Don't Invest in the S&P 500. Especially if you're retired. (108-year backtest results)

I know it’s tempting, but it does not pay to chase past performance.

To get data going back to 1908, they use a combination of indexes, but they currently map to:

US Total Market - Morningstar US Market
US Aggregate Bonds - Morningstar US Core Bond

Global Equities - Morningstar Global All Cap Target Market Exposure
Global Aggregate Bonds - Morningstar Global Core Bond

Financial Planning

DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice. Any opinions or assessments expressed are James’ own opinions or assessments, which are not affiliated with any third party. Any representations stated as facts or views based on such facts are relevant to circumstances applicable at the time of publication. This information should never be relied solely upon to make decisions, and James accepts no liability for any investment actions undertaken by viewers. Please seek regulated financial advice or an advisor if you require assistance. The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested.

James Shack™ property of James Shackell
Copyright © James Shackell 2023. All rights reserved.
The author asserts their moral right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this channel and any video published on it.

00:00 Intro
00:57 The Test
04:14 US
07:46 Global
13:26 Third Strategy

[MaryLawson]

I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2024

[WillieNickell]

Treasury yields and other safe cash-like investments are raising high returns, yet most investors believe this is a good time to buy stocks than gold despite crash. I'd love to spread across $400k into profit yielding dividend equities and end the year well, but unsure of which to get acquire.

[eliseduffyfxx]

I recently sold a house in Portland, and I'm considering investing the proceeds in stocks. I know it's a wonderful time to buy, but is this the right moment? When will I fully recover? I'm honestly just perplexed at this point as to how other folks in the same market are making over $450, 000 in gains in a matter of months.

[angeladeem]

I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.

[trade]

I admit I fell for the clickbait of "Don't invest in the S&P 500". To be more truthful, it should be titled "Don't invest in only the S&P 500". Other than that, it makes sense.

[AdamLevine]

I have been retired for 6 years. I have a 130K annuity, plus a 401k depleted to $350, 000 of money that I’m considering allocating in a 60/40 stocks and bond ratio. i'm hoping this is a valid thought process?

[eddied]

Another excellent video, James. One of the clearest explanations I've seen of why timing is everything when you retire and how a few years of poor performance can make all the difference. A great explanation of the difference between average returns and how volatility in those returns really does make a difference when you've retired.

[tonyh]

The elephant in the room is that after 80 years of age, you’re not flying around the world, not buying Porsche cars, hell I eat out a lot and almost never see octogenarians in restaurants
Maintaining a £500, 000 pot is pointless as you age. (Nursing home fees ‘priced in’ of course)

[daviddean]

Happy New Year, Mr. James Shack. Thank you for all your videos and may I wish you the very best for 2024 and appreciation from Nova Scotia, Canada.

[leecraddock]

As usual another excellent video. Not what I expected and thanks for the tip, as I am hurtling towards retirement. Keep the videos coming, they are really good at assisting your viewers understanding of a complex subject matter

[jocar-]

Very useful information as always and essential viewing for those nearing or just started their retirement journey. Perhaps a mention of dynamic withdrawal guardrails could have been added as an additional method for sustainable withdrawals.
As you have highlighted, investment fund and/or bonds selection for appropriate diversification is important since index funds will contain all listed companies and will therefore contain trash as well as winners.

[SF-fblv]

I've been doing the maths on retirement for a LONG time, and this is one of the most interesting and thought-provoking things I have ever heard! Great job; subscribed!.

[EdwinBoettcher]

I have a 3 fund portfolio consisting of 33% S&P, 33% Total stock, and 33% international. I feel a need to focus on complete growth so I went 100% stocks, but does the SP500 and TSM overlap too much to make sense holding both? However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait but watching my portfolio dwindle away is such an eye -sore.

[pataleno]

Great Video James. I’m 55 in March and very heavy invested in S&P. I do also invest in a global index fund.
Looking to retire in about 5 years. This is certainly food for thought on how I invest in future.

[blue-fjky]

Very thoughtful analysis!

I'll add that the world is a small place now and US companies have serious international exposure, so holding a US index fund includes much of the world's returns. This was not always historically the case.

[martinz]

Very good video. Many thanks. I intend to invest 85% in Global Stock Index (ACWI) and 15% in Small Caps.

[markbernhardt]

This answers my headscratching moment looking at the funds in my mom's annuity. US large cap growth and value, small cap growth and value, international, US bonds, International bonds. Killer job explaining

[AshJun]

Great content. I find a lot of finance you tubers default to the US with their commentary and analysis so it's good to see a different perspective.

[quickcinemarecap]

00:02 Questioning the wisdom of investing in the S&P 500, especially for retirees
01:56 Diversify retirement portfolio beyond S&P 500 for sustainable income
03:55 Backtest results show varying success rates for S&P 500 investments during retirement.
05:50 The 4% rule may be too conservative, aiming for 85-95% success rate could be better
07:48 A globally diversified portfolio outperforms the US Stock Market in retirement scenarios.
09:59 Withdrawal rate and portfolio performance impact retirement sustainability.
11:55 Diversify globally for lower volatility and higher income in retirement.
13:51 Small cap value stocks have outperformed the S&P 500 over the long run.

[andrewdiener]

I would simply re calculate a scenario every year that gave a ninety percent success rate and adjust my spending accordingly. A dynamic spending plan that would give you more to start, and give you more clarity, and also possibly more spending, most years.