Will This Outperform The S&P 500...With LESS Risk?

could this fund outperform with less risk than the S&P 500 all right so I've been reading this article because this is very interesting to me so I've been working my man Craig israelson as you know in his retirement portfolio analyzer uh spreadsheet you can get it's it's freaking fantastic um and there's some negative Nellies that say well Craig is real in 712 portfolio because that's where the basis of that's where I got to know Craig just reading through horse's mouth and VAR financial planning magazine and stuff and I said man so when on day I reached out to him and he said yeah he'd love to do an interview and here we are I'd call Craig a friend of mine he's freaking crushes great great guy crushes anyway the the premise how I came to find out Craig was in N in the ODS when everything was getting trounced the one thing that didn't get trounced was his 712 portfolio and so this is what we're seeing here the 712 portfol but we're not going to talk about this today we're going to talk about something else I want to share with you but the point was when you spread your risk out of I got to close the door when you oh I guess I can't cuz I got dog sitting right there so air conditioning the outside great Al Gore is gonna put me in jail finny oh boy so when you're spreading your risk among many different asset classes it's hard for one of those asset classes to take you out Allah in 2001 and two the S&P 500 got smoked but wasn't the S&P it was the S&P 500 but the grow stock of stuff of the S&P 500 Wellington you'll know it's did fine value stocks did fine if you look at Windsor now 2002 they didn't come here but they didn't get destroyed nearly to the extent that the S&P 500 did and the reason for that is because the S&P 500 was so heavily overweighted in the tech stuff that when Tech you know fell on his back and everything went down with it in the S&P 500 as a whole but these other stocks did not dividend stocks did okay well just bonds did fine so where I was reading in financial planning magazine and hores mouth Craig had written about this like look this 712 portfolio um has done fine um it did it survived the whole odds now over the last 10 to 15 years it has done poorly relative to the S&P 500 not poorly as an investment but relative to the S&P 500 because the S&P 500 is just blown everything out of the way it's just just just a fact and so and the reason for that is what they used to be called the nifty50 the what they call it now the Magnificent 7 or something like that so the mag magnificent sevens represent more and more of the proportion of the S&P 500 this reminds me a lot like 1999 I'm not saying these companies you Nvidia and Amazon have the nose bitter PE ratios like we had in 19 .99 I'm not saying that I'm not even saying you should get out of the S&P 500 I'm not saying that at all I'm just doing this video because of the interest to me and so if we go to Craig's 712 portfolio he's got 8.33% in all these different asset classes Commodities real estate cash uh I can't read all that what that stuff is but you can see right here this is 712 portfolio if we look at historical performance we're going to come over here we're going to see of the seven major asset classes uh you'll see right here is equal weighted multi-asset portfolio has done 99.33% um since uh what was it 199 uh since 1974 9.33% where the uh let's see where's the S&P 500 the S&P 500 is things done better I can't remember but you can see right there 99.33% average uh since 1974 all right now it's going to be tough to to mimic that because you got to rebalance and all that all these different asset classes every year but it just shows you right there with a standard deviation 10.52 all right so nine well actually we can compare that to SP 500 because we can go 1974 to 2023 9.33 versus 10.52 so let's see what the stand the S&P 500 did and we're going to go to the political calculations website which just freaking awesome love these these gents these germs ladies and germs we're going to go to 1974 and we had 9.33 and you're going have you guys just sit there by thumb through this my man R said the other day watching you on the internet it's like watching my uh do a spreadsheet it's like watching my grandpa figure out the internet I thought that was pretty funny 1974 and we're going to go to the end of 2023 right there I don't think had standard deviation so we're going to see yeah 11.11% with full dividends so if we see uh Craig is rails and stuff a average 9.33 but the S&P 500 average 11.11 and I don't know the standard deviation on top of my head for the S&P 500 I can almost guarantee you it's more than the seven Buck the seven asset class portfolio does it have standard deviation here yeah I don't see it I think it's almost 15% or something like that be desay so anyway so then what happened was there's this Rob or not from the research Affiliates was writing back in the late a early teens about the equal weighted S&P 500 Index and there's a ticker for that by the way don't forget to fondle the like button fondle it and tickle it at the same time we we're fondling and tickling tickle tickle tickle tickle tickle tickle pretend you're tickling Pablo don't forget to do that and if you haven't subscribed subscribe now if you don't like my politics don't subscribe I don't care but you know if you're like this guy Josh he's all right I'll I'll I'll take what I can and I'll leave the rest behind that's fine because I'm gonna encourage you I'm gonna tell you where it's at and all of a sudden You' be like a Josh zombie like Josh says go I'm going zombie say zombie dumb says the Reverend Horton anyway so back then Rober not had said look the equaled S&P 500 actually outperformed the S&P 500 in the ODS and that kind of made sense to me because you're spreading your risk among uh basically smaller stocks in particular so you didn't get nearly as crushed in the S&P 500 as you did uh because you're spreading your risk among among so what an equal it's just different just exact same thing as Craig is realon instead of having the market cap weighted where the basically top in this case top 10% of the