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’ve started 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. Today we’ll look at an 80% Stock portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 80% Stock portfolio:

       Click here to learn how to invest in a diversified 80% Stock portfolio. Keep in mind that you’ll need $47,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.25%.

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

Now for some quick facts about this 80% Stock portfolio:

• The highest calendar year return for this portfolio was 67.7% in 1933.
• The lowest calendar year return for this portfolio was -40.3% in 1931.
• From 1927 to 2007, the average annual return for a diversified 80% Stock portfolio was 10.6%.
• During any consecutive 3 years from 1927 to 2007, this portfolio lost money 9 times out of a possible 79 periods. In 3 of those 9 times, it lost less than 9.0% of its original value.
• The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 60% of its original value.
• During any consecutive 5 years from 1927 to 2007, this portfolio lost money 5 times out of a possible 77 periods.
• During any consecutive 7 years from 1927 to 2007, this portfolio lost money only 2 times out of a possible 77 periods. These 7 year losing periods started in 1928 and 1929, near the beginning of the Great Depression.
• This 80% Stock portfolio never lost money during any consecutive 10 year period from 1927 to 2007.
• This portfolio never averaged less than an 8.0% annual return during any consecutive 30 year period from 1927 to 2007.
• In 44 of the 52 possible consecutive 30 year periods from 1927 to 2007, this portfolio had a return higher than its historical average of 10.6%. For nearly 85% 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 an 80% 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 8.0% annual return. (Even if you started just before the Great Depression!!!) And 85% of the time, you would have had a higher than average return over a 30 year time period. Take comfort in those facts when the media barrages you with doom and gloom news every day.

If you enjoyed this article, you might also be interested in:

1. A Closer Look at a Diversified 60% Stock Portfolio
2. A Closer Look at a Diversified 70% Stock Portfolio
3. A Closer Look at a Diversified 50% Stock Portfolio
4. A Closer Look at a Diversified 40% Stock Portfolio
5. A Closer Look at a Diversified 30% Stock Portfolio