Does anyone believe 100 percent equities is not risky?
- willthrill81
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Re: Does anyone believe 100 percent equities is not risky?
Let's flip the title of the thread for a moment, "Does anyone believe 100 percent nominal bonds is not risky?"
Again, it depends on how we define risk. If it's in terms of funding future real consumption, then 100% nominal bonds could be very risky indeed.
In truth, 100% of anything has some level of risk. Even something like a TIPS ladder has risk because (1) you might have underestimated your future expenses and (2) TIPS only go out to 30 years, which could be longer than your lifespan.
Again, it depends on how we define risk. If it's in terms of funding future real consumption, then 100% nominal bonds could be very risky indeed.
In truth, 100% of anything has some level of risk. Even something like a TIPS ladder has risk because (1) you might have underestimated your future expenses and (2) TIPS only go out to 30 years, which could be longer than your lifespan.
The Sensible Steward
Re: Does anyone believe 100 percent equities is not risky?
You're ignoring dividends, which is a cardinal sin.CraigTester wrote: ↑Mon Aug 01, 2022 4:22 pmHomer - you make me proud!HomerJ wrote: ↑Mon Aug 01, 2022 4:08 pm I am a little worried that you've never experienced a long or deep crash when not working.
Is your self-awareness good enough to accurately imagine how you will react to a 5-10 year crash while pulling money each year?
Your total confidence that all stock market crashes recover quickly makes me worry for you. Because that confidence is badly misplaced. Open a history book.
Here are some example dates that can be referred to in the history books you mentioned above.
As shown, it can take up to 20 years to retain earlier high water marks if 100% equities
20 yrs. May 1901-Aug 1921.
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
All the best,
CraigTester
Especially for those earlier dates when dividends were in the 4%-6% range.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: Does anyone believe 100 percent equities is not risky?
Yes, if you have pensions or other income sources that cover all your expenses, then there is zero risk with all your "extra unnecessary money" in stocks.T-NYC wrote: ↑Mon Aug 01, 2022 4:33 pm We are 100% equities in three index funds. We can meet our base expenses without any distributions. At some point we will be building a home and will reduce our equities to fund it. The remaining portfolio will stay in equities. While we would not want to lose our investment, we could and it would only affect our house-building plans. Realistically, if all three index funds went to zero then there are bigger, more immediate problems.
There is zero risk investing it all in beanie babies as well.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: Does anyone believe 100 percent equities is not risky?
Everything is risky, a 100% bond fund is risky, all cash is risky...
Re: Does anyone believe 100 percent equities is not risky?
returns in index funds are likely to outperform beanie babies, thus our choice.
Re: Does anyone believe 100 percent equities is not risky?
Yep. Life is risky. Everybody has risks in their life, and you can’t eliminate all of them. Over half of all accidental deaths happen at home, so staying at home is risky too….
For me, it’s a question if what’s appropriate. I think a 100% equity portfolio is appropriate for lots of people, but not for everybody. That is the portfolio I had until I got within 10 years of retirement.
Re: Does anyone believe 100 percent equities is not risky?
What is the odds of cash is the worst asset class in 10 years? 100%
Time is the ultimate currency.
Re: Does anyone believe 100 percent equities is not risky?
For 100% equities, you need to ask over what time-frame.
This is important and tends to be overlooked.
Bogle himself, demonstrated in his book on mutual funds that over a 1 year period, (S&P 500) you can lose over 50%, over 5-year rolling period the loss is far less (few percents), but over 20-year rolling period, you are positive. Also portfolio volatility is reduced drastically. Risk is defined as nominal loss of capital.
This is important and tends to be overlooked.
Bogle himself, demonstrated in his book on mutual funds that over a 1 year period, (S&P 500) you can lose over 50%, over 5-year rolling period the loss is far less (few percents), but over 20-year rolling period, you are positive. Also portfolio volatility is reduced drastically. Risk is defined as nominal loss of capital.
- willthrill81
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Re: Does anyone believe 100 percent equities is not risky?
I believe that inflation-adjusted loss of capital is a big risk.
The Sensible Steward
Re: Does anyone believe 100 percent equities is not risky?
It depends on which period we are talking about. This can be run over portfolio visualizer or similar. Stocks have returned over long periods something like 7-8 %. Inflation maybe 3-4%. So over long periods you are better off with stocks. That is still better than bonds.willthrill81 wrote: ↑Mon Aug 01, 2022 6:35 pmI believe that inflation-adjusted loss of capital is a big risk.
Re: Does anyone believe 100 percent equities is not risky?
Picketty seems to show what you want for multiple centuries of family wealth is real estate ==
"As Piketty points out, for most of history, the return on capital could be understood as the value of land. Think about Downton Abbey. Lady Grantham doesn’t know what a weekend is because her family never worked. But yet, before the wars anyway, between help from wealthy relatives and the value of Downton, the Granthams were always well-off. Or imagine Jane Austen’s Mr. Darcy. The wealth he reaps from Pemberley Mansion is self-perpetuating. Return on capital, then, is how much you get for every dollar (or pound) that you invest. In the 19th century, and again today, that rate has been high."
