So my 401(k) is up 10.4% this year just investing in the S&P500 ...

[SyZ]

Well, it puts 90% into the S&P500, which I told it to invest 100% into, because it puts the other 10% into the company stock for the pension. So far this year, it's up 10.4%. Seems pretty insane, but I also know the S&P500 is rather conservative, and I still have 20 (if I get out of the game early) to 35 (if I retire at 66 per usual) years left to invest - should I be considering swapping to something with more risk that is more diversified? This is an 18k / year contribution to the work 401(k) and I don't yet have a Roth IRA outside work which I really should...

[JJ-]

Are you sure that you're not mistaking a portfolio balance increase for investment returns? S&P is only up 6.7%. Your company stock increase would have to be on the order of ~30% to make up the difference.

[TheAnonOne]

Are you sure that you're not mistaking a portfolio balance increase for investment returns? S&P is only up 6.7%. Your company stock increase would have to be on the order of ~30% to make up the difference.

He could be up more than the 6.7% because the SP500 has tanked 2-3 times this year and recovered. If SOME of his purchases were during those times, then he would have had beat the sp500.

For me, I got some stock during the jan/feb crash, the may 'lul' and the BREXIT. So I had to beat 6.7%.

Of course, these swings REALLY would only change your returns during your first 1-3 years, because after that, your contributions would go from being massive portions of your total invested worth, to being small dents.

[Jack]

should I be considering swapping to something with more risk that is more diversified?

Riskier and more diversified than 100% S&P 500? What did you have in mind?

You could swap out for a total US stock market index or even an international index, but IMO those aren't significantly different in diversity or risk than the S&P 500.

Beyond that, as far as I know the only things riskier involve either leverage or less diversification (or are a different asset class entirely, such as real estate).

[beastykato]

No, I'd say he is telling the truth.  My 401k portfolio is up 8.6% in the S&P and I have ~15% of that in bonds because I hold all of  my bonds in my 401k for tax purposes.

[JJ-]

He could be up more than the 6.7% because the SP500 has tanked 2-3 times this year and recovered. If SOME of his purchases were during those times, then he would have had beat the sp500.

...

Of course, these swings REALLY would only change your returns during your first 1-3 years, because after that, your contributions would go from being massive portions of your total invested worth, to being small dents.

Valid.

[JJ-]

No, I'd say he is telling the truth.  My 401k portfolio is up 8.6% in the S&P and I have ~15% of that in bonds because I hold all of  my bonds in my 401k for tax purposes.

Yeah. I haven't been paying enough attention. I just looked and some of my accounts are reporting gains of 10-15% YTD, others less. Who knew.

Getting back to the root of the matter, as Jack alluded to, anything reasonable that is more risky and more diversified than the S&P just doesn't exist.

[SyZ]

I learned / was taught that large cap = less risk, mid cap = meh risk, small cap = wtf risk, meaning I'm investing in the smallest risk possible, which would make sense given we aren't expecting Apple and State Farm and Walmart and Toyota to belly up, meaning there's much less risk than investing in an upstart Irish business who wants to invest all their money into a 5 year plan to beat Apple, or whatever. I agree it's exceptionally diversified, which is initially why I put all my money there. Then I just kind of left it because I was getting good returns and didn't see why I should go elsewhere

[jorjor]

I learned / was taught that large cap = less risk, mid cap = meh risk, small cap = wtf risk, meaning I'm investing in the smallest risk possible

No you aren't. You're investing in the smallest risk of those three options you presented. There are plenty of other possible investments that provide lower risk.

[Jack]

I learned / was taught that large cap = less risk, mid cap = meh risk, small cap = wtf risk, meaning I'm investing in the smallest risk possible

If we're talking about individual stocks, I agree. If we're talking about large cap index funds vs. mid or small cap index funds, I'm not so convinced. After all, the probability of one "upstart business" going belly-up might be high, but the probability of all of them doing so at the same time is low.

For example, consider the Vanguard Extended Market fund (VEXMX), which is basically total stock market minus the S&P 500. According to Morningstar, its 15-year standard deviation is 18.02 vs. 14.71 for the S&P 500. That's still higher, but not all that much higher. More importantly, its Sortino Ratio is 0.69 vs. the S&P 500's 0.54, which suggests that small caps have better risk-adjusted return.

[k9]

Getting back to the root of the matter, as Jack alluded to, anything reasonable that is more risky and more diversified than the S&P just doesn't exist.

*cough* Russell 2000 *cough*

[TheAnonOne]

If you wanted more risky(as in a gamble) put it all on RED(or your company of choice) and hope it goes well.

Choose a smaller or medium tech company and hope Google/Amazon/MSFT/Apple buys them out.... You might be an overnight millionaire(or more), but more likely you'll end up in an alley eating banana peels...

[k9]

More reasonably, a basket of small cap value stocks is known to have a higher risk & higher reward than a basket of large cap blend stocks. I'm not sure betting on only one stock improves reward as much as it augments risk.