If someone is younger and invests across Roth 401k, Roth IRA / switching to traditional for income limits
, and traditional brokerage They put pretty much everything into either a S&P 500 index fund and SWPPX. Is there any reason to invest elsewhere if they have another 30 years in market?
Tell me why someone should do more than S&P 500 index
byu/Hopeful_Reindeer7725 ininvesting
Posted by Hopeful_Reindeer7725
27 Comments
Unsatisfied gambling addition
Depends what your goals are. Some people want to beat the market. Some people want dividend income.
There are reasons, but as a generic recommendation or a starting place, it’s very solid. In other words, you can’t go wrong.
Not everyone believes in the efficient markets hypothesis.
Cosplay as Buffett
OR qqq
I mean the Sp500 is fine, but if american underperformance (see the lost decade and Japans 30 year stock market collapse that they have only just recovered from) worries you then id suggest global diversified investing. Something like VT, which provides exposure to global stocks.
Because the difference between avg 15% returns per year vs avg 10% returns per year means retiring ten years earlier.
Most of the recent gains in the s&p500 are from a select few companies.
But how will I have crazy days if all my money is in an index fund?
If you have the right size and better judgement adding some smaller positions of high beta stocks can extend gains past the S&P. A hedge fund knows that if they buy spy they can make the market rate. But people are paying them to make better than the market. Now if you look closely at private family funds, they will run both S&P index with a mixture of blue chips to cash flow, and high beta earners to make slightly more.
100% equity allocation might be psychologically uncomfortable.
A total world index, instead of only US listed companies, or a total market index, which includes smaller listed companies, are common choices other than the S&P 500.
There are more tax efficient things you could do with a taxable brokerage account, but they aren’t reasonable to implement for most people.
The S&P500 forward PE is high and the US may not maintain it’s hegemony. Even when you diversify, weighting by market cap, S&P500 will still be over 50% of your portfolio.
Need international at minimum
FOMO is the main reason.
It’s a hell of a drug lol
100% equities is already considered very high risk by most institutions
The only other reason would be for higher risk such as single stock investments
online money spaces are basically survivorship bias with usernames.
the broke people are quieter, the rich people post more, and the liars post the loudest. 170k at 37 is fine.
I’m thinking of dumping my portfolio manager and just investing in an index fund. He’s not generating any alpha. I can diversify in some high dividend holdings if I want.
Because small/midcaps and international stocks exist
Investing is a guess–a bet, honestly. We’ve got tools that turn it in to less of a gamble, but it’s still a bet. Will going all in on Google be a winner vs the overall market? Really long term, probably no. Medium term? Maybe.
A company can have a string of years it out performs the market. Maybe you want to be there for that time.
Greater diversification mitigates risk and allows investors to take advantage of upsides all across the market rather than just in a single index. Small caps are known for their strength in market recoveries and Mid caps are known for their growth potential. International exposure also adds diversification and allows for greater performance than U.S. stocks from time to time.
If none of those things appeal to you, investing entirely in the S&P 500 is fine.
Because diversity protects you from unexpected events. Which, by nature, you can’t anticipate.
For most people the answer is “no”.
The S&P alone is not sufficient diversification
No, you tell me why someone should only invest in the S&P500 rather than the total market. What’s special about the number 500?
Yes of course. If you’re open for more risk there’s absolutely more risky options to invest, like QQQ or basket of higher risk-return options
Especially with a 30 year return horizon you could
If the value of the US dollar declines rapidly then the value of cash flows in non USD denominated assets are worth more.
And since currency volatility is a random walk, you should absolutely own Ex US equity