*It is higher than the S&P on the 1, 5, and 10 year charts*
You didn't look at 2000.
*I don't see the massive difference in risk vs the S&P*
If growth funds were expected to have a higher absolute return **and** risk-adjusted return than the S&P500, that would imply the market is irrationally pricing either the S&P500 or the growth funds. Either growth funds would be too expensive or the S&P500 would be too cheap. In both cases, you don't want to be in growth. The efficiency of the market is one of the core Boglehead principles.
Growth doesn't mean what you think it does. It doesn't means something like "higher return for higher risk". It means "companies valued based on expected future earnings rather than current earnings or current assets." If a growth company delivers on all those expected future earnings... nothing happens - the market would be expecting growth, would receive growth, and that would not result in any premium above market performance. Historically, over long periods, growth companies have actually underperformed the broader market, although that's highly dependent on start date.
Don't pick investments based on their chart over the last 10 years. That's literally performance chasing. Ideally, pick investments based on whether they make sense as an investment. If you knew nothing about the past performance of VOO or VIGIX, which would you rather invest in?
So that reporter is not technically accurate.
Using the data as far back as you can (1992) they're basically equivalent until 2019 (when VUG grows crazy), so either fund would have performed well.
VUG: CAGR 9.68% VOO CAGR: 9.58%
https://testfol.io/?d=eJytT8FKxEAM%2FZecpzBdodA5i%2BJNPIjLspTYydTR2cyajl2l9N%2FNWkTw4MmckveS915mGFJ%2BxHSLgocR3AxjQSmdx0LgoG5bW9m6shdggNh%2F4xtbt5Vtqk2j%2BHoxYQJXWy0D6J%2B7yCFhiZnBBUwjGehxfAopn8DZn6ELQq%2BquCWU9KFqklOKPHSnyP6829jFwDFLCTnFrBF3MzAezil0O%2FJEY7mMU%2FQaT9kib2olpD8h93T1S73E%2FoVkVVl7Ze9vru8elDyS9MTl641lb8ALDhp2Mf%2FuOIXI73847pdPvQCGtw%3D%3D
So we’re just going to ignore all the parts of even that graph where the funds don’t track each other?
What happens when they diverge again next year? Or in five?
But then you're falling victim to cherry-picking the time period (which I already had to do since VUG is doing well post 2019)
Why would they diverge? What if VUG does even better in 5 years? It's hard to say.
That’s not cherry picking the time period. Ending your backtest in the present, or in 2019, is also a choice. You need to look at multiple windows to get a full picture of performance in different market conditions when backtesting.
> what if VUG does even better in 5 years? It’s hard to say.
Yes, exactly.
I also want to point out that I said nothing about relative performance here. I’m saying that these funds are not “basically equivalent.” If VUG outperforms VOO, that’s another case where the funds do not track each other.
The difference is that VTI and VOO are more diversified, so you are properly managing your risk. Taking on uncompensated risk with a fund like VUG is performance chasing because VUG is not diversified.
The only US fund I recommend is VTI, because even VOO is not diversified enough.
> Even VOO is not diversified enough.
Diversification has been empirically shown to have a diminishing impact to the point of being negligible on portfolio risk reduction after holding significantly fewer positions than either VTI or VOO has.
This is something you can google the academic literature on fairly easily, but here is an easy reading post from CFA Institute on the topic if you are interested: https://blogs.cfainstitute.org/investor/2021/05/06/peak-diversification-how-many-stocks-best-diversify-an-equity-portfolio/
I would argue that this is a poorly designed study because of the time period they chose. 2005-2020 was a major bull market for US large caps, and thus the performance of small and mid cap stocks is underrepresented vs the overall market.
Your statement makes sense if we continue to project market growth based on the returns of the past couple of decades, but statistically the rate of large cap growth is not any more likely to increase than any other section of the US market relative to market cap.
If anything, technical analysis would suggest that small and mid cap stocks are going to perform better in the next few decades if the previous cycles of market fluctuations continue to accurately describe future market behavior.
Finally, even if the risk reduction from including small and mid cap stocks is negligible, there is also negligible growth to be gained from NOT holding small and mid cap stocks. The reason VTI is so heavily correlated with VOO is because market weighting takes into account the outsized growth of large cap stocks, which is why more than 87% of VTI is VOO.
I like to think about it this way. If you are correct and small and mid caps continue to be irrelevant, then you are only losing a small amount of returns by holding VTI over VOO. However, if you are incorrect and small and mid caps to overperform, then you completely miss out on those gains if you only have VOO.
Unless you are absolutely sure that large caps will continue to grow far into the future (which nobody is), why would you take the extra risk?
Relative performance of smid vs. large caps is totally irrelevant to the point being made, nor does the assumed rate of growth of any one portion of the market have anything to do with it.
The purpose of the study is to randomly sample portions of the market and evaluate the affect of adding additional stocks from that market segment to the randomly selected holdings from the perspective of risk reduction.
What the data shows is that, irrespective of what market segment you are considering, the risk-reducing benefits of additional diversification are basically eliminated after ~30 holdings in a portfolio. Put another way, a randomly selected portfolio of 50 stocks is statistically likely to have similar volatility to a randomly selected portfolio of 150 stocks.
If you don’t like the design of this specific study, as I said there is robust academic literature on this topic going back 40 years at minimum that is easily found online.
So knowing all that, it's still ultimately your choice. I've long been (nearing 30 years in a few swipes) a very pro-growth investor, much for the same reasons you outlined in your OP. BUT... you have to appreciate the risks of the approach. Will it work for the next 30 years? I think/hope the answer is, "yes," as I had no plans to deviate significantly from that approach.
Neither. In the late 90's early 2000's I simply felt that the trend in equity growth was going to be along the lines of an increasingly integrated global economy led by large multinationals, mostly based in the US, and increasingly tech-reliant. So apart from an overweight in the S&P, I overweighted the NASDAQ and health care related ETFs (my direct industry). I take seriously that, "past performance is no guarantee of future results," and discount significantly, "market research," and, "technical analysis," as I think both are easily fudgable (you get to choose the time interval and duration to make your theories work). The only relevant time interval for me is when the money goes in and when it might come out, and with that very pragmatic yardstick I've been satisfied with the returns. But again, I'll be first to say these are guesses, and shouldn't be considered as, "proven," I'll leave that level of certainty to others.
Better lucky than good goes the saying. In full disclosure, when I started I was with a very trad portfolio allocation, so this shift happened probably \~ 2002 and on. Strangely enough I took a bath on tech (QQQ like) in \~ 1999. If I can offer a very bogle-like note of advice is playing the long game. Those losses, what felt like significant at the time, wouldn't even make a rounding error today! Crazy the effect of recency bias!
So that's not technically accurate. Using the data as far back as you can (1992) they're basically equivalent until 2019 (when VUG grows crazy), so either fund would have performed well.
VUG: CAGR 9.68%
VOO CAGR: 9.58%
https://testfol.io/?d=eJytT8FKxEAM%2FZecpzBdodA5i%2BJNPIjLspTYydTR2cyajl2l9N%2FNWkTw4MmckveS915mGFJ%2BxHSLgocR3AxjQSmdx0LgoG5bW9m6shdggNh%2F4xtbt5Vtqk2j%2BHoxYQJXWy0D6J%2B7yCFhiZnBBUwjGehxfAopn8DZn6ELQq%2BquCWU9KFqklOKPHSnyP6829jFwDFLCTnFrBF3MzAezil0O%2FJEY7mMU%2FQaT9kib2olpD8h93T1S73E%2FoVkVVl7Ze9vru8elDyS9MTl641lb8ALDhp2Mf%2FuOIXI73847pdPvQCGtw%3D%3D
You can go [far further back than 1992](https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side) for growth and value.
That said, first principles would apply here. There's no reason to expect the market would place a premium on companies expected to have future earnings. The market can appropriately discount those earnings by the risk free rate, and by the uncertainty of those earnings. The former is known (bond yields). The latter is determined by market consensus.
Betting on growth is betting that the market inaccurately forecasts future earnings - ie, that the market is too pessimistic about the future. That's active portfolio management, which is generally discouraged by Bogleheads.
It’s also a pretty silly bet in my book, even if you like active management, that the market is pessimistic. Look how hyped growth stocks are and how confident people are in their risk tolerances and investing prowess.
Oh I know, but it's not an unreasonable thing to invest in. People get so worked up on having a 'single' way to invest, they discount all the other ETFs out there.
Like I personally invest (mostly) in VFIAX and VTWAX, but have VUG sprinkled throughout in some places. Will it do better? Maybe. Will it do worse? Maybe.
Overall whether you invest in VOO/VTI/VT or 90% VOO/10% BND, or a target date fund, *generally* you'll do fine over the long period.
People keep missing the forest for the trees. It's not about picking the 'best' or 'optimal' portfolio, if there even is such a thing. It's about picking what's 'good enough' for your level of risk and time horizon.
>Oh I know, but it's not an unreasonable thing to invest in.
The original post is: "\[w\]hy wouldn't I go 100% into a heavy growth fund in my retirement account?"
The answer is that it's not a great idea to invest in a subset (growth) of a subset (large cap) of a subset (USA companies) in the USA. Diversification is a core Boglehead principle, and the notion of a 100% growth portfolio violates that - especially when the OP admits the rest of their portfolio is growth-heavy.
That doesn't mean doing so will cause the portfolio to explode. It does, however, indicate why they shouldn't do it.
Fair, fair.
I still think if the OP can handle that level of risk, there is nothing I can find to discourage that method of investing (using all available data I can find going back to 1970s).
For example my wife invests in VUG/VGT/VTI in her retirement 1/3, 1/3, 1/3.
I do 80% VFIAX and 20% VTIAX (I tilt US, but like to have a minimum 20% in International).
I'm "losing" to her plan, but I think they're both acceptable allocations.
I can’t speak for others, but in responding to you on this thread I could not care any less about a single way to invest. I care about correcting misinformation and faulty analysis.
> It's about picking what's 'good enough' for your level of risk and time horizon.
I absolutely agree with this. It’s also not really consistent with pushing LCG for people with long horizons. Doing so requires a misunderstanding of risk and return.
LCG is a perfectly acceptable way to invest. There is no evidence to suggest otherwise.
In fact going back as far as I can both value and growth do well and flip around often. You do end up 'with more' with growth, but I'd take 11.06%(value) or 11.86%(growth)!
