u/Mobile-Calligrapher7, note that these companies "dominating the industry" has little to do with their stock returns, which are primarily based on risk and investors' expectations. Moreover, we know that past returns are not indicative of future returns, that economic output is not correlated with stock market returns, and that good companies tend to make the worst stocks while bad companies tend to make the best stocks, so I'm not sure what makes you think those specific companies mentioned "will most definitely lead the market" going forward. Will it continue? In short, no one knows. How do we know which ones will do which? And during what time periods? What about different economic cycles? Tech has had a huge run recently. Just like with individual stocks, some sectors will outperform and some will underperform the market. In doing so, investors increase their chances of underperforming the market. Betting on sectors increases uncompensated risk - additional risk without an increase in expected return. In short, we should reliably expect to see the empirical results we've observed historically: that stock picking strategies, especially those that are poorly diversified, tend to underperform the market.Įven sector bets are usually not a prudent move, as they’re just stock picking lite. Looking at global stock returns from 1990 through 2018, only 1.3% of stocks accounted for the positive wealth creation in excess of T Bills. stocks from 1926 through 2017, in terms of lifetime dollar wealth creation, only 4% of stocks accounted for the net gain above T Bills. Most stocks underperform the market only a select few drive massive returns. Blindfolded monkeys randomly throwing darts for stock picks have beaten top hedge fund managers not just once, but consistently. On the 50th birthday of the S&P 500 index, only 86 of the original 500 companies remained. The evidence has shown that even most professional investors can't pick winners that beat the market over 10+ years, much less the average retail investor like you and me. In all seriousness, let's walk through it. Youre better off using any other brokerage if you're just going to ETF this vti n chill n00b shiz. That will most definitely lead the market Shout out to Optimized Portfolio & Ben Felix for the incredible content and a large influence for these allocations. Small Cap Value funds in taxable not the most tax efficient, though still expect risk premium to make up for said tax inefficiency. I plan to limit the HFEA portion of the Roth once another $3000 goes into it in 2023, effectively treating it as a lottery ticket.40% MSCI ACWI Ex-US Index (More common equivalent is VXUS).30% S&P 500 (More common Equivalent is VOO).75% (above average, though the only small cap value fund my company offers). 03%, though the Small cap value expense ratio is. The expense ratios for the S&P and Ex-US mutual funds are only. Planning to max out this with pre tax dollars - 6% match 100% vested after 3 years. why you picked your holdings: Global Diversification with size and factor tilt for increased risk & return. max drawdown / loss of capital): High (Age 22) account type: 401k, Roth IRA, Taxable Respectively. Your goals: Financial Independence your time horizon: 20-30 years taxable, 40+ years 401k & Roth your risk tolerance (e.g.
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