)

Those are life changing results. Well done!

 

[RetiredHappy]

Market is off 1.5% off of the all time high and you're already talking about "the start of a bear market"




“If You’re Worried About What Things Are Going to Be Worth Next Week…You’re Going to Make Yourself Way Poorer 20 Years from Now”

Don't I sound like a nervy investor?

 

[retire48in2018]

I remain with 100% with an asterisk.

I do have 3 years of expenses in cash and we can live on 2% withdrawal rate (once cash is gone) on a lower budget.

We retired at 51, and consider such a long time horizon in having 100% in equities (all mutual funds/ETF/index funds)

 

[DangerDad]

Vanguard’s Model Portfolio site looks at annual returns for the 95 year period from 1926 - 2020:

100% stock = 10.3%
80:20 = 9.8%
70:30 = 9.4%
60:40 = 9.1%

It’s true that more recent returns suggest a greater benefit from 100% stocks but perhaps this is just a form of recency bias..?

Yes, there are some fortunate investors who could safely remain 100% stock well into retirement. But for me it’s not worth that rather marginal difference in annual return. I’m still relatively aggressive but I also value diversification and stability.

Regards,
DangerDad

 

[FREE866]

Vanguard’s Model Portfolio site looks at annual returns for the 95 year period from 1926 - 2020:

100% stock = 10.3%
80:20 = 9.8%
70:30 = 9.4%
60:40 = 9.1%

You're right that the difference in % returns looks pretty small, however if you test a million dollars all stock versus a million dollars at 70/30 through FIRECALC for 30 years the average ending balance for the all stock is significantly higher.

 

[RunningBum]

45.01% (2015)

How did you do so well in 2015? That was a slightly down year for the DOW and S&P 500.

And check back with us when we run into another 2008, or 2000-2002. I was right about your age, and 100% stocks, when 2000 hit I'm fine now, but that set back my ER plans about 10 years.

 

[chassis]

@RunningBum did you notice @kttest's return in 2018? When another 2008 rolls around, it's reasonable expect a lower return.

But when he is killing it the other years, does it matter in your mind what happened in the hypothetical future 2008?

 

[kgtest]

Those are life changing results. Well done!

Thank you.

The ride up has been fun! Just wish we had more capital to invest. I will be able to offset any lower year returns now with my higher earnings. That is my combatant to inflationary risks. If I notice inflation at +8% then I go get a new job that is 1.1x of current salary. Seems logical to me. That way we are able to maintain our Quality of Life. 9.5yrs to ER

 

[kgtest]

How did you do so well in 2015? That was a slightly down year for the DOW and S&P 500.

And check back with us when we run into another 2008, or 2000-2002. I was right about your age, and 100% stocks, when 2000 hit I'm fine now, but that set back my ER plans about 10 years.

I think I bought AAPL on a dip and sold it high. I believe it went down to substantially and then bounced later, I could look back at the spreadsheet to be sure as I am just jogging the memory.

I quickly looked and this is what I had owned back then, but I was trading actively that year. Nowadays I just buy the whole market with VUG, VOT and VBK (and still own a little AAPL, MMM, and CASY)

VFINX
VIMAX
VIMAX
VIMAX
VTSMX
SCHA
VUG
VOOG
VDE
VHT
DPZ
DAL
CASY
MMM
XOM

Yepp, just looked, and a few factors that year.

1. I changed jobs and got lucky with an IRA rollover in terms of timing.
2. I bought AAPL heavily in January, and then sold it in April...will probably never get that lucky again. Then I repeated that again that year.
3. I was actively trading and getting admittedly "lucky" during that year. The unicorn year.
4. Looks like I had some solid Dividends that year as well.

 

[RunningBum]

I think I bought AAPL on a dip and sold it high. I believe it went down to substantially and then bounced later, I could look back at the spreadsheet to be sure as I am just jogging the memory.

Nice!

 

[Al in Ohio]

You're right that the difference in % returns looks pretty small, however if you test a million dollars all stock versus a million dollars at 70/30 through FIRECALC for 30 years the average ending balance for the all stock is significantly higher.

