New Study Supports 100% Equity Investing for Life – The Debate

Recently, I posted a video “New Study Supports 100% Equity Investing for Life” that went semi-viral with 14,000 YouTube views & 1,000 podcast downloads. 

There is an interesting active debate mainly on YouTube, and a bit on my blog with a lot of comments and questions. Let’s look at them and join the debate.

The evidence from the study to invest 100% in equities for life is certainly unconventional, so the comments revealed interesting insights.

This is an important topic. I have many posts on my blog over almost 20 years about how much better your Financial Plan and retirement income are with a high equity allocation. 

I have posts about other studies, including my own. I believe people with a high enough risk tolerance who will stay invested through market crashes should invest 100% in equities. This is unconventional wisdom – but studies show it works!

In my latest YouTube video, podcast episode and blog post you’ll discover:

• What did the study actually say?
• What did most of the comments agree on?
• Does the study support 100% equities right through retirement?
• Won’t many people panic and sell?
• How does the recommendation of 67% international look for US vs. non-US investors?
• Do international stocks provide good diversification?
• Would this work in some time periods but not others?
• Would it work for narrower equity indexes, such as the NASDAQ?
• Is this study new? 
• Isn’t the risk of running out of money in retirement similar for 100%, 80% & 60% equities?
• Isn’t it better to keep some cash?

What did the study say?

The study reveals that an all-equity portfolio through your entire life with 33% domestic stocks, 67% international stocks, 0% bonds & 0% cash outperforms traditional stock-bond strategies in building wealth, ensuring reliable retirement income, preserving capital and generating bequests.

In other words, 100% equities provided both a more comfortable retirement AND a more reliable retirement.

It compared this portfolio to both:

– Traditional 60% equities/40% bonds constant allocation.

– Age-based allocations such as: 100-age in stocks. These could suggest 70% stocks at age 30 and 20% stocks at age 80.

The conclusion is that diversifying with international stocks was more effective than with bonds or cash.

This research, backed by robust data from 39 developed countries and spanning long-term investment horizons, challenges two key conventional wisdoms:

1. That savers should diversify between stocks and bonds.

2. That young people should invest more heavily in stocks than when they are older.

Here are links to my video and the actual study: 

Video: “New Study Supports 100% Equity Investing for Life”

Study: “Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice”

What did most of the comments agree on?

• Many comments agree with 100% equities. For example:
• I have a pension and no use for bonds. I’m 100% S&P500.
• I’m in the same boat. Equities all the way ‘For The Win’!
• I actually already have an all stock portfolio.
• Who would have thought having a 1% real return in a debt-based inflation economy over the long term is risky. I’m so shocked. 😉
• Follow this model and stay away from bonds.

It is not surprising that the most common comment was agreeing with the study. Many viewers likely have seen my prior posts about how effective 100% equity investing can be. 

Does the study support 100% equities right through retirement?

Q: Might be wrong, but the study was over the life of the investor, not during retirement. Of course, a young person decades away from retirement should be 100% equities. Being in bonds for 60 years is definitely a drag.

A: The study shows results for life. It has a section specifically about 80-year-olds and how generally they are still best off with 100% equities. Note this requires they are able to stay invested when their investments go down. The authors say this strategy is not “safe”, but it is safer than holding bonds or cash. Ed

• Would you continue to take out 3 or 4% even if the market is down? Or use a home equity line of credit until the market comes back up? I am retiring younger so I am wanting to maximize several decades of retirement income. I appreciate your thoughts. Thanks.

Q: If an 80 year old is 100% in stocks and we get another financial crisis, how could they possibly recover, especially when having to potentially sell stocks at low points every month to pay the bills?

A: We have direct experience with this. We have clients that achieved their retirement goal and retired. Unfortunately, it was summer in 2008. 6 months after retiring, their investments were down 40%. What did we do? We kept sending them the cash flow in their retirement plan. We monitored their withdrawal rate and in some cases reduced their income by $100-300/month. In 2-3 years, they had fully recovered. Note this was the largest market decline since the 1930s, and investors were fine if they maintained their plan. Ed

Won’t many people panic and sell?

• This is excellent for experienced investors who survived many -20% drops. Average retiree will panic. Bonds are wonderful at smoothing volatility thus reducing panic selling.
• You can be an “experienced investor”, but surviving a 20% drop has more to do with current state and needs.
• 100% in stocks is insane, unless you don’t need that money.
• I don’t agree with this study. 20% bonds to smooth out the ride. 20% international stocks. Only in countries with hard working people.

Q: I actually already have an all stock portfolio, but to play devil’s advocate… the whole problem with this strategy is the fact that the vast majority of retirees absolutely cannot handle the extreme amount of volatility of a 100% equity portfolio. There is a lot of evidence showing how most investors will do something dumb when they see huge declines in their portfolio, ruining any benefit they could have had if they stayed the course. The reason the classic 60/40 portfolio is so popular is because it’s a smoother ride that the average skittish investor can handle, and that’s not nothing.

