Vanguard says you're investing too aggressively?

[NW-Bound]

I have reduced my holdings of megacaps, no make it gigacaps and teracaps, and will shift to value large caps, mid-cap blends, and small-cap blends.

Investing in non-large-caps means buying ETFs for me, because bitty companies are too numerous to follow and to choose.

PS. I am not a Boglehead, but I believe they call this slice-and-dice investing method.

 

[target2019]

In my Rollover IRA I split US Equity money into equal parts of:

1) SCHG SCHWAB U.S. LARGE-CAP GROWTH ETF
2) VXF VANGUARD EXTENDED MARKET INDEX FUND ETF SHARES

 

[pb4uski]

But it's not just Vanguard. All the brokerage houses have fairly pessimistic expectations of equity returns compared to historical norms over the next decade.

 

[MichaelB]

But it's not just Vanguard. All the brokerage houses have fairly pessimistic expectations of equity returns compared to historical norms over the next decade.

Very reminiscent of the late 90’s. Déjà vu perhaps?

 

[FREE866]

But it's not just Vanguard. All the brokerage houses have fairly pessimistic expectations of equity returns compared to historical norms over the next decade.

If one needs or wants their money to grow and has a 10+ year investment time horizon heavy equity exposure is the best allocation. Period. We have a century of evidence that supports that. I think you and I had the same conversation 10 and 5 years ago.

The reality is that if I adhered to how the brokerage houses told me to allocate my money the last 5, 10 even 15 and 20 years I'd have significantly less money today and might not even be retired ( which I was able to do in 2017).


and things like PE ratios are just ONE variable. If it were only that simple.

 

[FD1000]

If one needs or wants their money to grow and has a 10+ year investment time horizon heavy equity exposure is the best allocation. Period. We have a century of evidence that supports that. I think you and I had the same conversation 10 and 5 years ago.

The reality is that if I adhered to how the brokerage houses told me to allocate my money the last 5, 10 even 15 and 20 years I'd have significantly less money today and might not even be retired ( which I was able to do in 2017).


and things like PE ratios are just ONE variable. If it were only that simple.

You can't be sure. We have precedence.
From 01/2000 to 01/2010, the SP500 lost about 9-10%.

%. See

I never believed any forecast, nor did I use any in the past.

 

[Diogenes]

Several funds I would use now, no guarantee, of course. They have ST+longer term very good risk-adjusted performance. See below 3 years chart of ARBIX,SEMIX,HOSIX.

Arbix, Semix and Hosix reminds me of the three musketeers. Is there also a D'arbitragian? He would buy in one place, and immediately sell in another, exploiting market inefficiencies.

But seriously: is the recommendation to buy-and-hold the musketeers? Is that enough? Or ought one to trade them?

 

[FREE866]

You can't be sure. We have precedence.
From 01/2000 to 01/2010, the SP500 lost about 9-10%.

View attachment 63200%. See

I never believed any forecast, nor did I use any in the past.

100% sure?

Of course not, nothing is guaranteed.

However, cherry picking a ten year period over the last ninety ten year periods to refute my point is a bit of a stretch.

I think history is a pretty good guide and given that investing is a probabilities game if you back tested a diversified stock portfolio the numbers are pretty overwhelming that is the most profitable allocation.

 

[NW-Bound]

I read but don't follow any forecast. However, my individualistic and contrarian nature tells me to be wary of following the crowd. Once a place feels too crowded, I look for an exit.

 

[Chuckanut]

The reality is that if I adhered to how the brokerage houses told me to allocate my money the last 5, 10 even 15 and 20 years I'd have significantly less money today and might not even be retired ( which I was able to do in 2017).

There's the rub. It's the same with me. I do not like these very high PE ratios. But, had I listened to many experts and waited for a for reasonable PE level, I would have left a lot of cash on the table. Instead I have peeled off some stock profits and used those profits to buy more FDIC insured CDs, treasuries, and several agency bonds.

My ability to predict the market (be it stocks or interest rates) is pathetic.

 

[FD1000]

I read but don't follow any forecast. However, my individualistic and contrarian nature tells me to be wary of following the crowd. Once a place feels too crowded, I look for an exit.

The crowd has been invested in the SP500 (all funds + ETFs) the most since 2010...and the results have been amazing.

