Note to readers: This is an article I’ve written and updated annually since 1995. It presents what I believe is the very best way for long-term investors to build an equity portfolio.
This results in Portfolio 2, which is still 90% in the S&P 500. Assuming annual rebalancing , the 52-year compound return rises to 11.2%. That might not seem like much, but this small step would have turned that $100,000 investment in 1970 into $25 million. To create Portfolio 4, we move another 10% of the portfolio into U.S. small-cap value stocks, which historically have been the most productive of all major U.S. asset classes. This boosts the compound return to 11.7%, enough to turn that initial $100,000 investment into $31.7 million — with more than two-thirds of the portfolio still in the S&P 500.
To create Portfolio 6, we shift another 40% of the portfolio to four more important asset classes: international large-cap blend stocks, international large-cap value stocks, international small-cap blend stocks and international small-cap value stocks. Over the past 52 calendar years, this 10-part portfolio met all the asset-class predictions of academic researchers — and more than doubled the dollar return of the S&P 500.
Its only significant drawback is that it requires owning and periodically rebalancing 10 component parts. Relatively few investors have the time or inclination to do that.
Hypothetical “would have”. Did you get rich with it?
Insider trading?
Theoretical portfolio performance in hindsight! Brilliant!
Great hindsight. Keep it up!
Value can no longer beat growth over the long-term.
Hindsight is 20/20.
As long as Joe next door buys you out all ends well. And of course, the taxpayer keeps bailing out equity holders…..
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I was told that every achievement begins with the decision to try. Ignorance destroys so many opportunities. I'm a victim but was convinced by the right person ElliotSykess
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