Over 10 plus years maybe. The people who were on the home stretch for retirement and had 100% in the S&P 500 from 2000 to 2010 probably wouldn't agree with you. Yes it's great if your timing is right and large cap US stocks do good. But at the very least you should have total stock market instead of the S&P 500
I back tested this myself on portfolio visualizer and verified your results. This gives me more confidence with a multi asset class portfolio over the drum beat of “ Just buy the S&P”. :)
This is why I like that you hype on the guardrails and bucket strategies. I’m very heavy into equities, but when I retire I’ll have 2-3 years of expenses beyond pension in a cash bucket, and another 3-5 years in a conservative 403b. Hoping that will allow me to avoid withdrawals in down markets. Great video!
Warren Buffett just says if you are going to be a stock investor, most people are best off with the S&P 500. He does not present the idea as an all-inclusive retirement plan. We all understand your point, and would probably agree with you. But you are also comparing apples to oranges. Obviously you are not going to have the same investment goals and strategies at age 25 as at age 65.
Very informative, I'm retired receiving monthly income from my investments. Making sure my portfolio is diverse enough to return money in the most consistent way.
Thank you, James. I've wondered why we are encouraged to rebalance when the stock market is high. Your example of the diversified portfolio in retirement makes a lot of sense. I appreciate you putting this together.
I think comments like this from Buffett is more meant to be a (very over-generalized) high-level comment to send a very basic message to would-be investors. The point being "just do SOMETHING." Dave Ramsey takes a lot of the same heat for trying to market a very simplistic approach to investing. They are speaking in very general terms just to kick-start those that are not investing. If you look at Buffett's full portfolio, you don't have to look far to see that he (and Dave) do much more than "just investing in the S&P 500."
Good advice But I would have used 4% instead of 5% There is nothing wrong with using 5% but you'll need to be flexible if a bad sequence of returns happens
The wisest thing that should be on every wise individual's list is to invest in different stream of income and don't depend on the Government to bring in money or depend on your pension. Diversification is Key!
By cherry picking some of the worst years for sequense of return you would of ran out of money. Most other times you would not of, also 3 to 4% would/is a better withdrawal rate and a 2nd bucket with 3 to 5 years cash would ride out most every sequence of returns.
Yes, most other times this withdrawal rate works. That is true. You could lower your withdrawal rate to decrease this risk or you could diversify more and have a higher withdrawal
Don't let your fears get the best of you because fear is just an illusion that stands between you and your success and you need to take charge and stand your ground in other not to be pushed around by your fears Investment pays 100 100.
I think you’re taking Buffett’s comments too literally. I don’t think he is saying not to invest in fixed income or to keep some money in cash. I think his point is that for the money that you allocate to equities, just get what the market gives you with an S&P fund rather than take on extra risk trying to beat the market.
You're making a lot of assumptions about how someone would use Warren's advice as well as cherry picking one of the worst years to start retirement. Sure, you need to plan for worst case scenario, so any plan should have a way to address the worst starting years. That's how the 4% rule (not the 5% you chose to model) came about, as you know. Very few people would put ALL their investments in equities and I'm pretty sure that isn't what Warren was suggesting. That being said, I agree that diversification and a plan that adjusts as the market does it's thing is a good idea. The fact remains that holding index funds rather than attempting to pick stocks and time the market is a good foundation for investing. Those are my assumptions about Warren's advice.
The whole world loves to hype everything Buffet says. He did not get rich from buying an index. Most of his wealth is from investments in individual stocks decades ago.
Warren is in a high risk business (individual stock investor). Most of us don't have the education or experience to be buying individual stocks. 98% of actively managed stock mutual funds fail to beat their appropriate indexes. They're very good, however, at publishing fake 'growth of $10,000' graphs with their fund often displayed as outperforming the comparison indexes (by selectively choosing & changing said indexes). The financial services industry is very corrupt.
The problem is Buffet isn't giving you advice, he just throws a cookie cutter statement out there. If Buffet is giving advice specifically to you then yes I would pay attention but he's not
Warren Buffett is certainly smarter than I am and I follow much of what he says. This video is just an example of advice he gives that has been interpreted the wrong way in my opinion
Following Buffet is Better than nothing But there's a lot more to maximizing your investing. This guy is extremely good and you would be lucky to find someone as talented as him.
Run the S&P 500 (VFINX) at 4% or less ... different outcome. Or run Buffet's advice for his wife -- 90% 500, 10% short-term Treasuries. 5% withdrawal is risky with almost ANY portfolio.
Timing is everything! Those of us who recently retired will have a difficult time with both inflation and sequence of return risk.
You don't know if you have sequence return risk yet.
Your videos are some of the best that give retirement advice. Much appreciated 👍
Thanks John!
Buying the s&p is great for the accumulation years. Diversity wins during retirement.
Over 10 plus years maybe. The people who were on the home stretch for retirement and had 100% in the S&P 500 from 2000 to 2010 probably wouldn't agree with you.