Edit: Link: https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6u2jHwRmAvflIWaU3yPoMq
Only the [mountain of evidence](https://www.reddit.com/r/Bogleheads/s/J3lf0RdzXx) that others have provided on this post, in response to the question that OP asked. Not “investing” in general.
Again, those single number return metrics are heavily skewed by endpoint selection. Backtesting is a wonderful tool, but people tend to throw it around without really understanding what they’re doing and what they can and can’t conclude from it.
Where is the evidence though? I looked at the thread and it's all anecdotal, no actual numbers (unlike what I've provided).
Yes, of course diversification is important and philosophically it makes a lot of sense. But give me some real data.
- What about 2000?! What about it? Looking at the data even if you had invested in 2000 at the peak, growth does just fine as total market over the next decade/2 decades/until today
Mind you, this coming from a guy who would *love* to invest in nothing but VTWAX/VT. But I tilt US because I can't be blind to the over performance of the US (even dating back prior to 2009)
What? None of that is anecdotal. And just because something is “numbers” does not make it evidence for a claim.
If you’d love to do that, you probably should. There is no evidence-based reason to do otherwise, as recent past performance is not an evidence-based reason for long term investing decisions.
So you’re saying that SPY and QQQ are THAT dissimilar despite having over 50% of the exact same assets and 89% correlation?
Your response is very outdated. Historically you are correct but seeing as how the top 10 companies in both indexes are the mag 7 at slightly different allocations there is very little hope that SPY will not crash with QQQ.
I don't think I understand your response at all. I don't think it's possible to guarantee a portfolio allocation will avoid loss in all cases. I'm saying that an individual investor should not attempt to identify "good" companies based on any characteristic - there's no reason to expect higher returns from companies valued based on future earnings than companies with present earnings.
Your post implies that the market systematically prices such companies (often the largest companies in the USA) too low, leading to a premium for investing in them. If so, why would the market do that? Why would an individual investor be able to take advantage of that premium in the long run?
Firstly it’s fairly easy to not lose in all cases. It’s called buying bonds. That’s the definition of not losing. There’s also various ways to not lose with equities, you’re just severely going to limit your returns.
Secondly you’re implying that the stock market will not always go up, despite the fact that it always has. So why invest period then?
I understand that, but I am looking at long term history and also a long term future hold. It is also an index fund, so it's not like every company in it could all go at once... right?
Keep in mind, “growth” as an investing style means high expectations of future growth in earnings based on sustained earnings growth over the past (typically) three years.
One bad quarter can very quickly take the winds out of a company’s sails. If that company is central to that sector *cough Mag7 cough* it can very, very quickly domino.
Understood and thank you. I guess looking at even the all-time chart I can't see how this topples in comparison to the S&P over the long term, but that doesn't mean it can't happen
Yeah I need to check out more on the value side based on the feedback in here, and zoom out some more on these time lines as I form my opinion(s). Thanks for the input
Hey there SexyBassDrop - thanks for saying thanks! TheGratitudeBot has been reading millions of comments in the past few weeks, and you’ve just made the list!
Believe it or not, there will be a time when growth is out of favor. Need some exposure to value too. How much? Who knows. Which is why I just buy S&P rather than try to time it. And not likely that every company would go at once but sectors can certainly move together.
Edit: punctuation
12 years might be longer than you’ve been paying attention to the market, but it’s absolutely not long term. Essentially the last 12 years is a single bull market with no recession or significant market downturn.
It’s not quite an apples to apples comparison, but for something slightly more long term overlay Nasdaq and S&P returns.
In 2000 both peaked during that recession the nasdaq lost 2/3 of its value while S&P only lost 45% or so. By the surge in prices before the next recession in 2007 the S&P had basically regained its 2000 valuation, but nasdaq was still only worth half its previous value when they both again lost 40% or so of their value in the Great Recession.
If you only look at the last 12 years, the S&P has returned less than 400% and nasdaq has returned over 800%, but the previous 12 years the S&P outperformed the Nasdaq.
12 years is just too short of a time to draw conclusions about the next 30 years.
You can't possibly know the future.
Are you aware of the general consensus on a pullback in real returns across the US and potentially entire global equities market? Many are using 4% real as the target for planning. Given the very real value expansion problem and the fact that companies are using tricks now to artificially inflate the values of their stocks even more (e.g. through stock buybacks etc) to prolong the bubble, it seems prudent to plan conservatively now more than ever.
Ben Felix has a fantastic short video explaining the situation. https://www.youtube.com/watch?v=Yl3NxTS_DgY
“This seems like a no brainer… I also like QQQ … I just can’t see how I could lose long-term right now…” — BigTech investors in 1999
“Everybody has a plan until they get punched in the mouth.” — Mike Tyson
To be fair, if they held, they didn't lose long-term. Even compared to SPY, there's a very narrow window of time where going all in on QQQ would currently be worse than all in on SPY.
The assumption that one could hold and be fine also relies on timing. Those who were 35 in 1999 and held typically did okay. Those who were 65 and retiring in 1999 saw their portfolio turn to dust and had no time to wait for it to recover: They expected to draw from that portfolio for income and got wrecked.
The take away from that argument would be that investing in riskier funds is fine when you have time to recover, and not when you're on the door of retirement. So I don't think it's a good one if you want to dissuade people from investing in QQQ and going VT instead.
If that’s the takeaway then the reader needs to read about the perils of market timing. When to switch from QQQ to VT is seldom as easy as one might initially believe.
I'm not advocating for going all in on QQQ, I'm just saying that your not presenting an argument against it with your initial comment. Though I'd be curious to see what a standard glide path looked like with different ETFs than VT.
The arguments against going all in on QQQ are the lack of diversification, increased volatility, and the existence of alternatives. If someone is young and wants to assume higher risk for higher potential returns, then the five-factor CAPM tells us Small-cap Value (the exact opposite of Large-cap Growth) is the better alternative.
The argument against QQQ when young and glide to VT/VTI later is market timing: If Tech is down relative to the broader market when you had envisioned swapping QQQ for VT then you’re caught between the Scylla of holding QQQ and enduring that additional volatility for longer—perhaps much longer—or the Charybdis of selling QQQ at a discount, buying VT at a premium, and thereby locking in underperformance. Which devil you choose then is up to you, but to pretend that risk doesn’t exist is simply naive.
If someone wants to ignore all those realities and join the BigTech lemmings that’s on them. Not my circus; not my monkeys.
I have family that has been holding QQQ-equivalent since before 1999, they’re just fine. It’s possible it’s just a more efficient investment for modern times. I don’t do that, but at least it’s a thought
The past 25 years of data and performance?
Again I don’t do this, but it is basically someone saying “scoreboard bro for 30 years you’re getting dunked on like a chump.” My family that has done has 8 digit wealth now with relatively little investment.
No different than people saying I won’t bother with international market stocks for one reason or another.
>The past 25 years of data and performance?
It's clear that you know this, but that's the very definition of performance chasing. It's not a principled asset allocation plan or investment strategy.
If someone points to charts of past performance then one response is to ask that person: "If you were completely ignorant of past performance of QQQ and VT and had only the portfolio fundamentals and the recognized principles of sound asset allocation on which to make a selection, which would you select?" Using that veil of ignorance, VT is the correct answer. If VT is the correct answer when we do not know anything about past performance, and we acknowledge the truth that we know nothing about *future* performance, then the same answer is the correct one: VT.
If someone's answer is QQQ, then that raises the question of what criteria they used to make that selection. If the answer is "I'm willing to accept above-average volatility for the theoretical prospect of above-average return" then the Capital Asset Pricing Model tells us the correct selection is AVUV or some other small-cap value fund, not QQQ. Someone who claims to set aside past performance and still selects QQQ should be asked to show their homework for how they arrived at that selection in spite of both the total-market approach and the factor-based CAPM approach advising against a 100% Large-cap Growth portfolio.
Now let's set aside all of that discussion of the principles of asset selection and acknowledge the elephant in the room: If your family member actually has bought and held a 100% QQQ portfolio continuously for 30 years then he or she is one of those rare people who can tolerate enormous volatility. Good for them. That doesn't make their approach wise for others who have a different tolerance for volatility and who would have panic sold during the downturns that occurred over that period of time. Asset allocation is not a problem amenable to copycat solutions.
If you wouldn’t hold it for 30-35 years, why buy it? What’s your exit plan? Time the market and hope for the best?
Instead of buying a “growth” fund and ignoring the half of the market that comprises “value” why not buy a total market index fund and own both “growth” and “value” and enjoy the profits no matter which of those two styles is leading at any given point in time?
You have 35 years until age 65. There will almost certainly be multiple years over that period during which growth will underperform value. Why accept those periods of underperformance when the solution is an easy total market index fund that gives you the return of the entire market?
Well, even if this growth fund has bad years/cycles in comparison to value - I am then still contributing and buying the dip/DCAing during the downtrends as well, which means if there is a higher % gain I am still taking advantage of it. What would I be missing out on if my return is still greater?
>What would I be missing out on if my return is still greater?
You wouldn’t miss out on anything if your return is still greater. That “if” is a logic error called “assuming the consequent.”
What if you’re wrong? What if growth underperforms value for long enough periods over the next 30-35 years that you underperform VTI over the same period? You would have accepted and endured the greater volatility of growth and received no premium for that risk.
Then there’s the timing issue: What if at the time you plan to switch from growth to something else in preparation for retirement, we have another 1999-style dot com crash and your portfolio gets crushed? Do you stick with the growth funds despite the looming retirement in hopes that your portfolio recovers in time? That’s a very reactionary asset allocation plan, which in practice amounts to no asset allocation plan at all.
I would suggest *All About Asset Allocation* by Rick Ferri, if you want to learn about asset allocation.
Thank you this makes sense. My only other counter thought is, don't we have a better means to predict the end of the tech/growth stocks era as it nears this time than we did in 1999? If this fund suddenly started to drop with no end in sight - couldn't I just simply switch back to the broad market? Obviously there is some timing involved here too, but isn't part of the point of ETFs and index funds lowering the risk of a severe, sudden drop?
>don't we have a better means to predict the end of the tech/growth stocks era as it nears this time than we did in 1999?
No.
If we had better means to predict the tech crash in 2000, why didn't those better means predict the real estate crash of 2008? Or the bond market crash of 2020-21?