That’s all assuming that the folks invested at 100% stock do not get nervous when their portfolio tanks to less than half what is was in a major market drop at least once ( or more) in their lifetimes and have the guts to not cash out and lock in losses. Then that higher lifetime return ends up being the lowest. Those invested in 60/40 or 70/30 portfolios are historically much less likely to cash anything out since their portfolios retain a significantly higher value in a big crash. ( Significant enough to mentally make them feel much better about their position than their higher risk investing friends). More than half of those invested 100% in stocks during a crash will panic and sell too soon.

 

[FREE866]

That’s all assuming that the folks invested at 100% stock do not get nervous when their portfolio tanks to less than half what is was in a major market drop at least once ( or more) in their lifetimes and have the guts to not cash out and lock in losses. Then that higher lifetime return ends up being the lowest. Those invested in 60/40 or 70/30 portfolios are historically much less likely to cash anything out since their portfolios retain a significantly higher value in a big crash. ( Significant enough to mentally make them feel much better about their position than their higher risk investing friends). More than half of those invested 100% in stocks during a crash will panic and sell too soon.

You're bringing in other variables that may or may not be true depending on the investor. My point is that if you look at the data over a couple decades there is a big "price" to pay for the "security" of having less % of your portfolio in stocks.

 

[Al in Ohio]

You're bringing in other variables that may or may not be true depending on the investor. My point is that if you look at the data over a couple decades there is a big "price" to pay for the "security" of having less % of your portfolio in stocks.

It’s all about variables. The entire market is effected heavily by the human nature variable. Human nature for most who are invested in a 100% equity asset allocation is to panic and sell some off to either pull cash out to preserve what remains during a crash, or major correction. Some trade out stocks to finally diversify. In doing so they lock in huge unrecoverable losses. Plus they never see it coming since big market corrections and crashes happen quickly, often after long prolonged bull markets with big gains.

 

[tulak]

My worry is that I don’t have enough cash to buy more equities on a dip. This happened to me in 2008. I was able to go from something around 92% to 97% equities.

I always keep some cash/fixed income in case SHTF. Back then, it wasn’t as much, but now it’s five years of lean living. The rest goes into equities.

 

[FREE866]

It’s all about variables. The entire market is effected heavily by the human nature variable. Human nature for most who are invested in a 100% equity asset allocation is to panic and sell some off to either pull cash out to preserve what remains during a crash, or major correction. Some trade out stocks to finally diversify. In doing so they lock in huge unrecoverable losses.

It's a pretty straightforward and evidence based premise. 100% stocks , over time, provide the highest portfolio balance. Because "most" people can't adhere to that based on emotions doesn't negate the fact.

 

[chassis]

100% stocks +
present value of Social Security as a bond position +
3 years of living expenses in cash =
a solid high yielding portfolio

 

[winyaz]

Well, we'll have to wait to see how things turn out, but sorry to say that article really isn't useful.

In the paragraph following his first chart, the author implicitly assumes that he is dealing with samples of a random variable with a Gaussian (normal) distribution. This is a popular error among economists because it lets you say things like "67% of the values are within 1 SD" and "95% of the values are within 2 SD." But the fact is that the samples are not random at all; they are highly correlated. Whether the distribution is Gaussian or not is unknown but I'd bet against it. So, the numbers in the article are not really useful to prove anything. Also, as they always say, past results do not predict future performance.

You were the one who started throwing numbers around and asked me for one. Now you reject it because it is not perfect? I would rather have an imperfect estimate than a WAG.

The author also uses the time-honored technique of rejecting time periods that do not support his thesis.

I would say that he explained some variance over the nearly 100 year time frame rather than rejecting what didn't fit. There is clearly a high correlation between CAPE and subsequent 10 year returns - that article is not the only source of info on this subject and the correlation has been shown to hold up across other countries as well.

The acid test, really, is this: If the CAPE is really this reliable in predicting returns, why do we not see equity mutual funds that are able to use this information to consistently outperform the market?

