Crackerjack Greenback Prudent Advice for a Prosperous Future

December 2, 2008

A Closer Look at a Diversified 100% Stock Portfolio

Filed under: Diversified Portfolios,Investing,Retirement Planning — Paul Williams @ Crackerjack Greenback @ 4:00 am

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’m going to do a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments, so today’s post will be about a 100% Stock portfolio, the next in the series will be a 90% Stock portfolio, then 80% Stock and so on.

       Here’s a pie chart depicting the asset allocation for a diversified 100% Stock portfolio:

Allocation for 100% Stock Portfolio - Small

       Click here to learn how to invest in a diversified 100% Stock portfolio. Keep in mind that you’ll need $38,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.27%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Historical Returns for 100% Stock Portfolio - Small

Now for some quick facts about this 100% Stock portfolio:

  • The highest calendar year return for this portfolio was 83.4% in 1933.
  • The lowest calendar year return for this portfolio was -50.3% in 1931.
  • From 1927 to 2007, the average annual return for a diversified 100% Stock portfolio was 11.4%.
  • During any consecutive 3 years from 1927 to 2007, this portfolio lost money 12 times out of a possible 79 periods. In 4 of those 12 times, it lost less than 5% of its original value.
  • The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 70% of its original value.
  • During any consecutive 5 years from 1927 to 2007, this portfolio lost money 6 times out of a possible 77 periods.
  • During any consecutive 7 years from 1927 to 2007, this portfolio lost money only 3 times out of a possible 77 periods. All three of these 7 year losing periods were during the Great Depression.
  • This portfolio averaged double digit annual returns (10% or more) for 53 of a possible 67 consecutive 15 year periods from 1927 to 2007.
  • This 100% Stock portfolio never lost money during any consecutive 15 year period from 1927 to 2007.
  • This portfolio never averaged less than an 8.5% annual return during any consecutive 30 year period from 1927 to 2007.
  • In 47 of the 52 possible consecutive 30 year periods from 1927 to 2007, this portfolio had a return higher than its historical average of 11.4%. A little over 90% of the time, you would have had a higher than average return over a 30 year time period.

       My hope is that this information will prepare you for the possible risk of investing in a 100% Stock portfolio while giving you some perspective during tough times. I think it’s really important to emphasize those last two quick facts. If you have a time horizon of 30+ years, there is no historical period where you would have averaged less than an 8.5% annual return. (Even if you started just before the Great Depression!!!) And 90% of the time, you would have had a higher than average return over any 30 year time period! (That’s quite amazing if you think about it.) Take comfort in those facts when the media barrages you with doom and gloom news every day.

       If you think your time horizon is shorter because you’re close to or in retirement, consider this: if you are 60 years old and your life expectancy is 90, you have 30 years left. The time horizon for your retirement portfolio is 30 years! That’s why there’s such a wide range of possible portfolios for a successful retirement (see this post about what asset allocation you should use in retirement).


  1. Hey Paul. Great post. Being a total math nerd, I of course love the statistics.

    Where’d you get your data from by the way? I used to have a copy of Ibbotson’s yearbook, and I’ve had several occasions recently that made me think I should pick up an updated copy.

    Comment by Oblivious Investor — December 2, 2008 @ 8:21 am

  2. Hi,

    This is very interesting.

    How did you come up with the historical chart?

    Comment by Singapore Recession — December 2, 2008 @ 8:54 am

  3. Thanks, Mike. I figured you would like it. 🙂

    My data is a combination of index data and actual mutual fund returns (for the funds I discuss in that diversified portfolio post). I decreased the index returns by the mutual fund expenses to make sure it reflects something close to the return you’d actually get if you invested in the portfolio.

    Since I’m a financial planner, I have access to index data you can’t get online. But unfortunately that also means I can’t just share it with everyone either. The information on these portfolios is fair game though. I have a 2007 Ibbotson yearbook, but I find the information is not detailed enough for the portfolios I’ve created.