(from https://www.pbs.org/newshour/nation/how ... cys-wealth )
"As Piketty points out, for most of history, the return on capital could be understood as the value of land. Think about Downton Abbey. Lady Grantham doesn’t know what a weekend is because her family never worked. But yet, before the wars anyway, between help from wealthy relatives and the value of Downton, the Granthams were always well-off. Or imagine Jane Austen’s Mr. Darcy. The wealth he reaps from Pemberley Mansion is self-perpetuating. Return on capital, then, is how much you get for every dollar (or pound) that you invest. In the 19th century, and again today, that rate has been high."
(from https://www.pbs.org/newshour/nation/how ... cys-wealth )
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Re: Does anyone believe 100 percent equities is not risky?
Does this mean a one fund portfolio is not a good idea, like VTSAX?
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Re: Does anyone believe 100 percent equities is not risky?
Riprap wrote: ↑Mon Aug 01, 2022 11:52 am If the cash flow from 75% of the dividends is sufficient for your needs, then 100% equity is fine. It's really not a whole lot different than being a small business owner and having most of your net worth tied up in your business. If fluctuating values are a concern for one reason or another, then 100% is probably not a good idea.
(but don't tell the dividend haters.)
Re: Does anyone believe 100 percent equities is not risky?
Again, it all depends on each individual's situation.tvubpwcisla wrote: ↑Mon Aug 01, 2022 7:24 pm Does this mean a one fund portfolio is not a good idea, like VTSAX?
That's what you need to understand.
You can't make a blanket statement like that.
Stock market can crash and take a long time to recover. This has happened. It's not theoretical.
If your finances can withstand a 50%+ crash that takes a long time to recover, then 100% VTSAX still might work for you.
If one has a secure job (or two people working in a couple), and you're still young, accumulating with years to go, then sure 100% VTSAX could be a good idea.
If one in retired and has a pension and Social Security that covers all your basic needs, and the investments are just for vacations/luxuries/inheritance for the kids, then sure 100% VTSAX could be a good idea.
If one is pulling 4%-5% a year from your portfolio in retirement in order to pay for basic needs, then 100% VTSAX is not a good idea. Because a big crash that takes a while to recover could leave you broke.
Last edited by HomerJ on Mon Aug 01, 2022 8:09 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: Does anyone believe 100 percent equities is not risky?
When I was working for city and state government 34 years, my AA never held bonds and 100% equities ie 1987-2021.tvubpwcisla wrote: ↑Mon Aug 01, 2022 7:24 pm Does this mean a one fund portfolio is not a good idea, like VTSAX?
2.23 million portfolio and retired 11 months at 95 equities and 5 % cash.
Having pension at 66k a year mitigates risk.
Re: Does anyone believe 100 percent equities is not risky?
My wife and I started late so for us it's too risky NOT to be 100 percent equities for at least 25 years. We are simple people and can live thrifty. If we were to retire today SS would cover 100 percent of our expenses assuming we had a paid off house which we plan to have by retirement, and I have no objection to working part time jobs well into old age if needed. If we want to have the kind of financial life we dream of then 100 percent is the way to go for us. If we reach a substantial (to us) net worth then well rebalance into fixed income, but long downturns are just part of the risk we accept.
Re: Does anyone believe 100 percent equities is not risky?
If you’re 20 or more years from retirement, I would say 100% equities is the least risky strategy. I believe there has never been a 20 year period where bonds outperformed equities.
As you get closer to and enter retirement, that risk profile changes given your timeframe and cash needs.
As you get closer to and enter retirement, that risk profile changes given your timeframe and cash needs.
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Re: Does anyone believe 100 percent equities is not risky?
Are your expenses less than 66k annually, or at least not too much above that level ? Or are you pulling 80-90k annually from your portfolio ? Makes a huge difference.retire2022 wrote: ↑Mon Aug 01, 2022 8:07 pmWhen I was working for city and state government 34 years, my AA never held bonds and 100% equities ie 1987-2021.tvubpwcisla wrote: ↑Mon Aug 01, 2022 7:24 pm Does this mean a one fund portfolio is not a good idea, like VTSAX?
2.23 million portfolio and retired 11 months at 95 equities and 5 % cash.
Having pension at 66k a year mitigates risk.
An important key to investing is having a well-calibrated sense of your future regret.
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Re: Does anyone believe 100 percent equities is not risky?
