7 Reasons Not to Have a 100% Stock Portfolio Story

7 Reasons Not to Have a 100% Stock Portfolio

If stocks tend to outperform most, if not all, asset classes, why bother owning anything else? A seasoned investor may view that as a silly question.

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But those with only a decade or so of investing experience have seen the stock market climb steadily upwards, save for that blip in early 2020 that we recovered from quite rapidly.

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Here we came up with 7 different reasons to diversify your portfolio to own additional asset classes and why an all-stock portfolio may not be such a good idea.

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7 Reasons Not to Have a 100% Stock Portfolio

If 100% stocks is good, 110% stocks must be better, right? How do you get 110% stocks? Well, debt is basically a negative bond.

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So if you borrow 10% of the size of your portfolio and invest the entire portfolio plus that 10% in stocks, you have a 110% stock portfolio.

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The primary reason people cite for 100% stock portfolios is because in the long-run, at least in the United States, a 100% stock portfolio has had higher returns than a portfolio that contained any percentage of bonds.

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There have been long time periods in the past when bonds outperformed stocks, even in the US, and even longer time periods in other national markets.

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Stocks outperform bonds most of the time over 10 years, but nowhere near all the time. It becomes especially noteworthy if you also include all those 10-year periods when stocks barely outperformed bonds.

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7 Reasons Not to Have a 100% Stock Portfolio

If stocks tend to outperform most, if not all, asset classes, why bother owning anything else? A seasoned investor may view that as a silly question.

But those with only a decade or so of investing experience have seen the stock market climb steadily upwards, save for that blip in early 2020 that we recovered from quite rapidly.

Here we came up with 7 different reasons to diversify your portfolio to own additional asset classes and why an all-stock portfolio may not be such a good idea.

7 Reasons Not to Have a 100% Stock Portfolio

If 100% stocks is good, 110% stocks must be better, right? How do you get 110% stocks? Well, debt is basically a negative bond.

#1 Why Not 130% Stocks?

So if you borrow 10% of the size of your portfolio and invest the entire portfolio plus that 10% in stocks, you have a 110% stock portfolio.

The primary reason people cite for 100% stock portfolios is because in the long-run, at least in the United States, a 100% stock portfolio has had higher returns than a portfolio that contained any percentage of bonds.

#2 Why Not 100% Small-Value Stocks?

There have been long time periods in the past when bonds outperformed stocks, even in the US, and even longer time periods in other national markets.

#3 Bonds Might Outperform Stocks

Stocks outperform bonds most of the time over 10 years, but nowhere near all the time. It becomes especially noteworthy if you also include all those 10-year periods when stocks barely outperformed bonds.

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