It's currently at $35K, my retirement year is 2050, and I'm planning to max it out for the foreseeable future. I'll start looking for good moments to move it to something steadier in 2040.
I looked at the fees for a bunch of indexes and the S&P was lowest. I figured the fees look great in a good quarter but can hurt in a bad quarter. I'm obviously not a finance expert.
Talk me out of it.
talk me out of allocating my entire 401k to the S&P 500
byu/CardiologistOk2760 inpersonalfinance
Posted by CardiologistOk2760
42 Comments
Why would we talk you out of a good choice? SP500 is great.
Dont get stupid with your retirement. And dont touch crypto
You can also just start having contributions go towards S&P
I won’t. I think you’re good for the next 15-20 years. Then maybe 5-10 years before retirement, start introducing bonds to your portfolio to balance things out
Why not just pick a low fee retirement target date fund with a target of 2050? The money you put in now will be almost 100% in stocks (more diversified than the S&P 500), and then it will slowly (and automatically) move to a mix with more conservative investments as you get older.
If your 401k has any good international or midcap funds, it may be worth considering diversifying a bit there.
But you certainly could do a lot worse than S&P 500.
Why would I do that? I did the same thing and it has done well over the years
Do you feel it is a wise choice to exclude half of the world’s economy?
If you don’t k ow how to pick your own asset allocation, then going 100% into the target date fund that closest matches your expected retirement year is a wise choice.
I think you have 2 questions here. Should you be 100% equities and should your equity position be only US Large Cap stocks.
The first comes down to if you have the risk capacity and tolerance to handle the volatility of a 100% equity allocation. As long as you don’t panic sell during the next crash and are willing and able to ride it out then it’s hard to argue against it but most people can’t or don’t do that.
There is no way to know if Large cap US stocks will outperform the broader market over the next 25 years. If you want to hedge your bets you can diversify by adding international stocks and/or using a total us market fund that includes small and mid caps instead of just an S&P 500 fund.
S&P will out perform most financial advisors anyway. Stick with it and sail
that’s a solid plan. Then those last 10 years go into lower yield safer investments. SP500 has ups and downs so you don’t want to retire with it all in there during a down market, but if you have a few years it overall has an upward trajectory with a pretty solid yield.
I’m not making a recommendation but I did see an interesting video by Hank Green on YouTube about the S&P500 being heavily driven by companies in the AI space. If AI continues to grow, the return will be great. If we are on a bubble, you may feel like too much of your portfolio is tied to AI. He did include the disclaimer that he’s a science guy not a finance guy, but he has decided to diversify a bit more.
What do you guys think?
Edit to include link to video: https://youtu.be/VZMFp-mEWoM
You’re not really diversified because you’re only in American stocks with the S&P500. We are entering a very different era that shows every sign of not performing like the last 100 years. We are already seeing capital flight from the USA and it could get much worse. Diversify abroad as well.
My 401k is 90% s&p 500. I think its a good idea.
Most “gurus” can’t come close to the SP500. In fact it is probably better than a target fund (lower fees / less rebalancing). My crappy 401K only offers high fee funds. My IRA and Solo 401K are on the Fidelity 500 though.
S&P 500 has a great track record when you average all its good and bad years. Continues going up (which is a solid performance).
Absolutely nothing wrong with going 100% S&P with your time horizon. I’m 10 years from retirement and I’m still 100% equities. Now my wife and I each get a pension when we retire which is what we will treat as our “bond” portion so I will probably never go lower than 100% equities.
It wouldn’t hurt to diversify just a bit. You could do a whole world index fund or break it into a few different funds.
I have three funds…
S&P 600 (small cap) 50%
S&P 500 – 30%
World minus U.S – 20%
Putting your money in the sp500 is a very SOUND choice. The sp500 has consistently put out 9-10% a year over long periods of time and I dont remember the exact numbers but I think over a 15-20 year time horizon you are pretty much guaranteed to have made money since its inception.