Yes my expenses is 48k per year, my retirement income for 2021 was 208k and this year it is projected to be 321k, which includes withdrawals from pretax 457 and Roth conversions.BernardShakey wrote: ↑Mon Aug 01, 2022 8:41 pmAre your expenses less than 66k annually, or at least not too much above that level ? Or are you pulling 80-90k annually from your portfolio ? Makes a huge difference.retire2022 wrote: ↑Mon Aug 01, 2022 8:07 pmWhen I was working for city and state government 34 years, my AA never held bonds and 100% equities ie 1987-2021.tvubpwcisla wrote: ↑Mon Aug 01, 2022 7:24 pm Does this mean a one fund portfolio is not a good idea, like VTSAX?
2.23 million portfolio and retired 11 months at 95 equities and 5 % cash.
Having pension at 66k a year mitigates risk.
My income in retirement is higher than while I was working which was never over 98k.
I turned 62 this year and could apply for SSA but will delay
until 70, 28k a year versus 42k.
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Re: Does anyone believe 100 percent equities is not risky?
Yeah, well then you can be 100% equities.retire2022 wrote: ↑Mon Aug 01, 2022 8:44 pmYes my expenses is 48k per year, my retirement income for 2021 was 208k and this year it is projected to be 321k, which includes withdrawals from pretax 457 and Roth conversions.BernardShakey wrote: ↑Mon Aug 01, 2022 8:41 pmAre your expenses less than 66k annually, or at least not too much above that level ? Or are you pulling 80-90k annually from your portfolio ? Makes a huge difference.retire2022 wrote: ↑Mon Aug 01, 2022 8:07 pmWhen I was working for city and state government 34 years, my AA never held bonds and 100% equities ie 1987-2021.tvubpwcisla wrote: ↑Mon Aug 01, 2022 7:24 pm Does this mean a one fund portfolio is not a good idea, like VTSAX?
2.23 million portfolio and retired 11 months at 95 equities and 5 % cash.
Having pension at 66k a year mitigates risk.
My income in retirement is higher than while I was working which was never over 98k.
I turned 62 this year and could apply for SSA but will delay
until 70, 28k a year versus 42k.
An important key to investing is having a well-calibrated sense of your future regret.
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Re: Does anyone believe 100 percent equities is not risky?
Homer. That is not correct.HomerJ wrote: ↑Mon Aug 01, 2022 5:44 pmYou're ignoring dividends, which is a cardinal sin.CraigTester wrote: ↑Mon Aug 01, 2022 4:22 pmHomer - you make me proud!HomerJ wrote: ↑Mon Aug 01, 2022 4:08 pm I am a little worried that you've never experienced a long or deep crash when not working.
Is your self-awareness good enough to accurately imagine how you will react to a 5-10 year crash while pulling money each year?
Your total confidence that all stock market crashes recover quickly makes me worry for you. Because that confidence is badly misplaced. Open a history book.
Here are some example dates that can be referred to in the history books you mentioned above.
As shown, it can take up to 20 years to retain earlier high water marks if 100% equities
20 yrs. May 1901-Aug 1921.
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
All the best,
CraigTester
Especially for those earlier dates when dividends were in the 4%-6% range.
We’ve discussed this before.
The above periods of course include dividends.
And they are inflation adjusted.
This is a real blind spot for you, but it’s very easy to confirm the data for yourself.
You don’t have to take my word for it.
Just run the numbers. (Or if you don’t know how, ask someone you trust to do it for you).
I know it doesn’t fit the happy talk to acknowledge it can take 20 years to recover an earlier high water mark in the SP500, but the data is what the data is.
Hopefully by understanding this, you can avoid making an ill informed risk-reward trade off.
And you can also avoid steering someone else in the wrong direction.
All the best,
CraigTester
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Re: Does anyone believe 100 percent equities is not risky?
Excellent point. Japan certainly comes to mind but definitely not the only one….willthrill81 wrote: ↑Mon Aug 01, 2022 4:23 pmIn other places, it's taken much longer than that at times.CraigTester wrote: ↑Mon Aug 01, 2022 4:22 pm As shown, it can take up to 20 years to retain earlier high water marks if 100% equities
Re: Does anyone believe 100 percent equities is not risky?
Totally relative. Many could take a 50% drop and have 0 impact on their lifestyle. After 10-15 years, 100% equities is probably less risky in absolute terms for a given fixed lifestyle because you have a ton more money than your 60/40 friends.
This is why measuring risk in terms of volatility is a bit silly. Who’s less risky? The guy with $15m at 100% equities or the 60/40 guy with $4m, the first guy withdrawing 1% (150k) and falling or the $4m withdrawing 3% (120k)?
The first guy all day long has less risk in absolute terms. But that’s not what volatility would tell us… it would say the opposite.
But again, I’m talking to the most conservative investment crowd on planet earth. So I already know what the opinion here will be… human brains aren’t wired to experience market swoons like this. They see a loss of $7.5m (on $15m) and lose their marbles, the 60/40 guy who lost 600k bringing them down to $3.4m sleeps like a baby with half the money. Just bizarre.
