How much and what equity asset classes will investors choose for their portfolios? While this podcast is aimed at young investors, it also has implications for older investors who have a portion of their portfolio invested for younger heirs.
Daryl Bahls has produced two new tables that give us a long-term view of the implications of the proportion of your portfolio that is committed to equites and the selection of equity asset class.
One table titled, “Which 2 million dollar decision is right for you?”) compares 6 different combinations of 90% bonds with 10% equities. The equity combinations include 5% and 10% positions in the S&P 500, small-cap blend and small-cap value. Compared to an all bond portfolio, the lifetime impact of adding these 10% equity positions ranges from 2 to 10 million dollars.
The second table, “Which 10 million dollar decision is right for you?”) reflects the aggressive decision to invest in an all-equity portfolio with all or part of your portfolio. In other words, you may only put 20% of you portfolio in equities but that position is left to grow without rebalancing.
Paul suggests young investors think of investing as if you are starting a company that you want to grow over the long term.
The following tables are also referenced during the podcast: https://paulmerriman.com/wp-content/uploads/2021/06/2-4-fund-combo-2020.pdf)
Table 9 in this series of tables found at https://paulmerriman.com/wp-content/uploads/2021/02/Fine-Tuning-Tables-50-50-2020.pdf)
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