100% stocks

[lordmetroid]

I can't count on the gold as the japanese historical example have shown gold doesn't act as a hedge against the stock market, bonds are just boring so what do I intend to do.

1. Dollar cost averaging,
2. Buy and hold a free domestic index fund.
3. ? ? ?
4. Profit!!1!

[Pointedstick]

As long as the "? ? ?" is "wait 30-50 years" then #4 is probably a safe bet! Can you trust yourself to stick to that plan for that long, though? That's the real question.

[MediumTex]

As long as you have the stomach for it and your retirement years don't happen to coincide with a secular bear market, 100% stocks is a fine portfolio.

In practice, very few people have the stomach for an all-stock allocation.  Many think they do, but then the market loses 40% and they discover they don't.  Back in the spring of 2009, I don't remember anyone sounding very enthused about stocks, even though it was the absolute best time to buy.

If a person retires at age 65 and plans to live until 90, there is an almost 100% probability that a secular bear market for stocks will unfold at some point during that period.  If you have 10-20 years to wait to get your inflation-adjusted losses back after such a secular bear market, it isn't a big deal.  For someone who is trying to enjoy their golden years, however, being told it will take many years of lower withdrawals to make sure you don't outlive your money after a secular bear market would probably kind of suck.

[barrett]

In what appears to be a low-return environment, working hard and saving a high percentage of earnings is critical. There just may not be many returns to be had in the next decade or two. It then follows that being able to dial down living expenses becomes super important. Investing could be really friggin' boring for a long time. But I also feel that staying balanced in a PP-ish way is a good path. Of course, I am happy to hear other thoughts.

[MediumTex]

In what appears to be a low-return environment, working hard and saving a high percentage of earnings is critical. There just may not be many returns to be had in the next decade or two. It then follows that being able to dial down living expenses becomes super important. Investing could be really friggin' boring for a long time. But I also feel that staying balanced in a PP-ish way is a good path. Of course, I am happy to hear other thoughts.

That was one of Harry Browne's rules: Use your earnings from your career for most of your wealth.  Don't assume the market is going to turn you into a lottery winner.

I was talking to a guy who owned an auto shop once about ways to get more power out of a certain engine.  After talking a while, he suggested a better approach might be to simply go with a larger engine.  When I read Harry Browne's suggestion to aim to save more money and invest it less aggressively, I thought about the shop owner's comment about simply getting a bigger engine rather than trying to modify a smaller one to deliver more power than it was designed to.

[Libertarian666]

Why only 100% stocks? Why not use margin and go to 150% or 200%? Your return should be even greater then!

Note:

[dualstow]

This idea was actually trumpeted by a somewhat bombastic guy on bugle-heads,
but without the  part.

[Jpeizie]

Go to the portfoliocharts.com FIREtime calculator and punch in a 100% stock portfolio. Then compare it to the PP. I wouldn't touch 100% stocks with a 10 foot pole after seeing that.

[LazyInvestor]

You must put your decisions within the context of your overall financial situation. The OP is living in EU. They pay lots of tax and have big social security nets. I guess an average EU person pays around 40-50% in tax, if they go unemployed they can get around 2000 EUR/month, many have partially paid mortgage, and have little investable savings. So for example,

- I'd consider easily accessible social support as a kind of fixed income saving available at any time. 2000/month -> 24K/year at 3% withdrawal rate equals to 800K in "fixed income" available in case of job loss or for the retirement

- If he has 1/3 paid mortgage on 300K house, that's 100K in real estate

So now, if he has e.g., 20K in savings available for investing, I'd definitely say dump it all in stock market even at 100%

On the other hand, if you're self-employed, no access to social security because of large assets, etc. then PP is top choice IMO.

OP, I suggest you go to Bogleheads forum and post your financial situation in the format they require (you'll see lots of examples) and they'll give you good advice if you should go 100% or not.

[lordmetroid]

You must put your decisions within the context of your overall financial situation. The OP is living in EU. They pay lots of tax and have big social security nets. I guess an average EU person pays around 40-50% in tax, if they go unemployed they can get around 2000 EUR/month, many have partially paid mortgage, and have little investable savings. So for example,

- I'd consider easily accessible social support as a kind of fixed income saving available at any time. 2000/month -> 24K/year at 3% withdrawal rate equals to 800K in "fixed income" available in case of job loss or for the retirement

- If he has 1/3 paid mortgage on 300K house, that's 100K in real estate

So now, if he has e.g., 20K in savings available for investing, I'd definitely say dump it all in stock market even at 100%

On the other hand, if you're self-employed, no access to social security because of large assets, etc. then PP is top choice IMO.

OP, I suggest you go to Bogleheads forum and post your financial situation in the format they require (you'll see lots of examples) and they'll give you good advice if you should go 100% or not.

I totally agree, I got so many nice security nets I can withstand a a great deal of volatility in my savings account. Of course the state will step in if I am totally bankrupt. Medical costs are practically free(there is a small fee of $50 for a visiting a doctor including any checks and bloodworks, dental is about $100 for a yearly checkup and cleaning). I also have an unemployment insurance signed with my union so that I have 80% of my salary for 150 days and then 70% for the rest of the year in case I can not find any employment(Purpose of this insurance provided by the unions is to avoid any members accepting less favorable non-union contracts, undermining the unions' power as a negotiating party).