This is why measuring risk in terms of volatility is a bit silly. Who’s less risky? The guy with $15m at 100% equities or the 60/40 guy with $4m, the first guy withdrawing 1% (150k) and falling or the $4m withdrawing 3% (120k)?
The first guy all day long has less risk in absolute terms. But that’s not what volatility would tell us… it would say the opposite.
But again, I’m talking to the most conservative investment crowd on planet earth. So I already know what the opinion here will be… human brains aren’t wired to experience market swoons like this. They see a loss of $7.5m (on $15m) and lose their marbles, the 60/40 guy who lost 600k bringing them down to $3.4m sleeps like a baby with half the money. Just bizarre.
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Re: Does anyone believe 100 percent equities is not risky?
If you can wait 29 years for a recovery you will doing fine:tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
I believe the risky assets are not equity Index Funds but rather:
Options Trading
Individual Stocks
Speculative Assets like Cryptocurrencies
Do you agree?
Source: https://www.advisorperspectives.com/com ... ink-part-2
You can also check out here if you would outrun of money: https://cfiresim.com/
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Re: Does anyone believe 100 percent equities is not risky?
You do not know that.tvubpwcisla wrote: ↑Mon Aug 01, 2022 10:15 amThe market will recover faster than you could have ever imagined and you will get to participate in that recovery to the fullest extent possible.DSBH wrote: ↑Mon Aug 01, 2022 10:13 amYes, if you have no issue with losing 50% of your investment, assuming that "risky" is about losing invested money.tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
...
Do you agree?
Re: Does anyone believe 100 percent equities is not risky?
This tool is amazing if it can be believed. I've got a friend that had to retire early due to health, but he's luckier than most. He retired at 53, and he's got about 2M in the S&P500. According to the tool, (just like you said) if he pulls out > 3%, he starts to see failure modes. If he keeps it to < than 3%, the tool says it will last him 100 years. Basically, if he can live off of only 50k a year, he should be ok -- even more so once SS kicks in. I'm happy for my friend although my gut tells me he's in financial danger, and I can't imagine the psychological impact of having to drain your resources when you know there's nothing that can ever change your situation. Can always play the lottery I guess to get a glimmer of hope, but every time you turn around there are additional expenses.dbr wrote: ↑Mon Aug 01, 2022 10:23 am This chart is the data for making that assessment: https://engaging-data.com/visualizing-4-rule/
Perhaps, it's ok to be 100% stocks as long as you have enough soup and your spoon is small.
It reminds me of how things used to be in the distant past -- where you could inherit a large sum or you could set somebody up and they could live off of the interest. This is the plot of many a 19th century novel. Fathers might set up their daughters this way, or sons always had something to fall back on while they made their moves in life. The worst case scenario was that these people would ever have to tap into their principal because that would equate to "ruin". It makes sense with bonds. It might make sense with rent from ownership of property, but a surprising alternative says you could do the same with stock. I wonder why we don't read about that? Must be a brave new world. Scary.
Then ’tis like the breath of an unfee’d lawyer.
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Re: Does anyone believe 100 percent equities is not risky?
Absolutely. My plan calls for a 30 year period of zero returns. The reason this is possible is because of the dividend payouts and keeping expenses low.fisher0815 wrote: ↑Tue Aug 02, 2022 12:49 amIf you can wait 29 years for a recovery you will doing fine:tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
I believe the risky assets are not equity Index Funds but rather:
Options Trading
Individual Stocks
Speculative Assets like Cryptocurrencies
Do you agree?
Source: https://www.advisorperspectives.com/com ... ink-part-2
You can also check out here if you would outrun of money: https://cfiresim.com/
Last edited by tvubpwcisla on Tue Aug 02, 2022 7:06 am, edited 1 time in total.
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Re: Does anyone believe 100 percent equities is not risky?
Correct. When it does recover, being 100% equity Index Funds allow you participate in the full recovery. If the market goes up 5% in one day, you get the full 5%.Northern Flicker wrote: ↑Tue Aug 02, 2022 1:08 amYou do not know that.tvubpwcisla wrote: ↑Mon Aug 01, 2022 10:15 amThe market will recover faster than you could have ever imagined and you will get to participate in that recovery to the fullest extent possible.DSBH wrote: ↑Mon Aug 01, 2022 10:13 amYes, if you have no issue with losing 50% of your investment, assuming that "risky" is about losing invested money.tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
...
Do you agree?
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Re: Does anyone believe 100 percent equities is not risky?
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Re: Does anyone believe 100 percent equities is not risky?
You can "believe" it, but you shouldn't rely on it for planning purposes. It's just a reflection of past returns, with no thought given to what might be appropriate assumptions about future returns.Dude2 wrote: ↑Tue Aug 02, 2022 6:34 amThis tool is amazing if it can be believed.dbr wrote: ↑Mon Aug 01, 2022 10:23 am This chart is the data for making that assessment: https://engaging-data.com/visualizing-4-rule/
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Re: Does anyone believe 100 percent equities is not risky?