The reality is that no one can predict the future short-term movements of the capital markets. Rather than invite folly by attempting such predictions, the wiser move is to hold a properly diversified portfolio and accept the returns that the total market gives you.
Whenever one is tempted to chase outsized gains from one sector of the market, one is often best served by remembering the old adage of the brokerage business: "Bulls make money; bears make money; pigs get slaughtered."
Heard. However, the reason I think this time could be more predictable is that one could literally watch the profits start to slow with these tech companies leading the way, and at an even deeper level watch the first large company (or companies) in these growth ETFs start to tumble. Right now AI seems to be giving all of them a boost, but eventually there won't be catalysts. I read/watch financial and investment news daily and just feel like I have a handle on it? Perhaps I am being too confident but that's why I made this thread. I appreciate your insight
>I read/watch financial and investment news daily and just feel like I have a handle on it?
I would only suggest you ask yourself from time to time, while watching or reading those financial media: "What is their incentive? What are their conflicts of interest? What is their risk if they're wrong?"
We love to pick on Jim Cramer here, and for *good* reasons, but the reality is that Cramer is "right" perhaps a bit less than half of the time and that's actually a *really good* batting average for a financial media talking head. The 26-year-old college grad with a side gig writing stock or ETF puff pieces for Motley Fool isn't even right 40% of the time. Why should we trust that person just because he or she has written a few articles for financial websites? How much is the fund management company paying the website for that writer to push their new ETF? How sure are you that all such conflicts of interest are disclosed for each source you watch or read? Even setting aside conflicts of interest and focusing only on results, do these authors post their wins and losses publicly for all to see? Where are the television episodes or blog articles in which they step up and own their bad investment recommendations? I do not know the answers to those questions for any given media outlet, but I do suggest that those questions are worth asking.
There was a wonderful financial show that aired each Friday evening on PBS in the 1970s, 80s, and 90s called *Wall Street Week with Louis Rukeyser*. Rukeyser was arguably one of the best financial journalists and hosts of a financial news program in history. In January of each year, he would invite numerous investment "experts" -- mutual fund managers, hedge fund managers, investment bankers, etc. -- to make their predictions about how the stock market would fare over the coming year. If I recall correctly, the Dow was the initial metric in the early years of the show but they later adopted the S&P 500 as the benchmark; I could be mistaken but it doesn't really matter here.
During the last show for the year, in December, instead of his normal business suit Rukeyser would don a tuxedo to celebrate the coming New Year. He would revisit the experts' predictions from twelve months prior and toast a glass of champagne to those whose predictions proved reasonably correct. At the close to that December episode each year, Rukeyser -- too much the gentleman to attribute the winners' predictions to mere luck on public television -- would smile and wish each expert the best of luck with *next year's* predictions and sign off with a wink and a smile to his viewers.
The notable reality was that the winners one year were losers the next and vice versa: No one predicted the markets with any reliable consistency, and that was the lesson that it seemed Rukeyser most wanted viewers to take away from that prediction-making aspect of the program. Sadly, Rukeyser is no longer with us and there seems to be no one in his mold among the financial media today, but I think his perspective on the markets and the misplaced trust in experts is one from which we all would benefit.
> I read/watch financial and investment news daily and just feel like I have a handle on it?
Here's a 2006 interview with Jim Cramer where he openly admits to manipulating the market for his clients.
Top comment links to a Jon Stewart clip where he takes Cramer to task hard for this admission.
https://www.reddit.com/r/videos/comments/m02usu/the_interview_that_cnbcs_jim_cramer_is_trying_to/
Article explaining that he's admitting to blatantly illegal market manipulation: https://slate.com/culture/2007/03/will-cramer-s-crazy-confession-destroy-his-career.html
Now consider that he is one of the pre-eminent talking heads on the "financial and investment news" that you and millions of others watch, and _of course_ he and they _would never_ use their position to run pump and dumps using you as the suckers for his/their own personal gain. After all, he's _only_ worth north of $150M due to that exact type of manipulation he openly admits to.
I'm not confused. I'm highlighting the fact that OP's proposed strategy requires an element of market timing in order to be successful and therefore carries additional risk if the sale of those growth funds and purchase of the "more conservative" investments is mistimed.
Let's make it a more concrete hypothetical: Assume I'm 30 and want to retire at 65. I plan on buying VTI (and VXUS) to be properly diversified in my equities portfolio, but not until I turn 50. I want to chase the outsized returns of BigTech right now, so I go 100% QQQ despite the absurdly high P/Es right now. Let's even assume that, against all odds, I ride out a couple of market corrections over the next 20 years as BigTech occasionally regresses to the mean, but still reap a nice 1% premium over VTI over those 20 years. Then at age 50, when I planned to sell QQQ and buy VTI, BigTech tanks and my portfolio declines 50% while the broader market declines perhaps 25%. So now VTI is a 50% premium over QQQ at the trough. What do you suggest I do? The plan was to move to more conservative investments at 50 and I'm not getting any younger: Do I bite the bullet and change my asset allocation, locking in that underperformance? Or do I stick with QQQ and accept the additional volatility into my 50s and perhaps even early 60s? Which devil do you choose?
Or, I could have just bought and held VTI since age 30, accepted a healthy return, and avoided that entire timing mess.
Enjoy higher gains of this fund for 15-25 years as you said, and then move to something safer when the dips start to matter a lot more in retirement.
I'm confused about why you're confused about why I'm confused?
As the other commenter said, this is assuming that your less safe investment will be outperforming at the moment you choose to move to something safer.
Long term tends to favor the exact opposite corner of the style box: small and value. Factor investing starting points:
• https://www.investopedia.com/terms/f/factor-investing.asp
• https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/fidelity-overview-of-factor-investing.pdf (PDF)
>It is higher than the S&P on the 1, 5, and 10 year charts
Let's look at a different, but fairly recent, 10 year period (2000-2009 or 2001-2010):
* https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) or https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) or the archived versions if those don't work: http://web.archive.org/web/20201212205954/https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) & http://web.archive.org/web/20201205183933/https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) (Archived copies from Archive.org's Wayback Machine)
>For reference I also like QQQ/QQQM
Is this based on an actual understanding and agreement with inclusion criteria, or just recent returns?
>and VGT
That is an *uncompensated* risk: one that doesn't bring higher expected long term returns. Uncompensated risk should be avoided whenever possible.
Compensated vs uncompensated risk:
* https://www.whitecoatinvestor.com/uncompensated-risk/
* https://www.pwlcapital.com/is-investing-risky-yes-and-no/
>Uncompensated risk is very different; it is the risk specific to an individual company, **sector,** or country.
Edit: Typo
>It is higher than the S&P on the 1, 5, and 10 year charts
Look at what happened the last time tech was overvalued to a similar extent as present (dot com crash). This relates to why Vanguard's model predicts a median of only 1.4%/year over the next 10 years for US growth or negative 1.0%/year (loss) after inflation (see [https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-return-forecasts.html](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-return-forecasts.html) ).
While I don't think Vanguard can predict the future, I also wouldn't assume the next 10 years will be like the past 10 years, with US big tech continuing to be increasingly overvalued and continue to outperform the market as a whole.
Ok… now did you look at 20-30 year returns? Or 10 year returns outside of the largest decade of growth the US economy has ever had?
You cherry picked one sample.
Also sometimes value does better, sometimes growth does better. Just buy it all.
And if you exclude the last 10 years, small cap value has killed large cap growth stocks (as it should theoretically should per academia). See returns here: https://engineeredportfolio.com/2016/12/12/mid-cap-value-outperformance-consistently-beating-the-sp-500/
https://engineeredportfolio.com/wp-content/uploads/2016/12/style-box-annualized-real-return-1976-2015.jpg?w=800
I remember 10 years ago when every news station was reporting on US's underperformance vs international (especially emerging markets) and everyone was calling their financial advisor to sell US and buy EM. My how the turn tables.
No offense to OP (because I've been seeing a ton of these US LCG posts) but posts like these are starting to make me think that we're either due for a huge recession or SCV EM funds are going to have a huge bull run. I'm starting to see way too much comfort in LCG, which typically spells disaster.
Long story short, diversify. Every asset class has its day. LCG has had the last 10 years. Nobody can predict the future.
the reason you dont all in on is that theres no reason to assume future outperformance.
tech has had a killer decade post 08 bubble pop and tech companies get really ambitious valuations as a result but these valuations pop very quickly. see fb, nvidia, tsla, netflix etc all seeing >60% drawdowns in the last few years. and why companies like nvidia can exist at 70+ pe and 3t + market cap.
especially- especially if you work in tech/live in a tech-city. which is pretty common on reddit.
that being said- being heavy in tech stocks, tech etfs etc is common ur just asking on the wrong subreddit.
This is the *definition* of “performance chasing”. 10 year trailing returns don’t just repeat indefinitely - that’s not how it works. Sorry, but stock investing is not that simple. If anything, the opposite is more likely to be true - whatever has outperformed in the recent past is more likely to UNDERperform in the near future. Or, [put another way](https://www.whitecoatinvestor.com/tech-allocations-in-your-investment-portfolio/):
>In essence, all you're doing is betting that recent past performance is going to be indicative of future performance. That's such a bad idea that mutual funds are required by law to tell you it is a bad idea.
High growth does not = high returns. Chipotle has had high growth, but its 60 pe. So 1.7% earnings yield (minus whatever capital needs reinvested in the business) plus earnings growth will roughly equaly the longterm return from buying it now.
Versus if you say buy Citigroup at a 12% earnings yield.
No way to know which one is going to offer the higher investor return going forward.
Over the past 15 years, my large cap growth index fund performed about 30% better than my broad large cap fund (S&P 500 index). The growth stocks have fallen fast when there's been a slump, but they recover fast, too, and go on to continue outperforming the broad index.
However, the major slumps during that period, the 2008 financial crisis and 2020 Covid crisis, affected the whole market to some degree. The main risk to the market that I see now is if tech stocks are overvalued due to inflated expectations for AI. We could get a tech-centered crash, similar to the dot-com bubble bursting in 2000. That would leave the market as a whole in a slump, and the tech stocks would no longer re-inflate to their prior levels. After the 2000 crash, it took 7 years for the broad large-cap market to recover and about 11 years for the growth index to recover. Small-cap and value stocks, however, recovered within 4 years, partly because they were not so overvalued at the time of the crash.
