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It all depends. What are your goals, what do you need/want the money for, what is your timeframe.
30+ years to retirement, 100% retirement portfolio in stock is not particularly risky.
You have $100million dollars and can easily live off of the 1.3% dividend, sure 100% invested in the S&P 500 probably not an issue.
A few million dollars, you’re 55 and retired early and are waiting untill 65-70 for SS and a pension to kick in. 100% in stock – you’re asking for trouble.
A few million dollars, your SS and pension cover all of your expenses, and you plan on leaving your investments to your grandkids – 100% in stock – probably ok…
Warren Buffet has set up a portfolio for his wife, upon his death. It is 90% in Vanguard total stock index and 10% in bond index. To me, that is the most aggressive one should be. 100% in stocks is not a good idea IMHO.
Close…actually he said, “I would put 10% of her inheritance to short-term government bonds and 90% to a low-cost S&P 500 index fund.”
But considering the amount she will be inheriting, she would have ZERO reason to accept risk in her portfolio…not a position 99.9999″ will find themselves.
Buffett’s wife could take zero risk and she’d be just fine. But she could also go 100% stocks and be just fine. That’s the irony of being super-wealthy: You have no need to take investment risk, but — if you do — that risk is unlikely to come back to haunt you.
It depends on your personal circumstances. We own index funds as well as a portfolio of stocks that pay growing dividends. We also have 20% in I-bonds and Short-term Treasuries. the dividends and interest cover 80% of our expenses. When we retire and start taking SS, we will switch to a 100% stock portfolio.
73 yr 8 mo old. Retired n January 2024.
At present, I have 100% of my invested dollars in Vanguard VTI (80%) and VXUS (20%.) That represents @50% of my total portfolio. Balance is 5% Cash, 45% in FIA Annuities w/Income riders.
Our Social Security covers @111% of our standard retirement expenses (including 10% Charitable Giving) so we can “afford” to be 100% equities, since if we need additional income, we can elect to start one of the annuities.
Do most retired folks feel comfortable 100% in Equities? I suspect not, regardless of what academics’ research tells us. (I was one of those academics for the past 15 years, after 40 years as a financial services professional.)
I think the difference is found in the differences between the definitions of risk capacity vs. risk tolerance. Most fully funded retirees have a greater risk capacity, which is the amount of risk their finances would allow, vs. their risk tolerance, which is the amount of risk they can manage and still sleep well at night.
Bottomline…a very individual decision…and unfortunately, one that many are not really financially literate enough to make soundly.
While it’s tempting, to sleep at night for my husband and I it wasn’t advisable. The down years and getting older point towards a more moderate and balanced portfolio, even if in hindsight you can see that much more money could have been made. Our crystal ball wasn’t dependable!
When I take my SS at age 70 next year, my wife’s and my combined SS plus an immediate annuity will pay all of our “necessary” (very liberally interpreted) expenses. I am keeping five years of budgeted optional expenses in CDs, but am otherwise 100% in stock index funds (so let’s call it 95% stocks). We are effectively insured against healthcare shocks, so there really isn’t a hell of a lot that can go wrong other than my untimely demise (even then, we have QLACs that will kick in in 2033 with an inflation rider). When we made that commitment, I thought of that as basically replacing the bond portion of our portfolio.
Before we both retired, we were making so much more than we needed to live on that we were unapologetically 100% all in. It is worth noting that we were notoriously lucky – we only started making real money from our professions in around 1997, and invested increasingly more in stock index funds every year until 2017. There is no getting around the fact that accelerating our investing during the Great Recession period (driven solely by our increasing income and our lack of fear) ended up being a great boon for us (the nominal return of the S&P 500 with dividends reinvested from January 2009 to December 2017 was 15.8%). You can certainly find periods during which it could have worked out much worse, but we retired at age 63 from jobs we could easily have continued, with increasing salaries, until the moment I am typing this. So that was another firewall. We are well aware that we were very lucky, in addition to just being good savers who understand how much it would cost us to afford what seems to us to be a very pleasant life. If we have any wisdom at all, it is the wisdom of understanding what is enough.
We were 100% equities, with keeping 10-20K in checking account, up until 3 years before we retired. Exceptions were when we knew we had large expenditures on the near horizon (houses, malpractice tail, etc.). To us, the only real downside was that when the market dipped/crashed, we couldn’t immediately buy more stock except through margin.
Most of that time (1985-2007) we were in individual stocks, before starting to transition to index funds about 10 years before retirement.
Prior to starting to accumulate a few years of income assets in anticipation of retirement, we figured that we could cashflow everything. It worked out well for us–BUT, spouse had a high earning job and we spent reasonable amounts.
Seems tough to paint with a broad brush … Literally everyone’s situation is different … Having a defined benefit federal pension with a COLA that covers my needs certainly allows me to have more in equities than I might otherwise
I have been almost 100% in stocks (VTSAX) 27 years and am in my mid 60s. I keep about 5 years in cash position–mostly in T-bills and some in checking account. It has been working well over the years. You need to have high risk tolerance and stay the course when market’s not doing well. I will continue this way through my life.
I understand why you have a cash cushion. I too have a three to five year cash/bond safety net. Technically then, aren’t you at 100% minus your 5 year cash position? What percent remains? In my case, this drops the overall equity % to around 80%.
100% stocks or even 90% stocks as a retired limited income person is nuts. No matter the performance of stocks vs bonds over the past 100 years. Cash, stock, bonds, and balance. You need to have funds available in non-volatile areas that cover your needs…if you are 70 or 80 and have the cash and can survive a 50% crash in the market then fine. Otherwise diversity is king. I have a 60/40 mix and property assets that I rent and on disability with SS and 5 yrs of cash. That is safety and room for fun. Market dives – I don’t care it will come back….