Not risky? Compared to what? Investing is risky, period, though there are vast differences among investors in terms of need and willingness to take risk. The risks one takes needs defining. If it is the risk of lesser return during market rallies, that is one approach. If it is risk during downturns, then 100 percent equities is very risky. Even bonds are risky in substantial downturns such as we have recently experienced, as is being all cash. Risk is a complex term, and what is expressed here is opinion based on interpretation of available data. Generally, however, few would say 100 percent equities is not risky.
Tim
Tim
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Re: Does anyone believe 100 percent equities is not risky?
That seems frighteningly overconfident.tvubpwcisla wrote: ↑Mon Aug 01, 2022 10:15 am The market will recover faster than you could have ever imagined and you will get to participate in that recovery to the fullest extent possible.
The market can fall farther and take longer to recover than you could have ever imagined.
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Re: Does anyone believe 100 percent equities is not risky?
Absolutely, no one knows what the market will do. When it does goes up 5 or 7 percent in a single trading session, it feels great to participate and capture all of those gains.Mountain Doc wrote: ↑Tue Aug 02, 2022 7:09 amThat seems frighteningly overconfident.tvubpwcisla wrote: ↑Mon Aug 01, 2022 10:15 am The market will recover faster than you could have ever imagined and you will get to participate in that recovery to the fullest extent possible.
The market can fall farther and take longer to recover than you could have ever imagined.
Re: Does anyone believe 100 percent equities is not risky?
OP,
Just to be very sure where you come from.
1) Are you 100% US Stock?
2) Do you have an emergency fund?
3) What is the size of your emergency fund? 6 months of expense?
4) Size of your portfolio? 4 years of expense.
KlangFool
Just to be very sure where you come from.
1) Are you 100% US Stock?
2) Do you have an emergency fund?
3) What is the size of your emergency fund? 6 months of expense?
4) Size of your portfolio? 4 years of expense.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: Does anyone believe 100 percent equities is not risky?
Yes. As historical data it is exactly correct by tabulation assuming there are not some data collecting errors.vineviz wrote: ↑Tue Aug 02, 2022 6:45 amYou can "believe" it, but you shouldn't rely on it for planning purposes. It's just a reflection of past returns, with no thought given to what might be appropriate assumptions about future returns.Dude2 wrote: ↑Tue Aug 02, 2022 6:34 amThis tool is amazing if it can be believed.dbr wrote: ↑Mon Aug 01, 2022 10:23 am This chart is the data for making that assessment: https://engaging-data.com/visualizing-4-rule/
As a forecast of the future it is more an education of the nature of things than a tool that tells you what is going to happen exactly. This thread is in the topic of risk rather than on the topic of how to plan to retire in 2022. That is why it is useful or not useful. The actual lesson is to see how unpredictable outcomes of investing in stocks and bonds can be. It might provoke discussion that one look for alternatives.
An important point is that a single individual retiring now gets the trace that will be in that chart 30 years from now and that trace will not be a repeat of any single one of the past traces. The forecast is that there is a weighted probability it will be somewhere from within the weight of the distribution of past traces. Extracting a safe rate or a worst case assumes that 2022 is not a new worst or a new best. People do try to figure out where in there one might be given what we know of conditions today. I think that is hard to do because there is likely to be as much error in trying to figure out the conditional chances from today as there is in just relying on a gross probability.
My purpose is for people to learn to be realistic about how unpredictable investing outcomes over time really are.
Re: Does anyone believe 100 percent equities is not risky?
Sorry. One mistake on my part. I believe that your portfolio = 40 years of expense.
Thanks.
KlangFool
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Re: Does anyone believe 100 percent equities is not risky?
A portfolio that has 1-2 years of cash and 4 years of stock is nowhere close to 100% stock. It's 67-80% stock.
Re: Does anyone believe 100 percent equities is not risky?
As I am writing below the chart is exact as a historical tabulation. The lesson should be more about the unpredictable nature of investing results than about planning what is going to happen to a certain person at a certain time. The general history of looking at data like this is to warn people how bad the worst case can be but also to give a perspective on the fact that the worst cases are rare and the better cases tend to be ok.Dude2 wrote: ↑Tue Aug 02, 2022 6:34 amThis tool is amazing if it can be believed. I've got a friend that had to retire early due to health, but he's luckier than most. He retired at 53, and he's got about 2M in the S&P500. According to the tool, (just like you said) if he pulls out > 3%, he starts to see failure modes. If he keeps it to < than 3%, the tool says it will last him 100 years. Basically, if he can live off of only 50k a year, he should be ok -- even more so once SS kicks in. I'm happy for my friend although my gut tells me he's in financial danger, and I can't imagine the psychological impact of having to drain your resources when you know there's nothing that can ever change your situation. Can always play the lottery I guess to get a glimmer of hope, but every time you turn around there are additional expenses.dbr wrote: ↑Mon Aug 01, 2022 10:23 am This chart is the data for making that assessment: https://engaging-data.com/visualizing-4-rule/
Perhaps, it's ok to be 100% stocks as long as you have enough soup and your spoon is small.