I got 25% of my house paid off and feel very comfortable with the current interest rates of 1,5% constituting a cost of about 20% of my current total monthly income at the moment so I got a lot of leeway for future rate hikes.

Almost 3 years of expenses saved up from hard work and frugality on an average salary allowing me to save about 50% of my salary.

All things considered, I think 100%  stocks index investing and value cost averaging is a good fit for me. Only thing I am worried about is a Japanese 25 year long bear market.

[dualstow]

If this forum could be made into a time lapse video, it would show a room full of clothed men + a few clothed women sitting in chairs, and suddenly an ochotona and lord metroid would come cartwheeling and somersaulting by, both fully nude, and fully excited about their discoveries of the week.

[Austen Heller]

Will this be 100% Swedish or European stocks, or will you do a world-cap weighting, like the VT ETF?
It is exciting, to see someone moving to 100% stocks.  100% stocks is a big bet on prosperity, but for all of our sake, I hope you're right.  Let us know when you have done it, so we can see how it turned out for you.  I am sure it will take some major juevos to actually pull the trigger.  Good luck to you.

[lordmetroid]

Will this be 100% Swedish or European stocks, or will you do a world-cap weighting, like the VT ETF?
It is exciting, to see someone moving to 100% stocks.  100% stocks is a big bet on prosperity, but for all of our sake, I hope you're right.  Let us know when you have done it, so we can see how it turned out for you.  I am sure it will take some major juevos to actually pull the trigger.  Good luck to you.

It will be 100% Mid Cap Swedish stocks. I like the Mid Cap Swedish Stocks as they have historically been giving a much greater return compared to the Large Cap index. I also thought about diversifying internationally but I don't like the extra currency risk.

Maybe I should get myself 50/50 Large Cap and Mid Cap.

[goodasgold]

I can't count on the gold as the japanese historical example have shown gold doesn't act as a hedge against the stock market....
t

Good luck, Lord M, but is the Japanese model necessarily relevant to what might happen in other countries? For example (and correct me if I am wrong), Japanese investors are reluctant to invest outside their own economy, which is very different from many other societies.

I personally would feel a lot more comfortable holding a chunk of gold along with all those equities.

[koekebakker]

It will be 100% Mid Cap Swedish stocks. I like the Mid Cap Swedish Stocks as they have historically been giving a much greater return compared to the Large Cap index. I also thought about diversifying internationally but I don't like the extra currency risk.

Maybe I should get myself 50/50 Large Cap and Mid Cap.

I think I have to be honest here Lord. Based on your ever-changing portfolio ideas and your very low tolerance for volatility there is absolutely zero chance that you will stick with a 100% stock portfolio.
If you insist on a 100% stock portfolio put at least 50% in a global index. Forget about a large allocation to Swedish midcaps, that will only lead to behavioral mistakes. If you have to invest in Swedish stocks get the total market.

The best idea for you would be to find a low-cost advisor (max 0.5% a year) who'll passively manage your money using strictly indexfunds.
If that's not possible pick a simple, conservative strategy.

An example of a simple allocation:
30% global stocks
60% intermediate Swedish treasuries and/or cash/cd's (whatever you like best)
10% gold

Or:
25% global stocks
25% Swedish stocks
50% Swedish treasuries

Set it and forget it!

You can thank me later.

[lordmetroid]

I already abandoned the idea a few days after my proclamation of 100% stocks.

[internationalcanuck]

I don't see what's wrong with 100% stocks as long as you aren't looking at it and don't need it for 20+ years.  Right now I have a retirement account that is 85% stocks 15% bond fund, but in reality, this 15% provides minimal diversification, as the 15% barely moves during stock downturn.  While "Efficient frontiers" says 100% stocks is sub-optimal for risk reward, I think that is interesting in theory, but I don't know if in the middle of a stock market meltdown, you're really going to be thankful that your account "only" declined by 25% instead of 35%, when you don't know how far the stock market will decline, except in hindsight.

I am going to transition to 100% stock portfolio - 33% US (50% large cap/50% small cap),33% international developed (50% large cap/50% small cap), 34% Emerging (50% large cap/50% small cap).  The small cap will increase risk (more return/more draw down), but also think small caps will be less correlated to the other international markets.

I already abandoned the idea a few days after my proclamation of 100% stocks.

[koekebakker]

I already abandoned the idea a few days after my proclamation of 100% stocks.

Allright, might have missed that. Good thing you reconsidered! Take it slow now 

[lordmetroid]

I already abandoned the idea a few days after my proclamation of 100% stocks.

Allright, might have missed that. Good thing you reconsidered! Take it slow now 

Yeah, I am trading stocks instead!

[MediumTex]

I already abandoned the idea a few days after my proclamation of 100% stocks.

Allright, might have missed that. Good thing you reconsidered! Take it slow now 

Yeah, I am trading stocks instead!

Let us know next week what your new strategy is!