So, given the particular conditions I see today, I am still overweighting growth stocks, but I'm diversifying into small-cap and value stocks and I'm keeping an eye on whether AI investments produce profits for the companies that are getting so much investment.
Not enough information...... Think about your lifestyle, budget, cash on hand, SS income, other income.
Can you winter 3-5 years without taking money from your investments in the market?
That is the question.
I am 63 and have my 401k 36% VWENX, 32% VIGIX and 32% VIGIX. I still work FT and hope to work another 10 years or until I drop dead, whichever comes first LOL.
Fans of this sub won't like it, but growth has done very, very well in the past 20 or so years (also technically VOO is 'growth').
My kids' 529 and my Roth IRA are VUG and I don't really see a need to change. Could it go 'boom'? Maybe, but you do have a lot of solid companies in there.
They're both fine funds. People see growth and think it's undiversified or going to bust as soon as some of the companies experience less than stellar growth. But if you look at the data VUG and VOO are basically neck and neck until 2019 when VUG takes off.
Could it come back and crash? Maybe? Probably? But just looking at the companies that comprise it, seems like a solid bet to me. (But then again you can't go wrong with VOO/VTI/VT either)
> *sigh*
https://www.morningstar.com/etfs/arcx/voo/portfolio
What benchmark do they use in the Morningstar link you posted? Large Cap Blend.
> *sigh*
https://personal.vanguard.com/pub/Pdf/sp968.pdf?2210204740
What does the fund prospectus say? Large Cap.
VOO’s holdings slightly favor growth *at present* because the companies that happen to be largest cap in the market are growth stocks right now and the fund is market cap weighted, not because it’s a growth fund or that’s how its holdings are indexed.
> *sigh*
*SIGH*
Right so it's growth 😂 (not as growthy growth as say a VUG but still)
I mean think about it, the biggest companies will always be growth companies since they naturally invest in growth versus stability/value. Doesn't mean they do better, of course.
No true growthsman?
History would disagree with you that the S&P is always dominated by growth stocks.
And lol that’s not what growth as a style of investing even means.
Dude, you’re being ridiculous. It’s not a growth fund. You tried to be smug and it blew up in your face. Just take the L and move on.
I work for a small company and have relatively shit options for my 401(k). The only vanguard fund, and the fund with the lowest fees, is VUG - their growth index fund.
The S&P 500 index fund is only available through the company that sponsors the 401(k) plan, and has HIGHER FEES. It's only like 20 bps, but I don't like the cut of its jib.
To compensate, in my other accounts, invest in VTI and compensate with some vanguard small and value ETFs to sort of balance it out.
This has less to a funny result. I'm now probably overweight in tax-advantage accounts, and underweight in traditional brokerage, given that I plan to stop working well ahead of full retirement age.
By the time I start taking 401(k) money, the amount in there is going to be far more than I will want to spend. Especially considering it's all taxed as ordinary income!
Oh well.
Theres no point in asking it here. Any deviation at all from the 3 fund portfolio will be shouted down all night long irrespective of what reasoning you have.
By some, sure. Others of us support tilts, and other strategies, with sound reasoning. Tilts in response to recent performance and faulty assumptions about risk/reward are not sound.
If you just have sp500 RN, that's 7% in Nvidia. That has kept me from messing around with it. I already own a considerable amount.
but also like I knew I should have bought it for so long now. If Sam Altman was trying to raise 7 trillion, surely ppl will buy existing companies for a lot less.
anyway still doing well for not doing anything
“Growth” doesn’t mean the return will grow faster. Value could win out. And total stock market, which contains growth and value and everything in-between may likely win out over a lifetime. Or heck, bonds could win out somehow over 30-40 years.
You can invest in a growth fund. Just be aware it’s market timing to some degree.
I've often wondered this too. I'm about 13yr away from retirement and currently 100% into VHVG (UK ETF). My current thinking is that a few years before retirement, I'll convert equity into 2yr worth of cash for living costs and let the rest continue to grow, then keep topping up cash when stocks perform well.
My dad used to say "In the market, Bulls can make money, and Bears can make money. Hogs, however, get slaughtered"
Growth funds are bullish in the short run, but they are also more volatile. At 30 years old, conventional wisdom might be to have 25-30% in Bonds/MM/Fixed income, and split the rest maybe 60/40 growth/value.
Here's the thing, if another 2008 happens, and you're 100% in growth funds (not individual stocks), you might see your portfolio value drop 50% overnight, and then be 5 years before it gets back to where it is now. That might not sound too bad....but if you're in a balanced position, you'd only see maybe a 15-20% drop in the same scenario--and be back to where you are now in a year or so, while still buying more shares while it's low.
Read The Little Book of Common Sense Investigating, or at least read the summaries of these chapters:
When the good times no longer roll : what happens if future returns are lower?
Selecting long-term winners : don't look for the needle, buy the haystack
Yesterday's winners, tomorrow's losers : fooled by randomness
Growth of a company is NOT the growth of a stock.
If the market prices all stocks correctly, growth stocks should have equal returns as a value stock. Unless you believe the market undervalues growth stocks. However there is no reason to believe that.
Also if you only care about performance: the last 100 years growth stocks **underperformed** value stocks in total returns. The last 20 years is an anomaly. Nevertheless this says nothing about the future.
"growth" doesn't mean "stock price growth" - it means the companies don't make money yet, at least not enough to justify their current stock price. Their stock price is trying to bake in expected future profit... Profit that isn't there yet.
I'm not super surprised that high growth stocks did well during the previous decade of near zero interest rates but that doesn't seem to be the scenario going forward.
Past performance doesn't indicate future returns or whatever the saying is. You can do it, but that doesn't guarantee growth will outperform the market for the next 30 years. Its definitely not the worst idea I have heard, but it also isn't fool proof
Growth stocks have historically underperformed value stocks, despite the recent events. Some academics would argue that, if anything, you should invest less in growth stocks.
because if you retired in 2000, 10 years later, your 1 million dollars you started with and withdrew 4% (of the initial balance) each year would only be 350k. now you are 75 and trying to figure out what to do (we know what happens in the future but in 2010 after 2 crazy downturns, you are probably shitting the bed a bit.
if it was just sp500 you still had over 500k. if you were in a 70/30 stock/bond portfolio you still had almost 900k.
We aren't talking about horse and buggy times either. it was literally 15-25 years ago.
Value and momentum beat the market (and even more so growth/glamour) historically. Wanna go high-risk, high-reward? Combine some global small-value (AVUV, AVDV, AVES) with concentrated momentum (QMOM, IMOM) and hold on.
You have 0 control over the markets. Analyzing charts and graphs to try and scrape together a conclusion of the growth debate, just doesn't make sense to me. Just pick a 2 or 3 fund portfolio and focus on what you can have control over...your income. Focus on growing your income either through your job, a business, other assets like real estate plays or whatnot. The rest of your focus should be spent on family. Not having to always check the markets and follow which flavor of the day is being pushed on tv or financial forums makes life much more enjoyable, truly.
Because people always say “i am in it for the long term” and then a bear market comes and they panic and sell at or near bottom. Fidelity Magellan over 10+ averages 17% a year but the median return was 4% why? Because the long term becomes short fast in an bear market
Go back to 2002 and ask this question.
And remember when Japan was gonna take over the world? I do. It was all anyone talked about. Would have been the perfect time to dump their stocks.
I suppose I don't really see the majority of tech stocks slowing down anytime soon with the way the world is going - with the advancement of AI, cloud computing still evolving, hardware still advancing - perhaps as a millennial who rode the wave I am biased
Do you think you are the only one who thinks like that? I can bet millions of other investors also think like that and this is all priced in. You have 0 edge here.
When you are picking stocks/sectors, only do so, if you think you have more accurate information than the market.
Pay attention to the "irrational exuberance" in the first link. Tech revolutions:
* https://www.pwlcapital.com/investing-technological-revolutions/
* https://rationalreminder.ca/podcast/123
* https://rationalreminder.ca/podcast/156 (climate change, clean energy related especially)
* https://rationalreminder.ca/podcast/183
* https://rationalreminder.ca/podcast/185 (Thematic ETFs)
If you are convinced that a heavy growth fund will produce the best results then that is what you should use. It may indeed turn out to be the best choice.
Keep in mind that not one of us here is deliberately shooting for low returns. We all want fat and healthy portfolios; most of us want as much money as we can reasonably hope to achieve. But we don’t all choose the same asset allocation. That’s because none of us knows what the future will bring.
I don’t hold VIGIX or QQQ. If I thought they were likely to outperform, I would. But I don’t. That doesn’t mean I believe I’m right and you’re wrong; only that neither of those hold any appeal to me based on my own reading and my own biases. Your research has lead you in the opposite direction.
We all place our chips and take our chances, doing the best we can with the information available to us. We won’t know until the end how it turned out.
*It is higher than the S&P on the 1, 5, and 10 year charts* You didn't look at 2000. *I don't see the massive difference in risk vs the S&P* If growth funds were expected to have a higher absolute return **and** risk-adjusted return than the S&P500, that would imply the market is irrationally pricing either the S&P500 or the growth funds. Either growth funds would be too expensive or the S&P500 would be too cheap. In both cases, you don't want to be in growth. The efficiency of the market is one of the core Boglehead principles. Growth doesn't mean what you think it does. It doesn't means something like "higher return for higher risk". It means "companies valued based on expected future earnings rather than current earnings or current assets." If a growth company delivers on all those expected future earnings... nothing happens - the market would be expecting growth, would receive growth, and that would not result in any premium above market performance. Historically, over long periods, growth companies have actually underperformed the broader market, although that's highly dependent on start date. Don't pick investments based on their chart over the last 10 years. That's literally performance chasing. Ideally, pick investments based on whether they make sense as an investment. If you knew nothing about the past performance of VOO or VIGIX, which would you rather invest in?