It reminds me of how things used to be in the distant past -- where you could inherit a large sum or you could set somebody up and they could live off of the interest. This is the plot of many a 19th century novel. Fathers might set up their daughters this way, or sons always had something to fall back on while they made their moves in life. The worst case scenario was that these people would ever have to tap into their principal because that would equate to "ruin". It makes sense with bonds. It might make sense with rent from ownership of property, but a surprising alternative says you could do the same with stock. I wonder why we don't read about that? Must be a brave new world. Scary.
I don't think anyone has yet solved the dilemma that safe withdrawal rates (aka worst cases) are as bad as they are and also as uncommon as they are while the better outcomes are hugely better. I personally am thankful to have a pension that never had the option of a lump sum and to have SS chosen at as old an age as possible and I didn't need to make very many decisions.
- burritoLover
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Re: Does anyone believe 100 percent equities is not risky?
That looks like a price chart not total return, despite being labeled as such.fisher0815 wrote: ↑Tue Aug 02, 2022 12:49 amIf you can wait 29 years for a recovery you will doing fine:tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
I believe the risky assets are not equity Index Funds but rather:
Options Trading
Individual Stocks
Speculative Assets like Cryptocurrencies
Do you agree?
Source: https://www.advisorperspectives.com/com ... ink-part-2
You can also check out here if you would outrun of money: https://cfiresim.com/
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Re: Does anyone believe 100 percent equities is not risky?
A 100% safe withdrawal rate would be equal to the dividend payout of the equity Index Fund.dbr wrote: ↑Tue Aug 02, 2022 7:49 amAs I am writing below the chart is exact as a historical tabulation. The lesson should be more about the unpredictable nature of investing results than about planning what is going to happen to a certain person at a certain time. The general history of looking at data like this is to warn people how bad the worst case can be but also to give a perspective on the fact that the worst cases are rare and the better cases tend to be ok.Dude2 wrote: ↑Tue Aug 02, 2022 6:34 amThis tool is amazing if it can be believed. I've got a friend that had to retire early due to health, but he's luckier than most. He retired at 53, and he's got about 2M in the S&P500. According to the tool, (just like you said) if he pulls out > 3%, he starts to see failure modes. If he keeps it to < than 3%, the tool says it will last him 100 years. Basically, if he can live off of only 50k a year, he should be ok -- even more so once SS kicks in. I'm happy for my friend although my gut tells me he's in financial danger, and I can't imagine the psychological impact of having to drain your resources when you know there's nothing that can ever change your situation. Can always play the lottery I guess to get a glimmer of hope, but every time you turn around there are additional expenses.dbr wrote: ↑Mon Aug 01, 2022 10:23 am This chart is the data for making that assessment: https://engaging-data.com/visualizing-4-rule/
Perhaps, it's ok to be 100% stocks as long as you have enough soup and your spoon is small.
It reminds me of how things used to be in the distant past -- where you could inherit a large sum or you could set somebody up and they could live off of the interest. This is the plot of many a 19th century novel. Fathers might set up their daughters this way, or sons always had something to fall back on while they made their moves in life. The worst case scenario was that these people would ever have to tap into their principal because that would equate to "ruin". It makes sense with bonds. It might make sense with rent from ownership of property, but a surprising alternative says you could do the same with stock. I wonder why we don't read about that? Must be a brave new world. Scary.
I don't think anyone has yet solved the dilemma that safe withdrawal rates (aka worst cases) are as bad as they are and also as uncommon as they are while the better outcomes are hugely better. I personally am thankful to have a pension that never had the option of a lump sum and to have SS chosen at as old an age as possible and I didn't need to make very many decisions.
Re: Does anyone believe 100 percent equities is not risky?
I would turn that around and say that the dividend payout of the equity index fund happens to be currently equal to the safe withdrawal rate predicted for 100% stocks.tvubpwcisla wrote: ↑Tue Aug 02, 2022 7:53 am
A 100% safe withdrawal rate would be equal to the dividend payout of the equity Index Fund.
Last edited by dbr on Tue Aug 02, 2022 8:09 am, edited 1 time in total.
Re: Does anyone believe 100 percent equities is not risky?
Now we know.
1) You are not 100% stocks. You have 1-2 years of expenses in cash, and 4 years of expense in stock portfolio. So maybe 75-80% stock? And by the way, cash is the worst asset class over the long run. Period.
2) Your portfolio may not be large enough to make your stomach turn during a crash. It’s fine to lose a year of hard earned income. It’s the other matter when you lose all 10 years of income on paper. Many felt that during 2008.