Yes it's great if your timing is right and large cap US stocks do good. But at the very least you should have total stock market instead of the S&P 500
This is a great video to remind people of why diversification is so important. Especially for pre-retirees and retirees in general. Thanks James.
Thank you.
I back tested this myself on portfolio visualizer and verified your results. This gives me more confidence with a multi asset class portfolio over the drum beat of “ Just buy the S&P”. :)
This is why I like that you hype on the guardrails and bucket strategies. I’m very heavy into equities, but when I retire I’ll have 2-3 years of expenses beyond pension in a cash bucket, and another 3-5 years in a conservative 403b. Hoping that will allow me to avoid withdrawals in down markets. Great video!
Thank you!
Warren Buffett just says if you are going to be a stock investor, most people are best off with the S&P 500. He does not present the idea as an all-inclusive retirement plan. We all understand your point, and would probably agree with you. But you are also comparing apples to oranges. Obviously you are not going to have the same investment goals and strategies at age 25 as at age 65.
Agreed
Very informative, I'm retired receiving monthly income from my investments. Making sure my portfolio is diverse enough to return money in the most consistent way.
Thank you, James. I've wondered why we are encouraged to rebalance when the stock market is high. Your example of the diversified portfolio in retirement makes a lot of sense. I appreciate you putting this together.
You showed a diversified portfolio that performed much better than the S&P 500 from 2000 to 2016. What was that better performing portfolio?
I think comments like this from Buffett is more meant to be a (very over-generalized) high-level comment to send a very basic message to would-be investors. The point being "just do SOMETHING." Dave Ramsey takes a lot of the same heat for trying to market a very simplistic approach to investing. They are speaking in very general terms just to kick-start those that are not investing. If you look at Buffett's full portfolio, you don't have to look far to see that he (and Dave) do much more than "just investing in the S&P 500."
Good advice
But I would have used 4% instead of 5%
There is nothing wrong with using 5% but you'll need to be flexible if a bad sequence of returns happens
The wisest thing that should be on every wise individual's list is to invest in different stream of income and don't depend on the Government to bring in money or depend on your pension. Diversification is Key!
By cherry picking some of the worst years for sequense of return you would of ran out of money. Most other times you would not of, also 3 to 4% would/is a better withdrawal rate and a 2nd bucket with 3 to 5 years cash would ride out most every sequence of returns.
Yes, most other times this withdrawal rate works. That is true. You could lower your withdrawal rate to decrease this risk or you could diversify more and have a higher withdrawal
We should include the ELEPHANT in the room, in this discussion. See my comment further above.
Don't let your fears get the best of you because fear is just an illusion that stands between you and your success and you need to take charge and stand your ground in other not to be pushed around by your fears Investment pays 100 100.
I think you’re taking Buffett’s comments too literally. I don’t think he is saying not to invest in fixed income or to keep some money in cash. I think his point is that for the money that you allocate to equities, just get what the market gives you with an S&P fund rather than take on extra risk trying to beat the market.
You're making a lot of assumptions about how someone would use Warren's advice as well as cherry picking one of the worst years to start retirement. Sure, you need to plan for worst case scenario, so any plan should have a way to address the worst starting years. That's how the 4% rule (not the 5% you chose to model) came about, as you know. Very few people would put ALL their investments in equities and I'm pretty sure that isn't what Warren was suggesting.
That being said, I agree that diversification and a plan that adjusts as the market does it's thing is a good idea. The fact remains that holding index funds rather than attempting to pick stocks and time the market is a good foundation for investing. Those are my assumptions about Warren's advice.
GOOD STUFF BRO!
Thank you!
The whole world loves to hype everything Buffet says. He did not get rich from buying an index. Most of his wealth is from investments in individual stocks decades ago.
Warren is in a high risk business (individual stock investor). Most of us don't have the education or experience to be buying individual stocks. 98% of actively managed stock mutual funds fail to beat their appropriate indexes. They're very good, however, at publishing fake 'growth of $10,000' graphs with their fund often displayed as outperforming the comparison indexes (by selectively choosing & changing said indexes). The financial services industry is very corrupt.
Dude, I would take Buffett's advice over yours any day. How many billions did you make from scratch?
The problem is Buffet isn't giving you advice, he just throws a cookie cutter statement out there.
If Buffet is giving advice specifically to you then yes I would pay attention but he's not
Looks like following Warren would put you out of work
Warren Buffett is certainly smarter than I am and I follow much of what he says. This video is just an example of advice he gives that has been interpreted the wrong way in my opinion
Following Buffet is Better than nothing
But there's a lot more to maximizing your investing.
This guy is extremely good and you would be lucky to find someone as talented as him.
Buffet was 100% correct. He never said anything about a 5% withdrawal rate, dude. WTF… 😂
Run the S&P 500 (VFINX) at 4% or less ... different outcome. Or run Buffet's advice for his wife -- 90% 500, 10% short-term Treasuries.
5% withdrawal is risky with almost ANY portfolio.
Or better yet: VWELX (the Wellington fund). More than doubles your money, even after 4% withdrawals adjusted for inflation!