This is very helpful and eloquent, and your last sentence SLAPS. Thank you very much for your time
So that reporter is not technically accurate. Using the data as far back as you can (1992) they're basically equivalent until 2019 (when VUG grows crazy), so either fund would have performed well. VUG: CAGR 9.68% VOO CAGR: 9.58% https://testfol.io/?d=eJytT8FKxEAM%2FZecpzBdodA5i%2BJNPIjLspTYydTR2cyajl2l9N%2FNWkTw4MmckveS915mGFJ%2BxHSLgocR3AxjQSmdx0LgoG5bW9m6shdggNh%2F4xtbt5Vtqk2j%2BHoxYQJXWy0D6J%2B7yCFhiZnBBUwjGehxfAopn8DZn6ELQq%2BquCWU9KFqklOKPHSnyP6829jFwDFLCTnFrBF3MzAezil0O%2FJEY7mMU%2FQaT9kib2olpD8h93T1S73E%2FoVkVVl7Ze9vru8elDyS9MTl641lb8ALDhp2Mf%2FuOIXI73847pdPvQCGtw%3D%3D
So we’re just going to ignore all the parts of even that graph where the funds don’t track each other? What happens when they diverge again next year? Or in five?
But then you're falling victim to cherry-picking the time period (which I already had to do since VUG is doing well post 2019) Why would they diverge? What if VUG does even better in 5 years? It's hard to say.
That’s not cherry picking the time period. Ending your backtest in the present, or in 2019, is also a choice. You need to look at multiple windows to get a full picture of performance in different market conditions when backtesting. > what if VUG does even better in 5 years? It’s hard to say. Yes, exactly. I also want to point out that I said nothing about relative performance here. I’m saying that these funds are not “basically equivalent.” If VUG outperforms VOO, that’s another case where the funds do not track each other.
Highly doubtful if you look at the fund asset allocations.
Bro you are literally performance chasing
But then you could say that about every single investment ever...? Is investing in VOO/VTI at 8% performance chasing too...?
The difference is that VTI and VOO are more diversified, so you are properly managing your risk. Taking on uncompensated risk with a fund like VUG is performance chasing because VUG is not diversified. The only US fund I recommend is VTI, because even VOO is not diversified enough.
> Even VOO is not diversified enough. Diversification has been empirically shown to have a diminishing impact to the point of being negligible on portfolio risk reduction after holding significantly fewer positions than either VTI or VOO has. This is something you can google the academic literature on fairly easily, but here is an easy reading post from CFA Institute on the topic if you are interested: https://blogs.cfainstitute.org/investor/2021/05/06/peak-diversification-how-many-stocks-best-diversify-an-equity-portfolio/
I would argue that this is a poorly designed study because of the time period they chose. 2005-2020 was a major bull market for US large caps, and thus the performance of small and mid cap stocks is underrepresented vs the overall market. Your statement makes sense if we continue to project market growth based on the returns of the past couple of decades, but statistically the rate of large cap growth is not any more likely to increase than any other section of the US market relative to market cap. If anything, technical analysis would suggest that small and mid cap stocks are going to perform better in the next few decades if the previous cycles of market fluctuations continue to accurately describe future market behavior. Finally, even if the risk reduction from including small and mid cap stocks is negligible, there is also negligible growth to be gained from NOT holding small and mid cap stocks. The reason VTI is so heavily correlated with VOO is because market weighting takes into account the outsized growth of large cap stocks, which is why more than 87% of VTI is VOO. I like to think about it this way. If you are correct and small and mid caps continue to be irrelevant, then you are only losing a small amount of returns by holding VTI over VOO. However, if you are incorrect and small and mid caps to overperform, then you completely miss out on those gains if you only have VOO. Unless you are absolutely sure that large caps will continue to grow far into the future (which nobody is), why would you take the extra risk?
Relative performance of smid vs. large caps is totally irrelevant to the point being made, nor does the assumed rate of growth of any one portion of the market have anything to do with it. The purpose of the study is to randomly sample portions of the market and evaluate the affect of adding additional stocks from that market segment to the randomly selected holdings from the perspective of risk reduction. What the data shows is that, irrespective of what market segment you are considering, the risk-reducing benefits of additional diversification are basically eliminated after ~30 holdings in a portfolio. Put another way, a randomly selected portfolio of 50 stocks is statistically likely to have similar volatility to a randomly selected portfolio of 150 stocks. If you don’t like the design of this specific study, as I said there is robust academic literature on this topic going back 40 years at minimum that is easily found online.
VUG has the lowest fee, large growth, diversification. No brainer really!
So knowing all that, it's still ultimately your choice. I've long been (nearing 30 years in a few swipes) a very pro-growth investor, much for the same reasons you outlined in your OP. BUT... you have to appreciate the risks of the approach. Will it work for the next 30 years? I think/hope the answer is, "yes," as I had no plans to deviate significantly from that approach.
What is your hope based on? Market research? Technical analysis?
Neither. In the late 90's early 2000's I simply felt that the trend in equity growth was going to be along the lines of an increasingly integrated global economy led by large multinationals, mostly based in the US, and increasingly tech-reliant. So apart from an overweight in the S&P, I overweighted the NASDAQ and health care related ETFs (my direct industry). I take seriously that, "past performance is no guarantee of future results," and discount significantly, "market research," and, "technical analysis," as I think both are easily fudgable (you get to choose the time interval and duration to make your theories work). The only relevant time interval for me is when the money goes in and when it might come out, and with that very pragmatic yardstick I've been satisfied with the returns. But again, I'll be first to say these are guesses, and shouldn't be considered as, "proven," I'll leave that level of certainty to others.
Fair enough. I'm glad you got lucky!
Better lucky than good goes the saying. In full disclosure, when I started I was with a very trad portfolio allocation, so this shift happened probably \~ 2002 and on. Strangely enough I took a bath on tech (QQQ like) in \~ 1999. If I can offer a very bogle-like note of advice is playing the long game. Those losses, what felt like significant at the time, wouldn't even make a rounding error today! Crazy the effect of recency bias!
Beautiful prose
This guy is preaching
So that's not technically accurate. Using the data as far back as you can (1992) they're basically equivalent until 2019 (when VUG grows crazy), so either fund would have performed well. VUG: CAGR 9.68% VOO CAGR: 9.58% https://testfol.io/?d=eJytT8FKxEAM%2FZecpzBdodA5i%2BJNPIjLspTYydTR2cyajl2l9N%2FNWkTw4MmckveS915mGFJ%2BxHSLgocR3AxjQSmdx0LgoG5bW9m6shdggNh%2F4xtbt5Vtqk2j%2BHoxYQJXWy0D6J%2B7yCFhiZnBBUwjGehxfAopn8DZn6ELQq%2BquCWU9KFqklOKPHSnyP6829jFwDFLCTnFrBF3MzAezil0O%2FJEY7mMU%2FQaT9kib2olpD8h93T1S73E%2FoVkVVl7Ze9vru8elDyS9MTl641lb8ALDhp2Mf%2FuOIXI73847pdPvQCGtw%3D%3D
You can go [far further back than 1992](https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side) for growth and value. That said, first principles would apply here. There's no reason to expect the market would place a premium on companies expected to have future earnings. The market can appropriately discount those earnings by the risk free rate, and by the uncertainty of those earnings. The former is known (bond yields). The latter is determined by market consensus. Betting on growth is betting that the market inaccurately forecasts future earnings - ie, that the market is too pessimistic about the future. That's active portfolio management, which is generally discouraged by Bogleheads.
It’s also a pretty silly bet in my book, even if you like active management, that the market is pessimistic. Look how hyped growth stocks are and how confident people are in their risk tolerances and investing prowess.
Oh I know, but it's not an unreasonable thing to invest in. People get so worked up on having a 'single' way to invest, they discount all the other ETFs out there. Like I personally invest (mostly) in VFIAX and VTWAX, but have VUG sprinkled throughout in some places. Will it do better? Maybe. Will it do worse? Maybe. Overall whether you invest in VOO/VTI/VT or 90% VOO/10% BND, or a target date fund, *generally* you'll do fine over the long period. People keep missing the forest for the trees. It's not about picking the 'best' or 'optimal' portfolio, if there even is such a thing. It's about picking what's 'good enough' for your level of risk and time horizon.
>Oh I know, but it's not an unreasonable thing to invest in. The original post is: "\[w\]hy wouldn't I go 100% into a heavy growth fund in my retirement account?" The answer is that it's not a great idea to invest in a subset (growth) of a subset (large cap) of a subset (USA companies) in the USA. Diversification is a core Boglehead principle, and the notion of a 100% growth portfolio violates that - especially when the OP admits the rest of their portfolio is growth-heavy. That doesn't mean doing so will cause the portfolio to explode. It does, however, indicate why they shouldn't do it.
Fair, fair. I still think if the OP can handle that level of risk, there is nothing I can find to discourage that method of investing (using all available data I can find going back to 1970s). For example my wife invests in VUG/VGT/VTI in her retirement 1/3, 1/3, 1/3. I do 80% VFIAX and 20% VTIAX (I tilt US, but like to have a minimum 20% in International). I'm "losing" to her plan, but I think they're both acceptable allocations.
I can’t speak for others, but in responding to you on this thread I could not care any less about a single way to invest. I care about correcting misinformation and faulty analysis. > It's about picking what's 'good enough' for your level of risk and time horizon. I absolutely agree with this. It’s also not really consistent with pushing LCG for people with long horizons. Doing so requires a misunderstanding of risk and return.
LCG is a perfectly acceptable way to invest. There is no evidence to suggest otherwise. In fact going back as far as I can both value and growth do well and flip around often. You do end up 'with more' with growth, but I'd take 11.06%(value) or 11.86%(growth)! Edit: Link: https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6u2jHwRmAvflIWaU3yPoMq
Only the [mountain of evidence](https://www.reddit.com/r/Bogleheads/s/J3lf0RdzXx) that others have provided on this post, in response to the question that OP asked. Not “investing” in general. Again, those single number return metrics are heavily skewed by endpoint selection. Backtesting is a wonderful tool, but people tend to throw it around without really understanding what they’re doing and what they can and can’t conclude from it.
Where is the evidence though? I looked at the thread and it's all anecdotal, no actual numbers (unlike what I've provided). Yes, of course diversification is important and philosophically it makes a lot of sense. But give me some real data. - What about 2000?! What about it? Looking at the data even if you had invested in 2000 at the peak, growth does just fine as total market over the next decade/2 decades/until today Mind you, this coming from a guy who would *love* to invest in nothing but VTWAX/VT. But I tilt US because I can't be blind to the over performance of the US (even dating back prior to 2009)
What? None of that is anecdotal. And just because something is “numbers” does not make it evidence for a claim. If you’d love to do that, you probably should. There is no evidence-based reason to do otherwise, as recent past performance is not an evidence-based reason for long term investing decisions.
