Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 17
It's Dialog time! I want to try some "back and forth" with FoolMeOnce. So...

I have a bone to pick with "Exceptional long term returns are to be expected as a possible result of taking exceptional risks. The returns intercst quotes are theoretical."

These are not theoretical returns. If you take actual historical results over the past 100 rolling 30-year periods, it was better to be 100% in equities for 74 of 100 such periods. No other approach did better than 4 out of 100 historical. Please, tell me if I am wrong on this point. It matters.

I think it a judgement call to equate holding a diversified portfolio of 100% equities with "taking exceptional risks". I own my home and have bonds in an e-fund. My retirement portfolio is 100% in equities. This does not seem exceptionally risky to me. Everyone will be different, which is how the world should be.

I am generally a numbers guy. The average American lives about 77 years. I personally hope for more, with some reason. I started investing at age 21 and hope to be FIRE at 50. That gives us about 30 years to build up a portfolio followed by another 30+ to spend the money. These numbers make it easier for me to stay 100% in equities for 30+ years.

If you have not worked through what compound returns mean over time, do it. The difference between earning 11% over 30 years and earning 9% is incredible! This is another reason we are comfortable in 100% equities.

I completely agree with FoolMeOnce's next point. He or She notes Intercst's excersize implicitly assumes "that mere mortals can withstand the kind of volatility associated with such a portfolio. Perhaps there are some who can, but I know of few people who have held a 100% equities portfolio for 30 years." If going with 100% equities will keep you from sleeping at night, don't do it. Period.

It is fine that 100% equities looks way too risky for at least one poster. It takes all kinds. We even have an earlier poster on this thread apparently suggesting you need to swing for the fences and take a huge bet on a small cap in order to achieve FIRE.

It's funny. I got slammed on the Berkshire board as a timid little sissy man for dollar cost averaging into Vanguard's total market index fund in recent weeks. The logic there is that if I was "confident" of a given equity I should commit more than 10% of our portfolio to that equity position. My wife and I set up rules for outselves, to help remain comfortable with our 100% equities approach. One rule is that no single stock other than Berkshire tops 10%. We let Berkshire go to 20% because we love it so.

In my opinion, consistently putting 15-20% of your gross income into a portfolio of 100% equities over very long periods of time is an outstanding approach for a FIRE wannabe. We have done this for 16 years and have done very well. We have never beaten the market, defined as the SP500, by 20% per year. Nevertheless, at age 38 my wife and I are well on our way to FIRE despite having three kids and doing the SAHM routine. We are big fans of dollar cost averaging into index funds and LTBH equity positions.

It worked for us. I thought Intercst's work a valuable exercise that supported why this approach might work for others. If you're a real FIRE wannabe, educate yourself thoroughly. After that, think for yourself (but let us know so we can learn from you).

Cheers,

JohnH
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.