A: You are probably right. The study does not say all-equity is safe or recommended. Just that the people that do it for the long-term will almost definitely have a more comfortable and reliable retirement. Their risk of running out of money is lower. My experience is that risk tolerance is a learned skill. Many people can learn to tolerate significant declines. Risk tolerance is the ability to do nothing when your investments are down. With education about market history and probably working with a trusted advisor, people can learn to do nothing. If they can, they are highly likely to retire more comfortably. Ed

How does the recommendation of 67% international look for US vs. non-US investors?

Some comments are from American investors wondering why they should not invest 100% in the US. A few countries have had higher returns than the US, but the US stock market has significantly outperformed the rest of the world the last several decades and US stocks are 74% of the world index today. Growth in the world is mostly in only a few countries, including the US.

Here is how different the study looks for US vs non-US investors:

% in Home country World Index Study

US investors 70% 33%

Canadian investors   3% 33%

• Investing 70% outside of Canada (US 51st state) is certainly good advice along with staying away from bonds.
• I’m 70% international – I’m not from America so I have about 70% there lol

Q: Since international (He means global.) is 76% US for US based investors, the 66% international and 33% domestic is the same as 50% US and 50% international.

A: The study considers “international” to be stocks outside the home country for investors in each country. Therefore, for US investors, 67% international would be 67% in Europe, Asia, emerging markets, America ex US, etc. This is why I think the results should be taken as an average of all countries – not necessarily optimal for specific countries. The US is about 70% of the world’s stock market and is higher growth than global stocks. US investors might be best investing 70% or more in the US, but keeping significant international diversification. On the other hand, Canadian investors should optimally have little in Canada, since we are only 3% of the world’s stock market and a lower growth country. This would probably apply to many of the 39 countries in the study. The average of all countries having 67% internationally might be optimal. That could be an average of 30% or so for US investors and 95% or more for investors in many other countries. Ed

Q: I think Ed would agree with my strategy to have 5% Canada instead of 30% Canada.

A: The study recommends 30% in the home country as an average for all countries. I believe this is way too high for most countries. It is averaged up by US investors, who probably should have more than 30% in their home country. For example, Canada is only 3% of the world’s stock market and we are a lower growth country with a non-diversified stock market. The independent portfolio managers we work with have virtually nothing in Canada. Ed

• If you go through the tables near the end, they show all the 39 countries they used in the study and how many years of good stock market history they have for each one. Ed

Do international stocks provide better diversification than bonds?

Q: 67% in international stocks. Wow. I didn’t see that coming. I’m almost 64 years old and am 100% in low-fee stock index funds, including only 15% in foreign/emerging markets. I have been debating with myself whether I should diversify into bonds. This study certainly complicates things.

Q: At age 64, you have 85% invested in the US market, that is risky. It is like you are putting all of your eggs in 1 basket. You are not well diversified across the globe. If you read the book by David Swenson who was in charge of the Yale investment portfolio known as the Yale Model. His diversification process is in line with this study. I lost about 80k when the US market dropped 22% in 2022. This is why proper diversification is essential.

A: Did you stay invested after the decline in 2022? If so, you probably did not lose anything. The stock market has historically recovered from all declines eventually, with 88% of declines recovering fully in 1-2 years. Ed

Q1: @EdRempel: You are correct, I was fully invested, it is when you sell that you actually lost money. Thank you for the feedback.

A2: This study improves on past studies by looking at 39 developed countries, solving some issues such as survivor bias, and looking over a typical full retirement of 30 years. The Yale study was only US, but still has similar conclusions. Interestingly, I quote David Swenson in my email signature. My blog is Unconventional Wisdom ( www.unconventionalwisdom.ca ). My email signature includes: “To have unconventional success, you can’t be guided by conventional wisdom.” -David Swenson” Ed

• You should also know that international funds in stocks yield more than bonds. Bonds do not account for inflation. Minus the average 3% inflation rate from the total returns from international stocks, you will still get on average about 8%, you can’t beat that.

Q: Why stay away from bonds?

A: Bonds barely keep up with inflation long-term, so they add hardly any growth. They are not reliable long-term after inflation. From 1900-1982, bonds made zero after inflation. 82 years with zero! From 1940-1980, bonds lost 50% after inflation after 40 years of investing! The standard deviation of bonds after inflation is higher than stocks for periods of 20 years or more. Bonds are steady short-term, but are not reliable as a long-term investment if there is any inflation in that period. Inflation being as high as the yield happens very often. From 1900-1982, bonds made zero after inflation. Ed

Would this work in some time periods but not others?