    If you or anyone else has some question they’d like to have answered, I’d be happy to check my data to see if I can help. I only have calendar year returns so I’m limited in what I can do, but it’s good enough to answer most questions. (I’d have many more 3 year periods in my analysis if I had monthly returns.) Maybe I’ll add that sometime if I get bored… haha!

    Comment by Paul Williams @ Crackerjack Greenback — December 2, 2008 @ 8:57 am

  4. @Singapore Recession:

    Please see the above comment. I have data for this portfolio back to 1927. My data is a combination of index data and actual mutual fund returns (Vanguard funds).

    The quick facts are just analysis of the annual returns. This is all data I generated myself by looking at the annualized returns of the portfolio over different rolling periods. For example, 3 year rolling periods would be 1927-1929, 1928-1930, 1929-1931, and so on.

    Comment by Paul Williams @ Crackerjack Greenback — December 2, 2008 @ 9:04 am

  5. This is very interesting. I have recently become interested in the stock market due to the economic situation.

    Comment by Katie — December 3, 2008 @ 8:47 pm

  6. Thanks, Katie! I’m sure a lot of people are paying closer attention to the stock market now because of everything that’s going on. It’s hard not to!

    Comment by Paul Williams @ Crackerjack Greenback — December 3, 2008 @ 10:23 pm

  7. […] Carckerjack Greenback gives us A Closer Look at a 100% Diversified Stock Portfolio. […]

    Pingback by Carnival of Personal Finance #182 - Don’t Go Broke Over The Holidays Edition | Free From Broke — December 8, 2008 @ 7:45 am

  8. Paul,

    Can you give me an explanation why you have over 60% exposure in the international markets and only 40% in the US? I am assuming your data shows that in the long term international does better than US. Is that the answer?

    Comment by Tony Smarjesse — April 15, 2009 @ 2:55 pm

  9. Tony,

    Thanks for taking the time to comment! American companies only make up about 40% of the total world stock market. If you put 80% or more of the stock portion of your portfolio in American companies, you’re basically putting all your eggs in one basket. Most American advisers tend to favor American stocks—and it’s probably just because they’re more familiar with them. A 60% int’l/40% U.S. mix better reflects the world market capitalization of stocks while providing great diversification.

    While economic problems like we’re experiencing today have some effect on the whole world, this is not the norm. By putting 60% of your stock allocation in int’l countries (that is, ANY country other than the U.S.), you diversify away some of the risk that comes from investing in any one country. When bad things happen in the U.S., it doesn’t always mean bad things are happening in the U.K., Australia, Italy, or China.

    So basically, having 60% in int’l stocks helps spread your risks out a little thinner. Thanks again for your question!

    Comment by Paul Williams @ Crackerjack Greenback — April 15, 2009 @ 4:07 pm

  10. Super article. It’s inspired me to do the same thing for the UK market on my Monevator blog, if I can find the data…

    Comment by Monevator — October 25, 2009 @ 10:25 am

  11. Hi, I am a Christian too and really enjoyed reading your articles. May I ask how you became a financial adviser and what exactly do you do? May I ask what education you have and what jobs you have had to gain the knowledge and experience you have? I am really interested in personal finance for a carer and love helping people with their retirement. Right now I am a finance major in college in my 3rd year. I found that my families 401K’s are full of high expense and load funds and like to help them with better funds. Jim

    Comment by James Williford — December 24, 2011 @ 11:05 pm

  12. Didn’t realize my full name would be published here could you please remove my last comment?

    Comment by James Williford — December 24, 2011 @ 11:06 pm

  13. Hi Paul,

    I am 23, trying to figure out the best allocation for my Roth IRA retirement account and 401k. I read elsewhere that if you have 10% bonds you can use that to buy more stocks when the market is very low. You can’t do this if you are 100% stocks. What’s your opinion on this? Thanks!!

    Comment by Sean — September 18, 2016 @ 12:28 pm

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