 

[FD1000]

100% sure?

Of course not, nothing is guaranteed.

However, cherry picking a ten year period over the last ninety ten year periods to refute my point is a bit of a stretch.

I think history is a pretty good guide and given that investing is a probabilities game if you back tested a diversified stock portfolio the numbers are pretty overwhelming that is the most profitable allocation.

Pretty funny, forecasting the future is impossible.
Again, it's not all about who made the most; many investors, even younger ones and retirees with big portfolios, are looking for the best risk-adjusted returns.

If you ask 100 investors age 65 with a portfolio size of $3-5 million and a $100K need per year from this portfolio. Which one would they prefer: making 12% annually with a possible 35% decline OR 8-9% with only a 10-15% decline?

Diversification is another myth. What is exactly diversification? What percent would you invest in each?
Buffett thinks it is the SP500.
Others think it should be a combination of several of the following: LC, SC, value, growth, blend, international, RE, commodities, and more.

 

[NW-Bound]

The crowd has been invested in the SP500 (all funds + ETFs) the most since 2010...and the results have been amazing.

No dispute there.

As mentioned elsewhere on this forum, I have had none of the Magnificent 7, other than Nvidia in some semiconductor ETFs. As an active investor, it took me a lot of work to keep up with the S&P, and that was mostly via semi and semi-equipment stocks. In the last few months, I have lightened up on these too.

 

[NW-Bound]

Buffett thinks it is the SP500.

Actually, Buffett does not invest in the S&P, and he's not diversified. I think what he meant was that small investors should not be trying to do what he does (picking stocks), and should just buy the S&P.

 

[Murdock75]

Below is a video talking about Vanguard saying the market is too expensive and you should pivot to dividend stocks and bonds. Any thoughts?

Up over 15% YTD so don't think I will change to lower returns.

 

[Dtail]

If one needs or wants their money to grow and has a 10+ year investment time horizon heavy equity exposure is the best allocation. Period. We have a century of evidence that supports that. I think you and I had the same conversation 10 and 5 years ago.

The reality is that if I adhered to how the brokerage houses told me to allocate my money the last 5, 10 even 15 and 20 years I'd have significantly less money today and might not even be retired ( which I was able to do in 2017).


and things like PE ratios are just ONE variable. If it were only that simple.

Yup, we have been through this before.
Vanguard predicted lower equity returns for the whole 2020-2029 decade. At year 2026, not really correct.
Will eventually be correct, just like a broken clock.

 

[NW-Bound]

Yep, when one rolls a dice and it keeps coming up 6, one should just keep going and not taking any money off the table. Why quit when one is on a winning streak?

PS. In fact, the S&P is not aggressive enough. Why not buy just the Magnificent 7, and cut out all the riff-raff? MAGS is the Mag 7 ETF, pure goodness. In the past 5 years, it's up 166%, while the S&P a measly 71% or so (dividends not included)? This is how riches are made.

PS. Even the NASDAQ at 96% after 5 years looks dim compared to MAGS.

 

[FD1000]

Actually, Buffett does not invest in the S&P, and he's not diversified. I think what he meant was that small investors should not be trying to do what he does (picking stocks), and should just buy the S&P.

I didn't say Buffett is invested in the SP500.
Buffett famously describes diversification as "protection against ignorance," for investors who truly understand business. For the other 95% of investors, which also means the pros, he recommends the SP500.

I based my model loosely on 3 Buffet’s rules but adapted it to funds: Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1 and Rule 3: Diversification is a protection against ignorance. I added a fourth rule: momentum. Rule 5 is based on experience.
My generic system looks for the best 5 wide range funds with good risk-adjusted performance, keeps changing them using momentum, and each fund must perform well. You do that 2-3 times annually. The idea is to be mostly in the right category (never diversify) + achieve better risk-adjusted performance by looking at performance first and then selecting the best SD + Sharpe ratio funds.
In the last 10+ years, I modified it to mostly 2-3 bond OEFs and added timing for in/out of the market.

Diversification, while often touted as the key to stability, can lead to mediocre performance when applied across several asset categories. For instance, when U.S. large-cap stocks (US LC) perform well, other categories like emerging markets (EM), international, and value stocks often lag—just look at the periods from 1995–2000 and 2010–2025. The opposite happened during 2000-10.