• That’s been great for the past decade or so, but it wasn’t always the case. Surely, it’s wiser not to put all your eggs in one basket.
• What will you do if the market crashes and S&P 500 index goes down by 50%, or just like from about 2000 up until 2010 the US market produces negative returns for a whole decade, a bear market for 10 years.
• I think bonds have been in a peculiar situation in recent years. When in the past were interest rates so low as they were in the past decade. That sent bond prices way up — and the interest rates rose to more historical rates, that sent bond prices crashing. I am resolved to not own bonds if we have interest rates of 2% or lower.
• The US equity market underperformed from 2000 up until about 2010. A whole lost decade. So if you’d put a lump in the US market, say S&P 500 index or total US index in 2000 it would be worth less in 2009. Including reinvested dividends, it would still be worth less than what you initially invested in 2000. And this equity bull market since 2009 is the longest bull market in recorded history. This definitely isn’t normal.

A: This study showed that the returns were higher and the risk of running out of money was lower over your lifetime, including right through retirement. It improves on past studies by looking longer term over the time of a typical retired couple, by fixing data issues such as survivor bias, and by including long-term data from 39 different developed countries. It did not work 100% of the time, but far more often than the conventional wisdom using bonds.

Would it work for narrower equity indexes, such as the NASDAQ?

@EdRempel Thanks for your review of this study. As it turns out, I just read the study yesterday and happened on your review of the study today. I have a question that I haven’t seen anyone address. I know that the study only focused on stocks, bonds, and short-term bills because of data availability. However, I’m curious how the conclusions might change if one were to include alternatives (e.g., real estate, private equity, private credit, infrastructure, commodities, etc.) in the mix. Do you think that real estate, infrastructure, private equity, private credit could change the conclusions at all, and if so, in what ways?

Q: What’s your opinion on investing long term (20+ years) in Nasdaq vs. S&P500 for retirement? You mentioned that equities become less risky with time compared to bonds. Does this principle hold true between different indices, i.e. high-returning equities become as risky as lower-returning equities?

A: The studies that show equities long-term have been more reliable than bonds are all about broad markets, such as S&P500. I have not seen similar studies for narrower indexes like NASDAQ. It may or may not be true. I did read a study years ago about the “Nifty 50” high growth stocks in the late 1960s. After a large bull market, they declined a lot and struggled for years. However, 30 years later, they had outperformed the S&P500 even if you bought then at the very peak. I would suggest that more focused indexes like the NASDAQ are likely to outperform the S&P500 long-term, but with a lot more volatility in both directions and probably more uncertainty over the long-term. Ed

Is this study new?

Q: Isn’t this old news? The study came out in Nov 2023.

A: No, This study is new. It was published December 2024. It is higher quality than past studies. Ed

Isn’t the risk of running out of money in retirement similar for 100%, 80% & 60% equities?

Q: At 12:58 (in my video about the study), it’s pretty clear that a 80/20 to 60/40 stock to bond ratios have very similar risks of running out of money at 3-4% withdrawal as 100% stocks. I suspect the study is warning against very heavy bond ratios of 40/60 stocks to bonds as some of these timed ETFs have.  I’m retired at 57 with a roughly 70/30 stock to cash+bond index fund ratio. I don’t believe that chart shows that I have a higher chance of running out of money. I’m happy with that ratio because of the possibility of a downturn in the future. I expect one significant economic downturn in retirement and have to prepare for that mentality and financially.

A: My study about the 4% Rule shows it has had a 96-97% success rate in history for portfolios with 70-100% equities. For higher withdrawal rates, such as 5%, the highest success has been portfolios of 90-100% equities. This implies that higher equities is likely more reliable over a 30-year retirement in more extreme markets. Of course, the higher the equity allocation, the higher the long-term returns on average – with the same risk of running out of money. The study just shows what has worked over time for most long-term investors. You can make market timing calls like you are if you want. Ed

Isn’t it better to keep some cash?

Q: I’m curious about your suggestions for withdrawal in retirement? I know in other articles you’ve mentioned not keeping a cash wedge.

A: My study “How to Reliably Maximize Your Retirement Income – Is the “4% Rule” Safe?” showed that holding cash has never helped any time in the last 150 years. There has never been a case where someone ran out of money during retirement with 100% equities that would not have also run out with a cash holding of any size. Cash holdings over 30 years have always had lower returns than stocks, which has been a more significant factor than using the cash through market declines.

Join the debate. 

What do you think? Is 100% equity investing for life, including right through retirement, with 33% domestic stocks, 67% international stocks, 0% bonds & 0% cash an effective portfolio for you?

My view for investors in Canada is that investing globally, with almost nothing in Canada (0-5%) & a high amount in the US, is the most effective for both building your portfolio and for providing a reliable retirement cash flow for you, as long as you will maintain your plan & allocation through market declines.

Ed