I have the same questions, but in the meantime I'm slightly overweight small-mid.

We got this reply:

Which I understand to mean "we don't know".

I've read a bunch of stuff about how small / mid caps have outperformed large since 1929 or whatever, but I'm too much of a noob to interpret this data and understand the economics behind it. Will the trend continue? Have small caps just been running hot? How significant is the sample that it has outperformed?

Another thing is that it's possible economic conditions and policies in the past have favored small caps, but going forward things could be less favorable for them. They say you incur extra risk in order to achieve higher expectation in the market, but when I compare the chart of small cap funds vs. large cap funds they seem very correlated with small cap just outright doing better for decades. I'm too used to poker where I'd rather invest in a guy with a pretty graph than a guy with an ugly graph.

I'm sure there are other variables I'm not even considering.

*shrug*

Yes, the reason people over-allocate to SCV relative to the market weighting is really 'that simple'. There's no free lunch...the expected additional return does come with expected higher volatility. There's also no guarantee that past results will be repeated.

The number of people who are intentionally overweighting mid/small can't have any real effect on 'pricing this in', in my opinion. 95%+ of typical investors would have no clue about anything like this.

I'm overweight both small and mid cap, and just like Brian posted...hoping for positive results over the long haul (20+ years). Same thing with having an over allocation to emerging markets right now. Higher expected risk, higher expected reward.

I'm your huckleberry.

I'll stack the assets I manage against yours times 10, anytime.

You clearly don't even understand the concept of diversification, nor efficient frontier. Your advice was unambiguously terrible for multiple reasons. I look fwd to your furious backpedaling and/or continued ignorance.

Pro tip: https://en.wikipedia.org/wiki/Harry_Markowitz

He's still alive, maybe you should send him a letter and learn something.

OrsonWellesApplause.jpg

I really don't know why the finance community as a whole is such a nit when it comes to retirement portfolio allocation.

When I merely suggest 100% S&P 500 I get flamed as hell. It is not like bonds are not volatile as well. Unless it is short term treasury or something.

Bonds from COP goes down from 130 to 105, I bought some and it then went back up to 130 in one year.

Perhaps they don't want to be liable for any screw ups.

You should read up on diversification

I've confirmed that you can roll the HSA once per year, and you don't have to wait to change jobs. So I would follow the strategy above, but roll every year instead of waiting to change jobs.

Here is a great blog post on HSA's:

http://www.madfientist.com/ultimate-retirement-account/

This. Just to give an extra hint...it has to do with correlation more than volatility. And regardless of any random anecdotes, any assertion that a typical bond allocation is as volatile as equity is lol.

Perhaps I should say international total market instead of S&P500, which is well, more diversified.

I mean, some advocate buying a crap tons of bonds. So called 20%/80% portfolio.

What happens when inflation pick up? Stock is going to go way up, and bonds with even a moderate term duration will get smoked. In terms of volatility bonds is safer but you can still be destroyed purchasing power wise, even if you have still a positive pnl. It is not pretty to hold even 10 year bonds when inflation is at 5%, and if you buy bonds with any shorter duration you can't have a decent withdrawal rate as they pay much less coupon.

I don't see anyone mention this and they loled at me when I say cash is not safe.

What happens when a or b or c or d or e or f or g occurs is the point of diversification. All asset classes can win or lose.

Maybe you should read the thread. The thing you quoted me as saying as advice was not a recommendation. I was responding to someone who was saying 100 to 120% equities was fine nearing retirement. A discussion ensued regarding asset mix nearing retirement. My point was the only people who could swing that were either people far ahead or far behind what they need. I'll stand by that point, but I am not recommending that allocation for someone far ahead of the game. Per bogleheads, need, ability and desire for risk factor into how much risk to take. If you wish to discuss this beyond responding "lol you don't know anything", I'd love to hear why I'm wrong.

If you are managing money professionaly, you have me beat. If it is personal money I doubt it. Certainly not x 10.

You're arguing that you should have a 100% equity portfolio because a 20% equity/80% fixed income portfolio is bad. That's ridiculous. There's other options in between.

It's really hard to argue that 90% equity/10% fixed income isn't better than 100% equity. If it's not enough risk for you and you have a strong view on USD inflation you can always leverage to something like 120%/12% by borrowing USD.

The diversification you get from the international equity markets is nothing compared to the diversification from fixed income, especially when **** hits the fan.

I'm a noob, as you know. But I just don't get the point of 12% bonds when I'm 30 years from retirement. If the **** hits the fan like 2000/1 and 2008/9, I'll be able to stay in long enough to make it back in the recovery. If there is no recovery, I'm likely ****ed no matter what and 12% or 20% bonds won't help me.

I can definitely see the value of switch a big chunk of my assets to something very safe when I'm 10 years away from actually using the money. Probably more than 12%.

Read up on modern portfolio theory if it doesn't make sense to you.

Plenty of people going 100% equities these days. If he's 30 years out and sure he's not going to panic sell into a meltdown, it's probably fine.

Only problem is until you ride out something like 2008 you really don't know how you're going to handle it imo.

"Modern Portfolio Theory (MPT), a hypothesis put forth by Harry Markowitz in his paper "Portfolio Selection," (published in 1952 by the Journal of Finance) is an investment theory based on the idea that risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk"

My risk tolerance is very high since I don't need the money for 30 years. So I don't see how this theory implies I should have more than 0% bonds.


My 401k was 50/50 S&P500/Russell2000 from 2002 (inception) until recently when I switched to 100% MSCI EAFE index. I don't plan to do any market timing with my 401k. Just switch between equity indexes.

Do plan to market time/gamble with my taxable account. Partially for entertainment value.

Looks to me like long term treasury bonds have fared well during market crashes and have had better results than fixed income — is that an adequate hedge iyo? Or was it just random chance that it happened to go down like that?

That's not what risk averse means. Would you bet $99,999 for a 10% chance at a million bucks? If not, you're risk averse.

Yes, t-bonds fall under fixed income and should generally be one of the main components of your non-equity allocation. These days a pretty good case can be made for diversifying from US Treasury bonds to other sovereign bonds.

Yep. Same as plenty going with heavy weightings of precious metals in the late 1970s and towards the end of the last decade. Same as plenty going 100% equities in the late 1990s and mid-2000s.

Stocks go up and then people increase their allocations. This happens with the same predictability as the sun rising in the east.

Hahahahaha!

Don't explain your jokes!

My initial guess is that random dude on the internet is probably more-or-less a normal person. All of the articles about how "stocks are overvalued" (or whatever reason to sell) will (suddenly) make a ton of sense to him during a major downturn.

They have done great since 1981. They did not do so well during the 1970s.

Oh I forgot the leverage, thanks for the point.

are you guys goig to be rude if i talk about investing here again or what?

welcome to the internet my friend!

Can you time when I read your posts to when I am the right amount drunk to be charitable in my comments?