Backtests are fun. Playing at statistics is fun. Neither AFIK has been demonstrated to be successful at predicting the future.

With your talk of predicting the future I think you are being disingenuous. You claim to understand normal/gaussian distributions but then conflate probabilities with predicting the future. The probabilities in black jack or poker can be calculated precisely but that does not predict the future. Still, if one is betting the probabilities may be useful.

 

[OldShooter]

That’s all assuming that the folks invested at 100% stock do not get nervous when their portfolio tanks to less than half what is was in a major market drop at least once ( or more) in their lifetimes and have the guts to not cash out and lock in losses. Then that higher lifetime return ends up being the lowest. Those invested in 60/40 or 70/30 portfolios are historically much less likely to cash anything out since their portfolios retain a significantly higher value in a big crash. ( Significant enough to mentally make them feel much better about their position than their higher risk investing friends).

Yup. There's always a horrible hypothetical. aka straw man. How about the one where the world banking system collapses? Or the asteroid hits? Or there is hyperinflation?

More than half of those invested 100% in stocks during a crash will panic and sell too soon.

Link or reference? Or is that your own fact?

 

[OldShooter]

You were the one who started throwing numbers around and asked me for one. Now you reject it because it is not perfect? I would rather have an imperfect estimate than a WAG.

Not me. Using a bad estimate is a bad idea IMO.

The D-Day weather problem: ... a story possibly apocryphal but worthwhile anyway: One day well prior to D-day, the army Met (meteorological) office received a request from SHEAF for a weather forecast on a specific day a couple of months in the future. "Impossible," they said and this was relayed up the chain of command. Back down came the order: "A forecast is required for planning purposes."

I would say that he explained some variance over the nearly 100 year time frame rather than rejecting what didn't fit. There is clearly a high correlation between CAPE and subsequent 10 year returns - that article is not the only source of info on this subject and the correlation has been shown to hold up across other countries as well.

I didn't argue about high correlation but I didn't look into it either. High correlation can exist but one or both of the time series can still be non-random and non-Gaussian. In this case its both.

With your talk of predicting the future I think you are being disingenuous. You claim to understand normal/gaussian distributions but then conflate probabilities with predicting the future. The probabilities in black jack or poker can be calculated precisely but that does not predict the future. Still, if one is betting the probabilities may be useful.

Your post was making probability predictions based on the article you linked. If you are now saying that the future cannot be predicted then we agree completely.

Last post on this topic.

 

[Al in Ohio]

Yup. There's always a horrible hypothetical. aka straw man. How about the one where the world banking system collapses? Or the asteroid hits? Or there is hyperinflation?

Link or reference? Or is that your own fact?

Business school. Easily verifiable. That is what causes the crash in the first place you know. It’s all human emotion. It’s happened several times since I’ve been invested. Never experienced an asteroid or world bank collapse however. They are far less frequent fortunately.

 

[OldShooter]

Business school. ...

My question was about your unsupported statement: "More than half of those invested 100% in stocks during a crash will panic and sell too soon." I don't know if that's true or not, but I suspect not.

 

[winyaz]

Your post was making probability predictions based on the article you linked. If you are now saying that the future cannot be predicted then we agree completely.

Last post on this topic.

Again with predictions. From Google:

The difference between probability and prediction is that probability is based on the set of data and varies between highly unlikely to extremely likely. Whereas the prediction is absolute and will either be right or wrong.

We do agree that the stock market cannot be predicted, but while you seem to stop there, I go further to assess what we do know about it. For example, the D-Day invasion required low tide at sunrise and a full moon. Something easily predicted months in advance. And the invasion was based on a weather report, but it was a current one: https://www.history.com/news/the-weather-forecast-that-saved-d-day

The primary point I am trying to make is that the US stock market is at near historic valuations. This is a fact: https://www.multpl.com/shiller-pe
and that this knowledge may actually be useful to investors - which seems to be the point we disagree on.

And I'll leave it at that.