Optimizing Portfolio: S&P 500 and International Stocks

Having the correct allocation strategy in retirement is crucial for success. The question often asked is whether solely relying on the S&P 500 is sufficient for a comfortable retirement.

In this guide, we’ll delve into 53 years of historical data to analyze the performance of the S&P 500 and international stocks, providing insights to help you make sound investment choices.


The S&P 500 – A Common Choice

The S&P 500, endorsed by notable figures like Warren Buffett, is a popular investment choice. However, is it a one-size-fits-all solution for retirement? Let’s explore the data to find out.

Comparing S&P 500 and International Stocks

Analyzing data spanning over five decades, we compare the performance of the S&P 500 against international stocks. The data reveals that the S&P 500 outperformed international stocks in 54% of ten-year periods. This challenges the notion of a straightforward decision, urging investors to carefully consider their choices.

The Recency Bias

Investors often fall prey to recency bias, assuming that recent trends will persist. While the S&P 500 has shown remarkable performance in recent years, it’s essential to recognize the cyclical nature of markets and avoid making decisions solely based on short-term trends.

Diversification – Beyond the S&P 500

Diversification is key to managing risk. While the S&P 500 includes large global companies, investing solely in it may lean heavily towards specific sectors, like technology. A balanced approach, incorporating international stocks, ensures exposure to diverse markets and industries.

Timing the Market – A Risky Proposition

Attempting to time the market by shifting between S&P 500 and international stocks can be challenging and risky. Instead, adopting a relative momentum strategy allows investors to capitalize on trends without making extreme, all-or-nothing decisions.

Income Generation in Retirement

Retirement planning involves not just accumulation but also systematic income generation. The stakes are higher in retirement, and selling investments during market downturns can be detrimental. Diversifying among various asset classes, including bonds and cash, can provide stability during turbulent times.

Crafting a Strategic Allocation

To address the challenge of income stability, a strategic allocation of cash and bonds can help to not sell stocks when they are down. Decide how many years you feel comfortable creating income and then allocate cash and bonds for that many years of income needed. If stocks go up, you can trim the gains and replenish the bonds for sustained retirement income. This allocation is designed to create income during market downturns, allowing time for stock investments to recover.


In conclusion, while the S&P 500 is a significant player, it may not be the sole answer to a secure retirement. Diversification, strategic allocation, and a careful understanding of market trends are essential components of a robust retirement investment strategy. By taking a comprehensive approach, investors can navigate the complexities of the market and build a foundation for a comfortable retirement.

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures

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