100K.Investing should be much more about balancing risks than declaring stocks risky and thinking a 60/40 portfolio has any chance of safety where a 70/30 portfolio fails. There is a large degree of irrationality here about risk - as if you will have to live under a bridge at 70/30 with your now bigger portfolio but somehow be fine with that smaller portfolio at 60/40.
Nobody should be averse to risk. They should take the time to actually understand risk.
Which is safer towards meeting retirement goals,
A) owning 5x expenses in stocks?
B) owning 10x expenses in stocks?
Which goes up or down more on a day to day basis, the safer one or the more risky one?
The obvious conclusion is that the definition of safety is not preventing a portfolio from going up or down. Safety comes from having that larger portfolio in option B).
Stocks go down 50 percent.
50/50 portfolio is now 75K.
60/40 portfolio is now 70K.
70/30 portfolio is now 65K.
I understand that your premise may be that it's INCONCEIVABLE for the higher-stock-percentage portfolio to not start out bigger.
But...it's not inconceivable.
1929-1939? Ouch. And it fell down again by 1944. So you could hold for fifteen years and still end up negative.
1964-1974? Well, 1974 is not QUITE below 1964. Not quite.
2000-2009? Hold ten years, negative total return.
Now none of these are more than fifteen years, so if you're young and don't need a penny of your savings, you could have just held out. But that doesn't mean that the stock-heavy portfolio would have been bigger.
I understand that 2009 might look to you like ancient history. To me, it looks like 2009. Just fifteen little years ago.
Statistics: Posted by BirdFood — Sun Sep 01, 2024 12:20 am — Replies 67 — Views 2291