Investing in SP500 vs. a Mixture of SP500 and Bonds
Many financial advisors teach a mixture of stocks and bonds, such as 70/30 ratio, or 60/40 ratio. The ratio is rebalanced yearly. The stocks/bonds ratio decreases with increasing age; for example, by age 60, some advisors use 60/40. By age 65, they use 50/50. By age 70, they use 40/60, or 30/70, etc.
For me personally, I invest in (1) real estate and (2) SP50. Besides real estate, all my money is invested in SP500. It is easy, simple and passive.
For illustrative purposes, simply assume that I invest $100k at the age of 30. How much money will I have at age 75?
[1]. Method 1, 100% in SP500.
Long-term SP500 historic annual return, 10%.
$100,000 x 1.1**45 = $7.3 million.
[2]. Method 2, 70% SP500, 30% bonds.
Long-term SP500 historic annual return, 10%.
$70,000 x 1.1**45 = $5.1 million.
Long-term bond historic annual return, 5%.
$30,000 x 1.05**45 = $0.3 million.
Total = $5.4 million.
By using Method 2, you have lost $1.9 million, compared to Method 1.
Note 1: This assumes no rebalancing annually. If you do rebalance, you will have to sell some SP500 and buy more bonds to maintain the 70/30 ratio. This means even less money than $5.4 million.
Note 2: Most financial advisors will increase the bond portion, perhaps by age 60, with 60/40 ratio. By age 65, 50/50 ratio, or 40/60 ratio. By age 70, 30/70 ratio. These will mean even less money than $5.4 million.
Note 3: This example makes a simple illustration of a single investment at age 30. Most people will continue to invest more money each year. This means making even more than the extra $1.9 million by doing the simple 100% SP500.
Method 1 makes $1.9 million extra money. In addition, it is simple and easy, and does not require rebalancing and calculating the ratio every year.
By David Meng, author of book “The Intelligent Small Investor”
Yes 100% SP500 will fluctuate a little more. However, what makes the investor money is the rate of return. That's where the rubber meets the road. An average of 10% annual return will make more money than 5% annually.
張先生用100%SP500, 李先生用70/30 or 60/40. 張先生多了2米。李先生少了2米，心理壓力也是有的吧，心情也会受到影響吧。張先生多的$2 million can help family members, travel, cruise ships, give to charity, help relatives in need. He will be happier with a satisfied life.
Yes you are right. I invest in real estate and SP500 because
my 401k is 100% in SP500, and my wife and I feel that we have enough real estate now, so our extra cash is also invested in SP500. But you are right, for those who do not have enough real estate yet, buying real estate with leverage produces hugher returns.
Retirement in my book: Two years living expenses in cash, all else in SP500. The math shows that compared to typical traditional methods, this method grows millions more in retirement. It is also simple.
Investing in SP500 vs. a Mixture of SP500 and Bonds
Many financial advisors teach a mixture of stocks and bonds, such as 70/30 ratio, or 60/40 ratio. The ratio is rebalanced yearly. The stocks/bonds ratio decreases with increasing age; for example, by age 60, some advisors use 60/40. By age 65, they use 50/50. By age 70, they use 40/60, or 30/70, etc.
For me personally, I invest in (1) real estate and (2) SP50. Besides real estate, all my money is invested in SP500. It is easy, simple and passive.
For illustrative purposes, simply assume that I invest $100k at the age of 30. How much money will I have at age 75?
[1]. Method 1, 100% in SP500.
Long-term SP500 historic annual return, 10%.
$100,000 x 1.1**45 = $7.3 million.
[2]. Method 2, 70% SP500, 30% bonds.
Long-term SP500 historic annual return, 10%.
$70,000 x 1.1**45 = $5.1 million.
Long-term bond historic annual return, 5%.
$30,000 x 1.05**45 = $0.3 million.
Total = $5.4 million.
By using Method 2, you have lost $1.9 million, compared to Method 1.
Note 1: This assumes no rebalancing annually. If you do rebalance, you will have to sell some SP500 and buy more bonds to maintain the 70/30 ratio. This means even less money than $5.4 million.
Note 2: Most financial advisors will increase the bond portion, perhaps by age 60, with 60/40 ratio. By age 65, 50/50 ratio, or 40/60 ratio. By age 70, 30/70 ratio. These will mean even less money than $5.4 million.
Note 3: This example makes a simple illustration of a single investment at age 30. Most people will continue to invest more money each year. This means making even more than the extra $1.9 million by doing the simple 100% SP500.
Method 1 makes $1.9 million extra money. In addition, it is simple and easy, and does not require rebalancing and calculating the ratio every year.
By David Meng, author of book “The Intelligent Small Investor”
我们以前没那么多房子和租金收入的时候定的70/30
然后我就从来没改过
SPX 100%
如果心脏大，家里随时有两年生活费现金，那么大概可以100%放股市。
所以全部换成SPX也就是几年的时间。
Yes 100% SP500 will fluctuate a little more. However, what makes the investor money is the rate of return. That's where the rubber meets the road. An average of 10% annual return will make more money than 5% annually.
張先生用100%SP500, 李先生用70/30 or 60/40. 張先生多了2米。李先生少了2米，心理壓力也是有的吧，心情也会受到影響吧。張先生多的$2 million can help family members, travel, cruise ships, give to charity, help relatives in need. He will be happier with a satisfied life.
do well. I hold mine for decades, and put more money in via dollar cost averaging. Good luck to you.
的房子，5万每栋都是很好的房子了，外加贷款买，20-30万的房子，在当时可都是非常豪的，豪宅了。45年累计的租金：现在350万的房子，湾区大约可以租每月7000元，一年是84000元，45年前那点贷款不值一提。不知道1975年的租金是多少，每月5百元？每年6000元租金收入？用最低的租金1975年，每年每栋6000元，最高的租金2020年，每年每栋84000元，估算45年年平均租金收入，每栋45000元，得出，45年的两栋房总租金收入大约是：4million。加上两栋房产现值最少，700万，总价值和收入最少，11 million。高出你的大盘总值700万好多，最少也高出400万，还是非常保守的计算了。
加州地产税很低，特别是45年前的房子更低，大盘股市和房子都有long termcapital gain, 如果不卖的话，也就忽略不计， 其它成本等计算太复杂，就不算了
总之，房产投资还是回报更高，但需要投对地点，哈。
my 401k is 100% in SP500, and my wife and I feel that we have enough real estate now, so our extra cash is also invested in SP500. But you are right, for those who do not have enough real estate yet, buying real estate with leverage produces hugher returns.
不过地主好像是不主张留现金的，家里有一分钱都要投资出去，用钱时再去借。
Matches 6%. It's in TIAA CREF. Mine is 100% in SP500.
Retirement in my book: Two years living expenses in cash, all else in SP500. The math shows that compared to typical traditional methods, this method grows millions more in retirement. It is also simple.
我读到一篇研究文章，里面讲述100% sp, 70/30 max 历史回报和波动率的数据对比。没有证据表明100% is significantly better than 70/30. 我找不到那篇文章了。但是你这样分开的计算应该是有问题的。
如果只有SP，波动率大。如果象08年跌48%，那么就需要涨90%几才打平。债券在这里就是减少这样的波动率，那么你不需要涨那么多就能打平。所以不是简单的分开单独算，就可以得出结论。而且08年债券涨幅是18%。如果在你投资末期，这样的组合是完全必要的（理论上）。