[caesarshift]

You've summed up my feelings well: I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar. And yet I don't trust that the stock market numbers represents actual growth. It's propped up. When does this end?

[JumpCrisscross]

> I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar

If the market crashes then cash outperformed. There is also a lot in terms of bonds, structured products and fund products between cash and equities.

[billmalarky]

You shouldn't necessarily be all equities. Look up "Risk Adjusted Return" and "Modern Portfolio Theory."

You can significantly lower variance (risk) and at the same time only slightly lower returns using diversification.

[ThrustVectoring]

Eh, futzing with your asset allocation is significantly less important than budgeting well, managing your lifestyle/expenses, and making your career work out well. You can retire without beating inflation, let alone stock market indexes.

[sp332]

Retire without beating inflation? Does this involve saving 30% of your paycheck for 40 years?

[ThrustVectoring]

It can. Depends on how much you make and spend. You can retire with zero savings if you can control costs to beneath what social security pays you, but it'll be really rough.

[QuarterReptile]

You're talking about allocating some set portion of your savings as bonds or cash, and occasional rebalancing away from your higher returning investments to maintain the proportion?

[billmalarky]

At the most basic, yes.

Take a look at this chart, it explains it way quicker than words could.

http://cdn.financialsamurai.com/wp-content/uploads/2016/06/T...

Note dropping from 100% equities to 70% equity and 30% bonds drops your return by about a percent while dropping your risk (variance) by just over 4%.

Taking on additional risk leads to a higher expected return, but you can see that more and more risk leads to increasingly marginal amounts of additional return in exchange for large amounts of risk.

The comment I was responding to felt distraught that he had to be exposed to the heavy risk provided by only investing in equities, when he could sleep better at night using investment diversification (ie different types of investments, not different stocks) while still maintaining a great ROI (certainly better than the negative ROI of just hoarding cash).