There are a lot of dummies out there who will recommend you put your money in intl exposure. It has sucked for 15 years now and those same folks have missed out on massive gains and don’t have an actual reason for why intl will do well in the future.
As someone with 100% of their 401k in the S&P 500, I don’t think it’s the most prudent approach because you have no real international exposure. I would tell you to do something like 80% S&P, 20% international ex-us fund unless you’re okay taking that risk. Maybe add a little small cap in as a bonus.
Mine has been 100% S&P500 since day 1 from August 2021 when I started investing. Everything I own is in it – HSA, 401K, Kids’ 529. I just don’t like anything else in paper money.
Depends on your age really. I see no reason that 100% S&P500 is a bad strategy for someone that’s no where close to retirement.
It’s also not the only good strategy so user’s choice.
That’s a lot of eggs in one basket. If you want to be more aggressive than a 2050 target date fund, look at a later one and consider mimicking it for your allocation.
For example, the Vanguard 2065 fund has 55% in US equity, 36% in non-US equity, 6% in US bonds, and 3% in non-US bonds (all index funds). That gives you a small hedge against stocks (with bonds) and good non-US exposure.
S&P is now tech heavy. It drops first when things go south. Forgoing diversification has never been wise. Given AI will make many jobs unnecessary over the next 5-10 years, that uncertainty makes it even more risky now, imo.
On the other hand, towards the end of a downturn is a great time to heavy on S&P and if you aren’t going to touch that money any decade soon, it’s probably a good bet.
Targeted retirement fund for 401k of you are going to set it and forget it.
Go with total stock index…VTI type thing. As long as you’re employed, I’d put 100% in it. You can worry about bonds when you retire.
Diversification of investment Asset classes is key. See also; Enron…
the S&P 500 is a fine class for investing. I have 5 different buckets – Large Cap, Small Cap, International, Growth + Income, Contrarian. Rebalance to 20/20/20/20/20 annually.
Do it
I have a Vanguard index fund allocated at 100% over the last 15 years and I’m not changing it any time soon. Perhaps when I’m 5-8 years out from retirement I’ll change it but index funds for long term growth are the way for the lay folk
[Is s&p500 enough](https://www.reddit.com/r/personalfinance/s/fzACcZQmMt)?
why sp500 and not VT? that’s only U.S stock market, and there’s no guarantee same thing won’t happen to USA what happened to Japan 40 years ago when people still thought it was the US of today.
Your instincts are correct. Put it all in VOO or VTI. 😉
Do the majority but keep like 10-20% toward cash/bonds/somewhere stable for when the next correction occurs and then you can lower your entry price.
Check out the Mr Money Moustache blog.
I hold everything in VTI and am retired.
So you’re convinced that the US stock market is going to outperform the rest of the world for the next 15 years? What’s your basis for that conviction?
To oversimplify Ben Graham: the market is bipolar.
Why are you looking to be talked out of something that beats all fund managers over time, has a low cost, and is diversified and generally safe with a time horizon like yours? Bored?
We can argue all day about what your equity composition should look like, but I would encourage you to really take some time to understand your risk tolerance. No one here has enough info to tell you whether 100% equities is appropriate for you.
With longer time horizons, I expect the higher your allocation to equities, the more money you’ll end up with eventually. However, bear markets happen and you need to be comfortable temporarily losing 30%, 40%, maybe 50% and not cashing out. The US market has been on a tear for over a decade and it has made people think they’re more aggressive than they are, so be careful.
Why? 100% S&P500 is the way to go
Why? This is likely your best choice
Why would you want be talked out of it? It’s a good idea.
Why are there fees on the funds? If your program doesn’t offer no fee index funds, roll it all out to brokerage IRA and buy ETFs.
Sounds fine to me.
> I figured the fees look great in a good quarter but can hurt in a bad quarter.
Of course the fees may bother you more in a bad quarter, but they cost you just as much in good quarters as in bad quarters.
The advice here is going to lead you to a disastrous mistake.
International exposure, currency risk, bond exposure, over exposure to tech industry (top 7 stocks in S&P make up 30%+)