Hard to beat dollar cost averaging the entire stock market, which is what VTI represents.
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Rebalancing is done between asset classes. But if you are going to rebalance, it's more efficient to buy target date funds.
Brain dead DCA + working in tech and getting RSU / ISO re-ups every year means you're just betting only on tech.
Customization allows you to mitigate/ manage some sector risk if you want it.
VTSAX - total US stock market mutual fund https://www.morningstar.com/funds/xnas/vtsax/portfolio
SP500 - VOO https://www.morningstar.com/etfs/arcx/voo/portfolio
Tech simply has a proven track record of raking in outsize profits, and I see no reason to bet against businesses with unmatched efficiencies of scale and enormous barriers to entry. Hell, even the king of investing, Warren Buffet, has been humbled by BRK only just keeping up with SP500 because of its huge 25% investment in Apple.
You would have to go out to VT - total world market to see a difference in portfolio allocation.
A safer approach would be to just purchase a fund which excludes tech. Personally I'm too lazy to do this and just have a total market fund :)
On the other hand, if you are 100% certain in your investment thesis that you don't want overexposure to any company including your employer, you could try direct indexing the rest of your portfolio e.g. buy S&P 500 except for your employer. Selling on vest is another simple alternative you could consider.
If you want to see how a specific asset mix based on your goals performs (e.g. more in cash and BND and less in VT because you have a big home purchase coming up), check out our app at https://livefortunately.com/
I’m traveling today so replies may be delayed.
We talk a bit more about it in our "white paper" blog post about what makes us different [2].
1: https://www.conning.com/-/media/marketingsite/documents/prod...
2: https://livefortunately.com/insights/what-makes-us-awesome
I personally have 50% going into SPY DCA then a bunch of other bets. Some of them have outperformed SPY, certainly in the bull market. We'll see how they do over 20 years though.
I've actually outperformed SPY with my personal bets, both over the last 10 years in general, as well as over the last 2 years (including this bear market).
But this is play money, not serious money. The bulk of my money is SPY/VTI + various Bond funds. I'm holding short duration and ultra-short duration and even Money Market for the near future, giving an eye to expectations from the Fed / interest rate hikes before jumping back into long term bonds.
SPY (S&P 500, average of the top 500 companies in the USA) is fine. VTI is fine. VT is fine. They'll all fluctuate with each other since they're different baskets, but picking a broad-basket of stocks and diversifying is the most obvious good strategy for stock picking.
Unless you invested in 2021…
The common “wisdom” of dollar cost averaging the market only works for those (1) who never sell (2) continue to have an ever inflating dollar and QE and (3) an ever growing economy
Right now energy prices are 3x-5x a few years ago. That will dramatically reduce growth and may even shrink the economy. Arguably the real economy has been stagnant for quite some time.
Not financial advice, but at the moment I would consider holding cash or other solid assets. Waiting for the energy situation to stabilize then buy in.
You could cost average, but timing the market can produce multiples more gains if your calm / collected, informed and willing to wait.
DCA reduces risks, particularly on the whole market. They said it doesn’t remove risk and it definitely reduces potential upside.
Read this:
https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
The article you link to: > The only other rule in this game is that you cannot move in and out of stocks. Once you make a purchase, you hold those stocks until the end of the time period.
Easy! Dollar cost average a leverage fund that invests in the entire stock market. TQQQ beats SPY over the long term.
TQQQ indexes the Nasdaq 100, not remotely close to "the entire stock market".
When I started just allocating money into tech stocks I, as a software guy, appreciated return went way, way, way up.
Those Wall St quants can only appreciate M1 so far. They can't see the server farms 5 years out running linux on mac hardware. Or even if they can, they're paid to make decisions every day. "Boss, I'm just going to park it all on hedged and leveraged AAPL derivatives for the next half decade and sit on a beach." Isn't really going to fly.
VTI in any case is "the market average", because its literally the whole market. Its surprisingly a difficult strategy to beat, becaust most stock pickers perform below average (!!!).
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The only thing is that the stock market is very volatile. So it makes more sense to mix in bonds with regards to historical risk/reward. You lower your average gains, but often reduce your losses. (Long term bonds are doing poorly early this year, but with interest rates rising, I'd expect that moving forward bonds are going to do well)
And that's where a "target lifepath" fund goes. Those funds mix "total stock market" with "total bond market" and call it a day.
What if in 10 years the government decides that apple is too powerful? A new CEO comes in and destroys what has been built? A new competitor comes up with a product that is vastly supperior? A total stock market crash happens and your portfolio didn't have any bonds/ shorts/ hedges.
You might be able to go into financial ruin and no one would blink an eye. If large, multigenerational funds go down its a very big deal indeed.
that's why
"Boss, I'm just going to park it all on hedged and leveraged AAPL derivatives for the next half decade and sit on a beach." Isn't really going to fly.
isn't going to fly because the risk delta on that is very high indeed.
I am skeptical on this one. I don't see enterprise customers having a lot of confidence to buy into a new server line as Xserve only lasted ~9 years. They could have have continued to shlep that line along. I would think that Linux on ARM would be more likely than M1.
It also sounds like you've been lucky so far. There are many periods over just the last 30 years where the "sure thing" ended up bankrupting people. The hard part is beating the market over the course of your life.
I would caution such reckless confidence. "The more you know, the more you realize you don't know." - if you are looking at a subject like quantitative analysis in stocks and thinking "this isn't so hard", you probably know so little that you think it's easy, but not enough to realize the intricacies of why it's hard.
But anytime I mention my gains on HN the crowd says the same two or three things:
1. You're just lucky.
2. Herp quit your job and work Wall St. (No. I'm not primarily money motivated and those people generally, um, are far from my cup of tea.)
3. You're just lying.
They can keep saying that, they can keep down voting me. They didn't buy Tesla early or Bitcoin early or Shopify early, so nobody did that wasn't lucky. I'm not saying I'm some sort of finance prodigy, but it has been pretty easy to call tech stocks for the past ten or fifteen years and combine that with dodging recessions and an otherwise diversified portfolio and yearly returns after inflation of 15% are achievable, not even counting the Bitcoin payday.
Maybe because you are just lucky?
They definitely can. I got paid quite good money to sit down with full time professional investors and tell them exactly that, and lots of other things. They don't go into these things blind.
They pay good money to people like us to tell them what they need to know so they can see the future just a little better than everyone else.