 

[NW-Bound]

I based my model loosely on 3 Buffet’s rules but adapted it to funds: Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1 and Rule 3: Diversification is a protection against ignorance. I added a fourth rule: momentum. Rule 5 is based on experience.
My generic system looks for the best 5 wide range funds with good risk-adjusted performance, keeps changing them using momentum, and each fund must perform well. You do that 2-3 times annually. The idea is to be mostly in the right category (never diversify) + achieve better risk-adjusted performance by looking at performance first and then selecting the best SD + Sharpe ratio funds.
In the last 10+ years, I modified it to mostly 2-3 bond OEFs and added timing for in/out of the market.

Congrats on finding something that works so well.

 

[SteveTX]

In regard to concentrated portfolios and just keeping them, I found an article from Jeffrey Ptak to be extremely interesting. I have listed the link address below, just cut and paste, hopefully no paywall. Very thought provoking...and more to it than the title would make you think...

What Beat the S&P500 over the past three decades? Doing Nothing

https://www.morningstar.com/stocks/what-beat-sp-500-over-past-three-decades-doing-nothing

 

[COcheesehead]

In regard to concentrated portfolios and just keeping them, I found an article from Jeffrey Ptak to be extremely interesting. I have listed the link address below, just cut and paste, hopefully no paywall. Very thought provoking...and more to it than the title would make you think...

What Beat the S&P500 over the past three decades? Doing Nothing

https://www.morningstar.com/stocks/what-beat-sp-500-over-past-three-decades-doing-nothing

From the article

Lessons​

The Do Nothing Portfolio’s success potentially holds lessons for individual investors like us, too.

1. Don’t insist on being fully invested at all times. A little extra cash, gradually amassed, can cushion the blows and is available to deploy as needed at the end of a long time horizon. It also can nicely complement a strategy of letting winners run, as it acts as a counterweight to the additional concentration at the top of the portfolio

His very first lesson is somewhat of a timing decision. Kind of funny when you think about it.

 

[oiseux]

In listening to the guy explain the Vanguard guidance change, it doesn't seem dissimilar to other voices (albeit 30-70 seems higher). As other mentioned, it depends on your age, risk tolerance, and needs relative to goals. And did I miss something, did they actually change their own target fund mix? My own mix is more conservative, but not nearly that conservative. And I have exposure to two of the AI-related stocks that are driving some of the largest overall gains.

The "Doing Nothing" is reassuring as that is my modus operandi

 

[Diogenes]

Yep, when one rolls a dice and it keeps coming up 6, one should just keep going and not taking any money off the table. Why quit when one is on a winning streak?

If one presumes (rightly or wrongly), that one has a preternatural knack for throwing the dice just-so, that it comes up 6 much more often than random expectation, then one naturally clings to one's strategy, and views askance as defeatism, something like "buying the whole haystack". This prompts some questions:

1. Can such dice-throwing skills be systematized and learned? Or is it more of an art?
2. If enough people attain such skill, does their activity arbitrage-away (correct term?) the advantage?
3. Does such skill persist? If not, do we have the wisdom to quit while we're ahead?
4. Is it really skill, or just long-tails of a random distribution?
5. Does the strategy eventually blow up? I mean, like LTCM?

 

[Montecfo]

5. Does the strategy eventually blow up? I mean, like LTCM?

hey, LTCM did not fail, they just ran out of capital before they could be proven right.

 

[NW-Bound]

If one presumes (rightly or wrongly), that one has a preternatural knack for throwing the dice just-so, that it comes up 6 much more often than random expectation, then one naturally clings to one's strategy, and views askance as defeatism, something like "buying the whole haystack". This prompts some questions:

1. Can such dice-throwing skills be systematized and learned? Or is it more of an art?
2. If enough people attain such skill, does their activity arbitrage-away (correct term?) the advantage?
3. Does such skill persist? If not, do we have the wisdom to quit while we're ahead?
4. Is it really skill, or just long-tails of a random distribution?
5. Does the strategy eventually blow up? I mean, like LTCM?

I don't know the answers to the above questions, because I don't possess the above knack.
Perhaps my sarcasm was too subtle.
Or rather, my comparison of the S&P500 going up non-stop to a string of consecutive dice throws is not apt.