3) You repeated many times that you don’t want to miss the recovery. If you follow bogleheads investing strategies, you still participate in the run up regardless of your AA. Bogleheads buy and hold, so we don’t sell low.
I don’t know why it gets in your head that 100% is good overall. I hope that you can learn from many posters chimed in above.
Time is the ultimate currency.
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Re: Does anyone believe 100 percent equities is not risky?
Absolutely correct!dbr wrote: ↑Tue Aug 02, 2022 8:09 amI would turn that around and say that the dividend payout of the equity index fund happens to be currently equal to the safe withdrawal rate predicted for 100% stocks.tvubpwcisla wrote: ↑Tue Aug 02, 2022 7:53 am
A 100% safe withdrawal rate would be equal to the dividend payout of the equity Index Fund.
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Re: Does anyone believe 100 percent equities is not risky?
H-Town wrote: ↑Tue Aug 02, 2022 8:09 amNow we know.
1) You are not 100% stocks. You have 1-2 years of expenses in cash, and 4 years of expense in stock portfolio. So maybe 75-80% stock? And by the way, cash is the worst asset class over the long run. Period.
Emergency fund is fully invested.
2) Your portfolio may not be large enough to make your stomach turn during a crash. It’s fine to lose a year of hard earned income. It’s the other matter when you lose all 10 years of income on paper. Many felt that during 2008.
I tend to look forward to the recovery periods more.
3) You repeated many times that you don’t want to miss the recovery. If you follow bogleheads investing strategies, you still participate in the run up regardless of your AA. Bogleheads buy and hold, so we don’t sell low.
If the market goes up 7% in one day, if you are not 100% equity Index Funds, then you will be missing out on those gains and will receive much lower than what the market is providing to you.
I don’t know why it gets in your head that 100% is good overall. I hope that you can learn from many posters chimed in above.
I feel 100% equity Index Funds is safe and what is not safe are Options Trading, owning Individual Stocks, and speculative assets like Crypto.
Re: Does anyone believe 100 percent equities is not risky?
+1. This is exactly the way I think and why I’m 100% equities in my investment accounts.mrspock wrote: ↑Mon Aug 01, 2022 11:28 pm Totally relative. Many could take a 50% drop and have 0 impact on their lifestyle. After 10-15 years, 100% equities is probably less risky in absolute terms for a given fixed lifestyle because you have a ton more money than your 60/40 friends.
This is why measuring risk in terms of volatility is a bit silly. Who’s less risky? The guy with $15m at 100% equities or the 60/40 guy with $4m, the first guy withdrawing 1% (150k) and falling or the $4m withdrawing 3% (120k)?
The first guy all day long has less risk in absolute terms. But that’s not what volatility would tell us… it would say the opposite.
But again, I’m talking to the most conservative investment crowd on planet earth. So I already know what the opinion here will be… human brains aren’t wired to experience market swoons like this. They see a loss of $7.5m (on $15m) and lose their marbles, the 60/40 guy who lost 600k bringing them down to $3.4m sleeps like a baby with half the money. Just bizarre.
Re: Does anyone believe 100 percent equities is not risky?
I get that. IMO, young investors should accumulate equity funds. As they get older, they should reconsider their AA depends on their personal situation.tvubpwcisla wrote: ↑Tue Aug 02, 2022 8:14 amH-Town wrote: ↑Tue Aug 02, 2022 8:09 amNow we know.
1) You are not 100% stocks. You have 1-2 years of expenses in cash, and 4 years of expense in stock portfolio. So maybe 75-80% stock? And by the way, cash is the worst asset class over the long run. Period.
Emergency fund is fully invested.
2) Your portfolio may not be large enough to make your stomach turn during a crash. It’s fine to lose a year of hard earned income. It’s the other matter when you lose all 10 years of income on paper. Many felt that during 2008.
I tend to look forward to the recovery periods more.
3) You repeated many times that you don’t want to miss the recovery. If you follow bogleheads investing strategies, you still participate in the run up regardless of your AA. Bogleheads buy and hold, so we don’t sell low.
If the market goes up 7% in one day, if you are not 100% equity Index Funds, then you will be missing out on those gains and will receive much lower than what the market is providing to you.
I don’t know why it gets in your head that 100% is good overall. I hope that you can learn from many posters chimed in above.
I feel 100% equity Index Funds is safe and what is not safe are Options Trading, owning Individual Stocks, and speculative assets like Crypto.
You like the market recovery so I got a riddle for you: if your portfolio drops 50%, how much gain would you need to recover to the level before?
Time is the ultimate currency.
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Re: Does anyone believe 100 percent equities is not risky?
