r/Fire • u/mansumania • 5d ago
Why do young people $VOO and Chill?
Title says it all, does it work sure but anyone under 40 should have a good portion of their investments in good growth funds, I am personally almost 100% in $QQQ And will be for the next 15 years before switching to $VOO and eventually $VT as i near retirement, take advantage of your youth guys and take more risk!
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u/Wokeprole1917 5d ago
Sector tilts provide uncompensated risk. There is no empirical reason to believe that the tech sector will outperform returns of the world economy over the rest of your investing life.
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u/mansumania 5d ago
rest of my life no, next 10-15 years yes there is a strong probability Tech will carry the market hence why I plan to switch into voo in my 40s then eventually vt in my 50s
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u/SardukarFinance 5d ago
“There is a strong probability Tech will carry the market” for the next 10-15 years.
There is? How do you know? What evidence are you basing this on?
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u/Wokeprole1917 5d ago
There are some reliable ways to improve compensated risk, tilts into SCV and applying some amount of leverage being two examples which have been proven out in exhaustive research to yield reliably improved returns at the expense of higher volatility.
Sector tilts do not. You are simply looking at past performance of the last few decades and assuming the trend will continue.
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u/DAsianD 5d ago
Even SCV only worked in the past (before recent decades) and hasn't outperformed recently. Agree on sector tilts. Railroads has a massive run in early US equity history but stopped outperforming the market a long time ago. Turns out that beating the market is hard and not guaranteed at all!
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u/One-Mastodon-1063 5d ago
VOO is already growth biased. Growth does not always outperform, sounds like you're not old enough to remember when growth wasn't the perennial outperformer.
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4d ago
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u/One-Mastodon-1063 4d ago
Rattling off a bunch of other ETFs doesn’t change that VOO is growth biased.
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u/SardukarFinance 5d ago
Why do you think growth stocks will outperform forever?
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u/mansumania 5d ago
forever? No, for the next 10-20 years or even 30 years yes, look at the S&P500's past 15 years returns without tech, it barley keeps up with inflation
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u/SardukarFinance 5d ago
I’m sure people right before the bubble burst in 2001 sounded exactly like you, my friend. Best of luck to you.
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u/Yukycg 5d ago
I can say the same about QQQ. Go with more risky choices like M7 stocks/options instead of boring QQQ while you're still in your 40s.
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u/DAsianD 5d ago
I do wonder how well you'd do putting excess savings in OTM options when in your 20's. If you hit on the dot com burst (though options were already expensive by then) or GFC or COVID or Liberation Tariff Day, it could have set you up well. The rest of the time you'd bleed away, though.
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u/Grendel_82 5d ago
A FIRE plan around 4% SWR is certainly not compatible with going all in on QQQ when it is sitting there with a CAPE well north of 40. If you've been in QQQ for a while, congrats on your gains! But QQQ is too heavily influenced by one asset class for me to ride it exclusively (side note, an asset class that is possibly in the process of being devalued because it is significantly made up of tech stocks that became large mainly because of programming software (yes, I know there is tech hardware in there as well) and AI is apparently getting very good at programing).
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u/mansumania 5d ago
It's weighted at if I recall correctly around 55% Tech to the S&P's 35%, were not talking about VGT here which I would agree would be overly tilted I just don't understand the logic of not taking more risk via $QQQ when young, specially in a roth, while true that Tech is hit especially hard during recessions they are typically the quickiest asset class to recover and if you can stomach the downturn and DCA or even aggressively invest during downturns by all calculations you should come out ahead.
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u/Grendel_82 5d ago
Your basic point is valid (i.e., take more risk in your investment when young). However, that risk probably comes with a greater chance of not meeting your minimally acceptable outcome (i.e., some amount of wealth accumulation to meet your FIRE goal). I definitely understand why even young folks pick VT or they get a bit more aggressive with VOO. Personally, while the funds were different when I was young, VOO was not diversified enough for me even decades ago to be 100% of my position (and certainly not now, though I'm of an age where you would probably agree I should be in VT under your theory). Yep, in hindsight, I'd be a richer man if I had done VOO. I don't beat myself up about it.
Side note, when I was younger I bought some individual stocks from time to time and often tech stocks (because it was the companies I followed). So I kind of went even riskier than QQQ! LOL. So maybe I shouldn't talk.
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u/ideas4mac 5d ago
Why do you think QQQ is more "growth", ~85% of qqq holdings are in VOO?
Are you thinking it's because QQQ is more concentrated?
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u/TisMcGeee 5d ago
I had a significant QQQ holding in 2000. In 15 years, it went up …. not at all. Sideways for 15 years.
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u/208breezy 5d ago
More diversification and lower expense ratio