I am within 5 years of retirement. I just bought my first bonds which are in Vanguard 2030 Target fund. I do have 3 years expenses in money markets. I really am not sure if I will keep the Target fund or any bonds as I view bonds as debt of a company and I am not a fan of debt ( even if it’s not mine). Stocks have done me well in my life and I feel like a proud owner owning stocks vs owning bonds.
Age 75. 80% individual stocks and 20% options — and, yes, I know this is not typical or recommended by financial planners. Am a retired CPA. Have always viewed the stock market as my window to the world. I’ve gone to Omaha to listen to Warren Buffett. I own companies that rent airplanes to the world, have a conveyor belt for sand in the desert, and sell cars to people who have a credit score of under 400. All are fascinating operations. And yes, I own a semi-conductor company that is putting 200 billion transistors on each chip — do you realize how incredible that is? At a rate of one number per second, 24/7, it would take you over 6,000 years to count to 200 billion. For me – a 100% stock portfolio is the adventure of a lifetime.
Early 60s here, retired, no social security yet. I’m over 90% stocks, about 8% cash, a smattering of bonds. I’ve always viewed bonds as a tool for mitigating some of the volatility of my stock portfolio. I have a high tolerance for risk, but my conditions are somewhat unique: I’m a military retiree, with VA disabilty. Upon no kiddng retirement, I did some thinking: with a minimal risk (and inflation protected) pension, VA disability, and upcoming Social Security, did I really need bonds? After a present-value calculation of those income streams and considering them as bond-equivalents for portfolio allocation purposes, I concluded that I didn’t need a sizeable bond position. What I really needed was the opportunity for growth presented by stocks, esp if I assume 25+ more years of shelf life.
I am with you SS for me and my wife plus 100% PT VA disability although I also have Vanguard Wellington Fund as my emergence fund…..8% a year when I need it……keep my peace of mind
No, I don’t think so. I’m heavy in stocks as well. Over 95%. There’s some indication that 100% stocks performs similarly to 75 or 80%. Bonds have pluses and minuses, but they tend to underperform stocks, and they can also lose money, so no guarantee there.
In the distant past, I remember seeing studies showing that 90% stocks-10% bonds performed similarly to 100% stocks but with less volatility. The return similarity was the result of the small performance bonus that came with rebalancing between stocks and bonds.
According to data from Jeremy Siegel’s Stocks for the Long Run, stocks are historically less risky (lower standard deviation and variance) than bonds over holding periods between 15 to 20 years. Inflation and the tendency for stocks to revert towards the mean seem to explain this (interestingly, bonds do not apparently revert towards the mean). Also, from 1871-2021 stocks outperformed bonds over ten-year periods 80% of the time and over 20-year periods 95% of the time.
Absolutely not if still working, but perhaps somewhat reckless if in the later years of retirement. In retirement, I think most folks should probably hold a fixed income percentage required for 3-5 years of living expenses in the event of a major stock downturn. Thus, an 80-90% stock portfolio even in retirement is probably not reckless for many investors.
I currently have 62% in stocks, age 80, but not using the funds for income. Primary goal is not growth, but stability and earnings.
What percentage of that 62% is still in your company stock?
It depends on your stage in life. I had 30+ years at nearly 100% investment in mutual funds, plus or minus a specific company holding. It served me well. I personally felt that level was reckless as I approached retirement, since I would no longer be able to recover my nest egg with a paycheck. So, I slowly adjusted to an 80% position during the three years prior to retiring. I can tolerate a 20% safety net of bonds, cash, and CDs moving forward without feeling reckless regarding the other 80%. But I also have a high risk tolerance, and strong faith in the overall market.
It seems like you are alluding to sequence of return risk. As one approaches retirement, sequence of return risk can wreak havoc with the longevity of our nest egg, particularly if we are 100% invested in volatile asset classes like stocks. Having 3-5 years of stable assets (short-term bonds, cash, CDs) as we approach and begin retirement greatly reduces this risk, as would having stable sources of income (annuities, Social Security, pensions).
I once held 100% of my money in stocks, then a large percentage for a number of years. But I moved enough into bonds a few years ago to cover spending needs when I thought I would have to replace income due to an early retirement. That hasn’t materialized, but I’m keeping a few years’ spending in short-term bonds as a safe-guard. The actual percentage in stocks is rising the longer I keep working and investing without spending my savings. Charlie Ellis weighed-in on this question a couple of year ago.
https://humbledollar.com/2021/10/no-bonds-for-me/
Great article by Charlie Ellis. Thanks!
I’ve always allocated a hefty percentage of my portfolio to stocks — maybe not 100%, but close to it. Early on, I realized I couldn’t pick hot stocks or hot funds, and I had no talent for figuring out which part of the global stock market would perform best. But allocating the vast majority of my portfolio to stocks was one way I could get an edge. This, of course, comes with two big caveats: You need a high tolerance for risk and you don’t want money in stocks you’ll need to spend soon.
I agree entirely. Being more specific, I would say you have to have a time horizon of a minimum of five years, preferably ten years (don’t need the money for 5-10 years).
Individual stocks or mutual funds consisting of all stocks? I would never do individual stocks, but I could see an argument for funds in some situations.
Not individual stocks. Low cost, well diversified equity mutual funds/etf’s, is what I had in mind.
In that case I’d say if your time horizon is long, or if the money is to be a legacy, and your risk tolerance allows… Go for it.