We've talked about Japan quite a lot on these forums, but just a reminder that almost nobody went-all in starting 1989. A mid-career Japanese investor would have done ok on a lifetime basis if they had started with an all Nikkei portfolio in the mid 1970s and continued contributing in the steady BH manner through a mid 2010s retirement. Yes, they would have seen huge losses, but those would have come on the back of huge gains in the early contributions, and decent gains for the post-crash contributions made in the early 00s. The big (and permanent) losses would have only been for contributions over a ~4 year period in the late 80s and early 90s. So, for steady (inflation adjusted) lifetime contributions, only about 10% of their contributions over a 40 year career would have seen big losses.7eight9 wrote: ↑Mon Aug 01, 2022 8:38 amNo. Investors in the Nikkei circa 1989 agree with me.tvubpwcisla wrote: ↑Mon Aug 01, 2022 8:33 am I am in the camp that 100% equities is a great investment approach because you get to participate in 100% of the Index Fund rallies without drag down.
I believe the risky assets are not equity Index Funds but rather:
Options Trading
Individual Stocks
Speculative Assets like Cryptocurrencies
Do you agree?
The ones who might have been in trouble would have been someone who retired in 1989 based on their portfolio on that date. But I don't think there are too many advocates for 100% equities in retirement (there are a few, I'm sure). Such a person would have also been fairly under-saved if they only had enough to retire after the late 80s blow-off top. I think most retirement savers would hope to have retirement-ready portfolio several years before actually pulling the trigger.
Last edited by alfaspider on Tue Aug 02, 2022 8:31 am, edited 2 times in total.
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Re: Does anyone believe 100 percent equities is not risky?
Whatever gain the market provides I am very happy with, as long as I participate fully in that gain. Being 100% equity Index Funds allows an investor to fully participate in the market returns.H-Town wrote: ↑Tue Aug 02, 2022 8:27 amI get that. IMO, young investors should accumulate equity funds. As they get older, they should reconsider their AA depends on their personal situation.tvubpwcisla wrote: ↑Tue Aug 02, 2022 8:14 amH-Town wrote: ↑Tue Aug 02, 2022 8:09 amNow we know.
1) You are not 100% stocks. You have 1-2 years of expenses in cash, and 4 years of expense in stock portfolio. So maybe 75-80% stock? And by the way, cash is the worst asset class over the long run. Period.
Emergency fund is fully invested.
2) Your portfolio may not be large enough to make your stomach turn during a crash. It’s fine to lose a year of hard earned income. It’s the other matter when you lose all 10 years of income on paper. Many felt that during 2008.
I tend to look forward to the recovery periods more.
3) You repeated many times that you don’t want to miss the recovery. If you follow bogleheads investing strategies, you still participate in the run up regardless of your AA. Bogleheads buy and hold, so we don’t sell low.
If the market goes up 7% in one day, if you are not 100% equity Index Funds, then you will be missing out on those gains and will receive much lower than what the market is providing to you.
I don’t know why it gets in your head that 100% is good overall. I hope that you can learn from many posters chimed in above.
I feel 100% equity Index Funds is safe and what is not safe are Options Trading, owning Individual Stocks, and speculative assets like Crypto.
You like the market recovery so I got a riddle for you: if your portfolio drops 50%, how much gain would you need to recover to the level before?
Re: Does anyone believe 100 percent equities is not risky?
I presume you already know the answer to my question?tvubpwcisla wrote: ↑Tue Aug 02, 2022 8:30 amWhatever gain the market provides I am very happy with, as long as I participate fully in that gain. Being 100% equity Index Funds allows an investor to fully participate in the market returns.H-Town wrote: ↑Tue Aug 02, 2022 8:27 amI get that. IMO, young investors should accumulate equity funds. As they get older, they should reconsider their AA depends on their personal situation.tvubpwcisla wrote: ↑Tue Aug 02, 2022 8:14 amH-Town wrote: ↑Tue Aug 02, 2022 8:09 amNow we know.
1) You are not 100% stocks. You have 1-2 years of expenses in cash, and 4 years of expense in stock portfolio. So maybe 75-80% stock? And by the way, cash is the worst asset class over the long run. Period.
Emergency fund is fully invested.
2) Your portfolio may not be large enough to make your stomach turn during a crash. It’s fine to lose a year of hard earned income. It’s the other matter when you lose all 10 years of income on paper. Many felt that during 2008.
I tend to look forward to the recovery periods more.
3) You repeated many times that you don’t want to miss the recovery. If you follow bogleheads investing strategies, you still participate in the run up regardless of your AA. Bogleheads buy and hold, so we don’t sell low.
If the market goes up 7% in one day, if you are not 100% equity Index Funds, then you will be missing out on those gains and will receive much lower than what the market is providing to you.
I don’t know why it gets in your head that 100% is good overall. I hope that you can learn from many posters chimed in above.
I feel 100% equity Index Funds is safe and what is not safe are Options Trading, owning Individual Stocks, and speculative assets like Crypto.
You like the market recovery so I got a riddle for you: if your portfolio drops 50%, how much gain would you need to recover to the level before?
Time is the ultimate currency.