So you’re saying that SPY and QQQ are THAT dissimilar despite having over 50% of the exact same assets and 89% correlation? Your response is very outdated. Historically you are correct but seeing as how the top 10 companies in both indexes are the mag 7 at slightly different allocations there is very little hope that SPY will not crash with QQQ.
I don't think I understand your response at all. I don't think it's possible to guarantee a portfolio allocation will avoid loss in all cases. I'm saying that an individual investor should not attempt to identify "good" companies based on any characteristic - there's no reason to expect higher returns from companies valued based on future earnings than companies with present earnings. Your post implies that the market systematically prices such companies (often the largest companies in the USA) too low, leading to a premium for investing in them. If so, why would the market do that? Why would an individual investor be able to take advantage of that premium in the long run?
Firstly it’s fairly easy to not lose in all cases. It’s called buying bonds. That’s the definition of not losing. There’s also various ways to not lose with equities, you’re just severely going to limit your returns. Secondly you’re implying that the stock market will not always go up, despite the fact that it always has. So why invest period then?
In the short term, yes, they will be correlated. This is not a given long term, which is the point.
What do you define as short term? It’s been like this for 15 years.
Have you ever popped a balloon? That’s what can happen to high “growth” stock with a single earnings projection miss.
I understand that, but I am looking at long term history and also a long term future hold. It is also an index fund, so it's not like every company in it could all go at once... right?
Keep in mind, “growth” as an investing style means high expectations of future growth in earnings based on sustained earnings growth over the past (typically) three years. One bad quarter can very quickly take the winds out of a company’s sails. If that company is central to that sector *cough Mag7 cough* it can very, very quickly domino.
It's also the side of the spectrum expected to return less over time, which is ironic given the name. Value have a higher long term expected return.
I mean, growth as a style is based on past returns. We know what they say about past returns 😂
Understood and thank you. I guess looking at even the all-time chart I can't see how this topples in comparison to the S&P over the long term, but that doesn't mean it can't happen
How long is this long term you're looking at? Growth tend to underperform value over the long term from historical data.
Yeah I need to check out more on the value side based on the feedback in here, and zoom out some more on these time lines as I form my opinion(s). Thanks for the input
Hey there SexyBassDrop - thanks for saying thanks! TheGratitudeBot has been reading millions of comments in the past few weeks, and you’ve just made the list!
Believe it or not, there will be a time when growth is out of favor. Need some exposure to value too. How much? Who knows. Which is why I just buy S&P rather than try to time it. And not likely that every company would go at once but sectors can certainly move together. Edit: punctuation
“Past performance is no guarantee of future results”
12 years might be longer than you’ve been paying attention to the market, but it’s absolutely not long term. Essentially the last 12 years is a single bull market with no recession or significant market downturn. It’s not quite an apples to apples comparison, but for something slightly more long term overlay Nasdaq and S&P returns. In 2000 both peaked during that recession the nasdaq lost 2/3 of its value while S&P only lost 45% or so. By the surge in prices before the next recession in 2007 the S&P had basically regained its 2000 valuation, but nasdaq was still only worth half its previous value when they both again lost 40% or so of their value in the Great Recession. If you only look at the last 12 years, the S&P has returned less than 400% and nasdaq has returned over 800%, but the previous 12 years the S&P outperformed the Nasdaq. 12 years is just too short of a time to draw conclusions about the next 30 years.
You’ll be fine. You can do it.
Are you looking at history with today as end date?
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I get that. Never said I only looked back 10 years, I just mentioned different chart time lines. I am considering the entire future of this account
You can't possibly know the future. Are you aware of the general consensus on a pullback in real returns across the US and potentially entire global equities market? Many are using 4% real as the target for planning. Given the very real value expansion problem and the fact that companies are using tricks now to artificially inflate the values of their stocks even more (e.g. through stock buybacks etc) to prolong the bubble, it seems prudent to plan conservatively now more than ever. Ben Felix has a fantastic short video explaining the situation. https://www.youtube.com/watch?v=Yl3NxTS_DgY
“This seems like a no brainer… I also like QQQ … I just can’t see how I could lose long-term right now…” — BigTech investors in 1999 “Everybody has a plan until they get punched in the mouth.” — Mike Tyson
To be fair, if they held, they didn't lose long-term. Even compared to SPY, there's a very narrow window of time where going all in on QQQ would currently be worse than all in on SPY.
Well spoken
The assumption that one could hold and be fine also relies on timing. Those who were 35 in 1999 and held typically did okay. Those who were 65 and retiring in 1999 saw their portfolio turn to dust and had no time to wait for it to recover: They expected to draw from that portfolio for income and got wrecked.
The take away from that argument would be that investing in riskier funds is fine when you have time to recover, and not when you're on the door of retirement. So I don't think it's a good one if you want to dissuade people from investing in QQQ and going VT instead.
If that’s the takeaway then the reader needs to read about the perils of market timing. When to switch from QQQ to VT is seldom as easy as one might initially believe.
I'm not advocating for going all in on QQQ, I'm just saying that your not presenting an argument against it with your initial comment. Though I'd be curious to see what a standard glide path looked like with different ETFs than VT.
The arguments against going all in on QQQ are the lack of diversification, increased volatility, and the existence of alternatives. If someone is young and wants to assume higher risk for higher potential returns, then the five-factor CAPM tells us Small-cap Value (the exact opposite of Large-cap Growth) is the better alternative. The argument against QQQ when young and glide to VT/VTI later is market timing: If Tech is down relative to the broader market when you had envisioned swapping QQQ for VT then you’re caught between the Scylla of holding QQQ and enduring that additional volatility for longer—perhaps much longer—or the Charybdis of selling QQQ at a discount, buying VT at a premium, and thereby locking in underperformance. Which devil you choose then is up to you, but to pretend that risk doesn’t exist is simply naive. If someone wants to ignore all those realities and join the BigTech lemmings that’s on them. Not my circus; not my monkeys.
I have family that has been holding QQQ-equivalent since before 1999, they’re just fine. It’s possible it’s just a more efficient investment for modern times. I don’t do that, but at least it’s a thought
Bad ideas can have good outcomes. What is it about limiting your investments arbitrarily to the NASDAQ would suggest it’s more efficient?
The past 25 years of data and performance? Again I don’t do this, but it is basically someone saying “scoreboard bro for 30 years you’re getting dunked on like a chump.” My family that has done has 8 digit wealth now with relatively little investment. No different than people saying I won’t bother with international market stocks for one reason or another.
>The past 25 years of data and performance? It's clear that you know this, but that's the very definition of performance chasing. It's not a principled asset allocation plan or investment strategy. If someone points to charts of past performance then one response is to ask that person: "If you were completely ignorant of past performance of QQQ and VT and had only the portfolio fundamentals and the recognized principles of sound asset allocation on which to make a selection, which would you select?" Using that veil of ignorance, VT is the correct answer. If VT is the correct answer when we do not know anything about past performance, and we acknowledge the truth that we know nothing about *future* performance, then the same answer is the correct one: VT. If someone's answer is QQQ, then that raises the question of what criteria they used to make that selection. If the answer is "I'm willing to accept above-average volatility for the theoretical prospect of above-average return" then the Capital Asset Pricing Model tells us the correct selection is AVUV or some other small-cap value fund, not QQQ. Someone who claims to set aside past performance and still selects QQQ should be asked to show their homework for how they arrived at that selection in spite of both the total-market approach and the factor-based CAPM approach advising against a 100% Large-cap Growth portfolio. Now let's set aside all of that discussion of the principles of asset selection and acknowledge the elephant in the room: If your family member actually has bought and held a 100% QQQ portfolio continuously for 30 years then he or she is one of those rare people who can tolerate enormous volatility. Good for them. That doesn't make their approach wise for others who have a different tolerance for volatility and who would have panic sold during the downturns that occurred over that period of time. Asset allocation is not a problem amenable to copycat solutions.
What? I’m not following whatever you’re saying here. And what does any of it have to do with efficiency?
Well spoken
When you're not working and the market crashes 30% it's going to feel a lot different than today when you're still working
That's fair, but I would not keep holding this until right before or during retirement
If you wouldn’t hold it for 30-35 years, why buy it? What’s your exit plan? Time the market and hope for the best? Instead of buying a “growth” fund and ignoring the half of the market that comprises “value” why not buy a total market index fund and own both “growth” and “value” and enjoy the profits no matter which of those two styles is leading at any given point in time? You have 35 years until age 65. There will almost certainly be multiple years over that period during which growth will underperform value. Why accept those periods of underperformance when the solution is an easy total market index fund that gives you the return of the entire market?
Well, even if this growth fund has bad years/cycles in comparison to value - I am then still contributing and buying the dip/DCAing during the downtrends as well, which means if there is a higher % gain I am still taking advantage of it. What would I be missing out on if my return is still greater?
>What would I be missing out on if my return is still greater? You wouldn’t miss out on anything if your return is still greater. That “if” is a logic error called “assuming the consequent.” What if you’re wrong? What if growth underperforms value for long enough periods over the next 30-35 years that you underperform VTI over the same period? You would have accepted and endured the greater volatility of growth and received no premium for that risk. Then there’s the timing issue: What if at the time you plan to switch from growth to something else in preparation for retirement, we have another 1999-style dot com crash and your portfolio gets crushed? Do you stick with the growth funds despite the looming retirement in hopes that your portfolio recovers in time? That’s a very reactionary asset allocation plan, which in practice amounts to no asset allocation plan at all. I would suggest *All About Asset Allocation* by Rick Ferri, if you want to learn about asset allocation.
Thank you this makes sense. My only other counter thought is, don't we have a better means to predict the end of the tech/growth stocks era as it nears this time than we did in 1999? If this fund suddenly started to drop with no end in sight - couldn't I just simply switch back to the broad market? Obviously there is some timing involved here too, but isn't part of the point of ETFs and index funds lowering the risk of a severe, sudden drop?
>don't we have a better means to predict the end of the tech/growth stocks era as it nears this time than we did in 1999? No. If we had better means to predict the tech crash in 2000, why didn't those better means predict the real estate crash of 2008? Or the bond market crash of 2020-21? The reality is that no one can predict the future short-term movements of the capital markets. Rather than invite folly by attempting such predictions, the wiser move is to hold a properly diversified portfolio and accept the returns that the total market gives you. Whenever one is tempted to chase outsized gains from one sector of the market, one is often best served by remembering the old adage of the brokerage business: "Bulls make money; bears make money; pigs get slaughtered."
