Hard-won lessons about money and investing

Re:Hard-won lessons about money and investing by oscilloscope on Sunday November 30, 2014 @05:18AM (#8676499)

Investing 90% of a portfolio in a large-cap US index fund and 10% in short-term treasuries is not considered a "conservative" asset allocation. It's missing a lot of low-hanging fruit in terms of portfolio diversification. For example:

The suggested portfolio isn't diversified with an International stock market fund. The S&P fund isn't exposed to small-cap and mid-caps, like Vanguard's Total Stock fund. The bond component is small and has no exposure to intermediate/long-term bonds or corporate bonds.

A more conservative portfolio would be, for example:

  60% Total US Stock Market
  20% Total US Bond Market
  20% Total International Stock Market

http://www.bogleheads.org/wiki/Three-fund_portfolio

Edit: I'm not saying that Buffett's suggested portfolio wouldn't outperform a conservative three-fund portfolio. Just that his 90/10 portfolio is very aggressive with a large-cap tilt.

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Re:Hard-won lessons about money and investing by arasmussen on Monday December 01, 2014 @12:46AM (#8679705)

Index funds are an extremely conservative strategy relative to trading individual stocks, many options strategies, futures, futures options, etc, etc, etc. Index funds are conservative because they aren't high risk or high reward.

Edit: Conservative is just a relative word. Sure index funds aren't conservative relative to the the things you listed, but they are to many many other strategies that Buffet (for example) used to get as rich as he is.

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