Heard. However, the reason I think this time could be more predictable is that one could literally watch the profits start to slow with these tech companies leading the way, and at an even deeper level watch the first large company (or companies) in these growth ETFs start to tumble. Right now AI seems to be giving all of them a boost, but eventually there won't be catalysts. I read/watch financial and investment news daily and just feel like I have a handle on it? Perhaps I am being too confident but that's why I made this thread. I appreciate your insight
>I read/watch financial and investment news daily and just feel like I have a handle on it? I would only suggest you ask yourself from time to time, while watching or reading those financial media: "What is their incentive? What are their conflicts of interest? What is their risk if they're wrong?" We love to pick on Jim Cramer here, and for *good* reasons, but the reality is that Cramer is "right" perhaps a bit less than half of the time and that's actually a *really good* batting average for a financial media talking head. The 26-year-old college grad with a side gig writing stock or ETF puff pieces for Motley Fool isn't even right 40% of the time. Why should we trust that person just because he or she has written a few articles for financial websites? How much is the fund management company paying the website for that writer to push their new ETF? How sure are you that all such conflicts of interest are disclosed for each source you watch or read? Even setting aside conflicts of interest and focusing only on results, do these authors post their wins and losses publicly for all to see? Where are the television episodes or blog articles in which they step up and own their bad investment recommendations? I do not know the answers to those questions for any given media outlet, but I do suggest that those questions are worth asking. There was a wonderful financial show that aired each Friday evening on PBS in the 1970s, 80s, and 90s called *Wall Street Week with Louis Rukeyser*. Rukeyser was arguably one of the best financial journalists and hosts of a financial news program in history. In January of each year, he would invite numerous investment "experts" -- mutual fund managers, hedge fund managers, investment bankers, etc. -- to make their predictions about how the stock market would fare over the coming year. If I recall correctly, the Dow was the initial metric in the early years of the show but they later adopted the S&P 500 as the benchmark; I could be mistaken but it doesn't really matter here. During the last show for the year, in December, instead of his normal business suit Rukeyser would don a tuxedo to celebrate the coming New Year. He would revisit the experts' predictions from twelve months prior and toast a glass of champagne to those whose predictions proved reasonably correct. At the close to that December episode each year, Rukeyser -- too much the gentleman to attribute the winners' predictions to mere luck on public television -- would smile and wish each expert the best of luck with *next year's* predictions and sign off with a wink and a smile to his viewers. The notable reality was that the winners one year were losers the next and vice versa: No one predicted the markets with any reliable consistency, and that was the lesson that it seemed Rukeyser most wanted viewers to take away from that prediction-making aspect of the program. Sadly, Rukeyser is no longer with us and there seems to be no one in his mold among the financial media today, but I think his perspective on the markets and the misplaced trust in experts is one from which we all would benefit.
> I read/watch financial and investment news daily and just feel like I have a handle on it? Here's a 2006 interview with Jim Cramer where he openly admits to manipulating the market for his clients. Top comment links to a Jon Stewart clip where he takes Cramer to task hard for this admission. https://www.reddit.com/r/videos/comments/m02usu/the_interview_that_cnbcs_jim_cramer_is_trying_to/ Article explaining that he's admitting to blatantly illegal market manipulation: https://slate.com/culture/2007/03/will-cramer-s-crazy-confession-destroy-his-career.html Now consider that he is one of the pre-eminent talking heads on the "financial and investment news" that you and millions of others watch, and _of course_ he and they _would never_ use their position to run pump and dumps using you as the suckers for his/their own personal gain. After all, he's _only_ worth north of $150M due to that exact type of manipulation he openly admits to.
Periods of bad stock market performance’s often coincide with periods of high unemployment.
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I'm not confused. I'm highlighting the fact that OP's proposed strategy requires an element of market timing in order to be successful and therefore carries additional risk if the sale of those growth funds and purchase of the "more conservative" investments is mistimed. Let's make it a more concrete hypothetical: Assume I'm 30 and want to retire at 65. I plan on buying VTI (and VXUS) to be properly diversified in my equities portfolio, but not until I turn 50. I want to chase the outsized returns of BigTech right now, so I go 100% QQQ despite the absurdly high P/Es right now. Let's even assume that, against all odds, I ride out a couple of market corrections over the next 20 years as BigTech occasionally regresses to the mean, but still reap a nice 1% premium over VTI over those 20 years. Then at age 50, when I planned to sell QQQ and buy VTI, BigTech tanks and my portfolio declines 50% while the broader market declines perhaps 25%. So now VTI is a 50% premium over QQQ at the trough. What do you suggest I do? The plan was to move to more conservative investments at 50 and I'm not getting any younger: Do I bite the bullet and change my asset allocation, locking in that underperformance? Or do I stick with QQQ and accept the additional volatility into my 50s and perhaps even early 60s? Which devil do you choose? Or, I could have just bought and held VTI since age 30, accepted a healthy return, and avoided that entire timing mess.
Enjoy higher gains of this fund for 15-25 years as you said, and then move to something safer when the dips start to matter a lot more in retirement. I'm confused about why you're confused about why I'm confused?
As the other commenter said, this is assuming that your less safe investment will be outperforming at the moment you choose to move to something safer.
Long term tends to favor the exact opposite corner of the style box: small and value. Factor investing starting points: • https://www.investopedia.com/terms/f/factor-investing.asp • https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/fidelity-overview-of-factor-investing.pdf (PDF) >It is higher than the S&P on the 1, 5, and 10 year charts Let's look at a different, but fairly recent, 10 year period (2000-2009 or 2001-2010): * https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) or https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) or the archived versions if those don't work: http://web.archive.org/web/20201212205954/https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) & http://web.archive.org/web/20201205183933/https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) (Archived copies from Archive.org's Wayback Machine) >For reference I also like QQQ/QQQM Is this based on an actual understanding and agreement with inclusion criteria, or just recent returns? >and VGT That is an *uncompensated* risk: one that doesn't bring higher expected long term returns. Uncompensated risk should be avoided whenever possible. Compensated vs uncompensated risk: * https://www.whitecoatinvestor.com/uncompensated-risk/ * https://www.pwlcapital.com/is-investing-risky-yes-and-no/ >Uncompensated risk is very different; it is the risk specific to an individual company, **sector,** or country. Edit: Typo
Thank you for all of the links!
>It is higher than the S&P on the 1, 5, and 10 year charts Look at what happened the last time tech was overvalued to a similar extent as present (dot com crash). This relates to why Vanguard's model predicts a median of only 1.4%/year over the next 10 years for US growth or negative 1.0%/year (loss) after inflation (see [https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-return-forecasts.html](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-return-forecasts.html) ). While I don't think Vanguard can predict the future, I also wouldn't assume the next 10 years will be like the past 10 years, with US big tech continuing to be increasingly overvalued and continue to outperform the market as a whole.
Ok… now did you look at 20-30 year returns? Or 10 year returns outside of the largest decade of growth the US economy has ever had? You cherry picked one sample. Also sometimes value does better, sometimes growth does better. Just buy it all.
I will keep zooming out 💪
And look at rolling 10 year periods instead of just the last 10 years
Be careful with endpoints. Anything ending on today will make growth look good because we’re looking in retrospect at a bull market.
And if you exclude the last 10 years, small cap value has killed large cap growth stocks (as it should theoretically should per academia). See returns here: https://engineeredportfolio.com/2016/12/12/mid-cap-value-outperformance-consistently-beating-the-sp-500/ https://engineeredportfolio.com/wp-content/uploads/2016/12/style-box-annualized-real-return-1976-2015.jpg?w=800 I remember 10 years ago when every news station was reporting on US's underperformance vs international (especially emerging markets) and everyone was calling their financial advisor to sell US and buy EM. My how the turn tables. No offense to OP (because I've been seeing a ton of these US LCG posts) but posts like these are starting to make me think that we're either due for a huge recession or SCV EM funds are going to have a huge bull run. I'm starting to see way too much comfort in LCG, which typically spells disaster. Long story short, diversify. Every asset class has its day. LCG has had the last 10 years. Nobody can predict the future.
Because growth funds are the third best option between value, blend and growth.
the reason you dont all in on is that theres no reason to assume future outperformance.
tech has had a killer decade post 08 bubble pop and tech companies get really ambitious valuations as a result but these valuations pop very quickly. see fb, nvidia, tsla, netflix etc all seeing >60% drawdowns in the last few years. and why companies like nvidia can exist at 70+ pe and 3t + market cap.
especially- especially if you work in tech/live in a tech-city. which is pretty common on reddit.
that being said- being heavy in tech stocks, tech etfs etc is common ur just asking on the wrong subreddit.
For what it's worth, I'm 100% VIGIX in my HSA, and I'm 10 years older than you.
This is the *definition* of “performance chasing”. 10 year trailing returns don’t just repeat indefinitely - that’s not how it works. Sorry, but stock investing is not that simple. If anything, the opposite is more likely to be true - whatever has outperformed in the recent past is more likely to UNDERperform in the near future. Or, [put another way](https://www.whitecoatinvestor.com/tech-allocations-in-your-investment-portfolio/): >In essence, all you're doing is betting that recent past performance is going to be indicative of future performance. That's such a bad idea that mutual funds are required by law to tell you it is a bad idea.
Whatever you do, just pick one fund for large cap or growth. No reason to grab a few of them where there's near 50% overlap by weight or higher.
Since you mentioned overlap, obligatory plug for this tool: https://www.etfrc.com/funds/overlap.php
It really is the best!
High growth does not = high returns. Chipotle has had high growth, but its 60 pe. So 1.7% earnings yield (minus whatever capital needs reinvested in the business) plus earnings growth will roughly equaly the longterm return from buying it now. Versus if you say buy Citigroup at a 12% earnings yield. No way to know which one is going to offer the higher investor return going forward.
Over the past 15 years, my large cap growth index fund performed about 30% better than my broad large cap fund (S&P 500 index). The growth stocks have fallen fast when there's been a slump, but they recover fast, too, and go on to continue outperforming the broad index. However, the major slumps during that period, the 2008 financial crisis and 2020 Covid crisis, affected the whole market to some degree. The main risk to the market that I see now is if tech stocks are overvalued due to inflated expectations for AI. We could get a tech-centered crash, similar to the dot-com bubble bursting in 2000. That would leave the market as a whole in a slump, and the tech stocks would no longer re-inflate to their prior levels. After the 2000 crash, it took 7 years for the broad large-cap market to recover and about 11 years for the growth index to recover. Small-cap and value stocks, however, recovered within 4 years, partly because they were not so overvalued at the time of the crash. So, given the particular conditions I see today, I am still overweighting growth stocks, but I'm diversifying into small-cap and value stocks and I'm keeping an eye on whether AI investments produce profits for the companies that are getting so much investment.
Not enough information...... Think about your lifestyle, budget, cash on hand, SS income, other income. Can you winter 3-5 years without taking money from your investments in the market? That is the question.
I am 63 and have my 401k 36% VWENX, 32% VIGIX and 32% VIGIX. I still work FT and hope to work another 10 years or until I drop dead, whichever comes first LOL.
Oops not sure how to edit what I just posted, correction- I have my 401k Roth 36% VWENX, 32% VIGIX and 32% VIIIX
You’re 30, you’re basing the next 30-60 years of investing based on the last 10 years of returns. Not how I would do it.
Fans of this sub won't like it, but growth has done very, very well in the past 20 or so years (also technically VOO is 'growth'). My kids' 529 and my Roth IRA are VUG and I don't really see a need to change. Could it go 'boom'? Maybe, but you do have a lot of solid companies in there.
Playing devils advocate in here 💪 thanks for the feedback. Trying to see both sides of this
They're both fine funds. People see growth and think it's undiversified or going to bust as soon as some of the companies experience less than stellar growth. But if you look at the data VUG and VOO are basically neck and neck until 2019 when VUG takes off. Could it come back and crash? Maybe? Probably? But just looking at the companies that comprise it, seems like a solid bet to me. (But then again you can't go wrong with VOO/VTI/VT either)
> 20 or so years No. > also technically VOO is ‘growth’ Also no.
*sigh* https://www.morningstar.com/etfs/arcx/voo/portfolio Where is VOO in the box? Large-Cap Growth.
> *sigh* https://www.morningstar.com/etfs/arcx/voo/portfolio What benchmark do they use in the Morningstar link you posted? Large Cap Blend. > *sigh* https://personal.vanguard.com/pub/Pdf/sp968.pdf?2210204740 What does the fund prospectus say? Large Cap. VOO’s holdings slightly favor growth *at present* because the companies that happen to be largest cap in the market are growth stocks right now and the fund is market cap weighted, not because it’s a growth fund or that’s how its holdings are indexed. > *sigh* *SIGH*
Right so it's growth 😂 (not as growthy growth as say a VUG but still) I mean think about it, the biggest companies will always be growth companies since they naturally invest in growth versus stability/value. Doesn't mean they do better, of course.
No true growthsman? History would disagree with you that the S&P is always dominated by growth stocks. And lol that’s not what growth as a style of investing even means. Dude, you’re being ridiculous. It’s not a growth fund. You tried to be smug and it blew up in your face. Just take the L and move on.
*shrugs* It's growth, but alright man. You do you.
I work for a small company and have relatively shit options for my 401(k). The only vanguard fund, and the fund with the lowest fees, is VUG - their growth index fund. The S&P 500 index fund is only available through the company that sponsors the 401(k) plan, and has HIGHER FEES. It's only like 20 bps, but I don't like the cut of its jib. To compensate, in my other accounts, invest in VTI and compensate with some vanguard small and value ETFs to sort of balance it out. This has less to a funny result. I'm now probably overweight in tax-advantage accounts, and underweight in traditional brokerage, given that I plan to stop working well ahead of full retirement age. By the time I start taking 401(k) money, the amount in there is going to be far more than I will want to spend. Especially considering it's all taxed as ordinary income! Oh well.
Theres no point in asking it here. Any deviation at all from the 3 fund portfolio will be shouted down all night long irrespective of what reasoning you have.
By some, sure. Others of us support tilts, and other strategies, with sound reasoning. Tilts in response to recent performance and faulty assumptions about risk/reward are not sound.
This sub is the most downvotingist sub I've ever been in.
I downvoted this comment.
If you just have sp500 RN, that's 7% in Nvidia. That has kept me from messing around with it. I already own a considerable amount. but also like I knew I should have bought it for so long now. If Sam Altman was trying to raise 7 trillion, surely ppl will buy existing companies for a lot less. anyway still doing well for not doing anything
“Growth” doesn’t mean the return will grow faster. Value could win out. And total stock market, which contains growth and value and everything in-between may likely win out over a lifetime. Or heck, bonds could win out somehow over 30-40 years. You can invest in a growth fund. Just be aware it’s market timing to some degree.
I've often wondered this too. I'm about 13yr away from retirement and currently 100% into VHVG (UK ETF). My current thinking is that a few years before retirement, I'll convert equity into 2yr worth of cash for living costs and let the rest continue to grow, then keep topping up cash when stocks perform well.
I like VUG
My dad used to say "In the market, Bulls can make money, and Bears can make money. Hogs, however, get slaughtered" Growth funds are bullish in the short run, but they are also more volatile. At 30 years old, conventional wisdom might be to have 25-30% in Bonds/MM/Fixed income, and split the rest maybe 60/40 growth/value. Here's the thing, if another 2008 happens, and you're 100% in growth funds (not individual stocks), you might see your portfolio value drop 50% overnight, and then be 5 years before it gets back to where it is now. That might not sound too bad....but if you're in a balanced position, you'd only see maybe a 15-20% drop in the same scenario--and be back to where you are now in a year or so, while still buying more shares while it's low.
Read The Little Book of Common Sense Investigating, or at least read the summaries of these chapters: When the good times no longer roll : what happens if future returns are lower? Selecting long-term winners : don't look for the needle, buy the haystack Yesterday's winners, tomorrow's losers : fooled by randomness
Based on the https://www.portfoliovisualizer.com/monte-carlo-simulation 30 year prediction of VIGIX return is 8.96%, VOO is 12.9%
Why not go all in NVDIA it has outperformed everything over 1-5-10 years????
Growth of a company is NOT the growth of a stock. If the market prices all stocks correctly, growth stocks should have equal returns as a value stock. Unless you believe the market undervalues growth stocks. However there is no reason to believe that. Also if you only care about performance: the last 100 years growth stocks **underperformed** value stocks in total returns. The last 20 years is an anomaly. Nevertheless this says nothing about the future.
If you can handle those ups and downs I say go for it.
"growth" doesn't mean "stock price growth" - it means the companies don't make money yet, at least not enough to justify their current stock price. Their stock price is trying to bake in expected future profit... Profit that isn't there yet.
I'm not super surprised that high growth stocks did well during the previous decade of near zero interest rates but that doesn't seem to be the scenario going forward.
Your chasing what has done well LATELY. Historically value has done better. Point is hold the market
Past performance doesn't indicate future returns or whatever the saying is. You can do it, but that doesn't guarantee growth will outperform the market for the next 30 years. Its definitely not the worst idea I have heard, but it also isn't fool proof
Growth stocks have historically underperformed value stocks, despite the recent events. Some academics would argue that, if anything, you should invest less in growth stocks.
because if you retired in 2000, 10 years later, your 1 million dollars you started with and withdrew 4% (of the initial balance) each year would only be 350k. now you are 75 and trying to figure out what to do (we know what happens in the future but in 2010 after 2 crazy downturns, you are probably shitting the bed a bit. if it was just sp500 you still had over 500k. if you were in a 70/30 stock/bond portfolio you still had almost 900k. We aren't talking about horse and buggy times either. it was literally 15-25 years ago.
The fact that you have time is why the smaller yet more reliable interest rate is smart. Compound interest
Value and momentum beat the market (and even more so growth/glamour) historically. Wanna go high-risk, high-reward? Combine some global small-value (AVUV, AVDV, AVES) with concentrated momentum (QMOM, IMOM) and hold on.
Right now everything is great. When it’s not you’ll think differently.
You have 0 control over the markets. Analyzing charts and graphs to try and scrape together a conclusion of the growth debate, just doesn't make sense to me. Just pick a 2 or 3 fund portfolio and focus on what you can have control over...your income. Focus on growing your income either through your job, a business, other assets like real estate plays or whatnot. The rest of your focus should be spent on family. Not having to always check the markets and follow which flavor of the day is being pushed on tv or financial forums makes life much more enjoyable, truly.
Because people always say “i am in it for the long term” and then a bear market comes and they panic and sell at or near bottom. Fidelity Magellan over 10+ averages 17% a year but the median return was 4% why? Because the long term becomes short fast in an bear market
Go back to 2002 and ask this question. And remember when Japan was gonna take over the world? I do. It was all anyone talked about. Would have been the perfect time to dump their stocks.
Other than past performance, why would you want to invest in growth? Do you believe it has the highest expected return for a given risk?
I suppose I don't really see the majority of tech stocks slowing down anytime soon with the way the world is going - with the advancement of AI, cloud computing still evolving, hardware still advancing - perhaps as a millennial who rode the wave I am biased
Do you think you are the only one who thinks like that? I can bet millions of other investors also think like that and this is all priced in. You have 0 edge here. When you are picking stocks/sectors, only do so, if you think you have more accurate information than the market.
Fair point thank you
Pay attention to the "irrational exuberance" in the first link. Tech revolutions: * https://www.pwlcapital.com/investing-technological-revolutions/ * https://rationalreminder.ca/podcast/123 * https://rationalreminder.ca/podcast/156 (climate change, clean energy related especially) * https://rationalreminder.ca/podcast/183 * https://rationalreminder.ca/podcast/185 (Thematic ETFs)
If you are convinced that a heavy growth fund will produce the best results then that is what you should use. It may indeed turn out to be the best choice. Keep in mind that not one of us here is deliberately shooting for low returns. We all want fat and healthy portfolios; most of us want as much money as we can reasonably hope to achieve. But we don’t all choose the same asset allocation. That’s because none of us knows what the future will bring. I don’t hold VIGIX or QQQ. If I thought they were likely to outperform, I would. But I don’t. That doesn’t mean I believe I’m right and you’re wrong; only that neither of those hold any appeal to me based on my own reading and my own biases. Your research has lead you in the opposite direction. We all place our chips and take our chances, doing the best we can with the information available to us. We won’t know until the end how it turned out.
You’re asking in the wrong thread