S&P 500 stocks are represented like 35% of the entire portfolio you're saying each stock in the S&P 500 will be 1 500th of a size so Apple be500 so in freaking Joe smoke shop they'll all be 1500 and so the problem with that is when we have a massive rally of these top seven to eight stocks like we've had in the last 10 15 years or so Apple becomes bigger Amazon becomes big and whatnot and Joe schmoke shop because it's still as equal weighted as Apple is is holding the index down if that makes sense and this is where the market cap dominates and we'll just show you right here so I ran a uh portfolio visualizer thing yeah it's not portfolio visualizer freaking stupid this is better than not but why' you why' you do that portfolio visualizer man and you'll see right here going back to 2010 the S&P 500 as this is in blue has uh $10,000 in the S&P 500 is worth 62,000 in as as of 2024 where it's only worth 50,000 and the equal weighted which is RSP did I already say that I can't remember if I did RSP and the S&P 500 is vo so Romeo Sierra Papa all right versus voo Victor Oscar Oscar all right so but the question is that's great and all but what did it do before that we're GNA go to this article right here I got the hiccups oh my goodness hold on a second boy how did I get the hiccups I'm going to show you something not sure what this is representing actually this I don't get it so the index level start at I guess zero in 1970 and the equal weighted ones at 500 with the S&P 500 is 250 or 27 that that's not a very confusing chart I want to show you something different oh right here right here us Equity Market concentration reached the highest in half a century all right so that you know in sell like oh my goodness let's keep going that that's not what I'm looking for here I'll show you what I'm talking about momentum is also historically extended this is all for the market cap this is the S&P 500 you can see when the high right here and then we gotop when it got high right here what's don't know and we got high right here 1979 now remember 1982 was a bottom all right so 1982 is a bottom so we got smoked from 79 to 82 is when you really if you were buying stocks in 82 you freaking made money man that's just really I'm I'm not saying you only had to make money in 82 I'm just saying that's usually the beginning of the great Reawakening of the equity markets so in of itself this tells us okay this is high it was equal high as it was in 1999 the those pleases in 1999 aren't the same as right now though I'm just telling you right now the PE ratios are much much lower than they were here uh for right now so I'm not in the same category I'm just not um I want to show you something else right here so this is interesting um so over the last 10 years the S&P 500 has beaten the equal weight by 200 basis points a year and that's real money I just showed you over the last 15 years it's pretty even Steven over the last 20 years though now remember this does the last 20 years does not include the first five years of this Century which the S&P 500 got smoked over the last 20 years the equated index beat the S&P 500 by five basis points not much but the hell of lot risk and again I don't know the exact standard deviation of the equated index and it might be higher I don't know but the but look at this man I mean the S&P 500 I just want to show you this this right here that's that's a big draw did that happen in the equated index in 2000 2001 and two I bet it did not because the equal weight index doesn't have as much in one SE sector and I'm G to show you here in just a second and if you look at the full period from 2003 to 2024 the equated index beat the S&P 500 by 40 basis points again not not a huge percentage don't get me wrong but it did take some of the downside risk off the table here we got the equated index versus the S&P 500 S&P 500 32% of the S&P 500 about a third is in it only 13.4 is in the equated index 8.1 is an Industrials only twice that in the equated index healthc care roughly the same uh there's another one in here right here real estate is three times that in the equated index as it is in the S&P 500 utilities three times that roughly uh materials about two and a half times but theit again you can see right here the difference right here communication Services only 4% of the equal index whereas 9.3 all right and the S&P 5 the equal performing in equal index wins over historic I don't know if it's going to happen in the future is they had access to more smaller siiz companies all right and so you can see right here the largest weight of the S&P 500 7% of the category the top 100 companies the S&P 500 69% of the S&P 500 is the top 100 that means the next 400 30% or the next 400 if that makes sense and the bottom is basically just the Bottom Feeders hardly have any waiting in the S&P 500 where they're 2% of the equated index isn't that interesting and the small companies if we just if we know our history which we do from 1976 to 1983 the small companies so overwhelm the large companies that's what makes a small cap premium I don't think that's going to continue I don't know but I will tell you what we also do know is that when things have a massive momentum and when a momentum shifts the things that built up the momentum can shift very quickly to the downside momentum and Trends are a big deal in investing and the S&P 500 is based on momentum and Trends it's just a fact and so now that we have this massive momentum of it a third of the S&P 500 is an it loan uh if that changes I don't know if it's going to uh the S&P 500 will be more volatile going down and because the equaled is more diverse it just is and I would think intuitively it' have less downside risk I can't say you should do this I don't know anything about your portfolio this is why I have bti by the way because vti is 30% small and midsize companies just FYI so of V of vti 70% is the S&P 500 but the other 30% is small and midsize company so I'm not changing anything because I don't have S&P 500 I got bti because even though this right here the top 100 companies represent 70% of the S&P 500 it only represents uh uh 7 time 7 uh only represents half of my portfolio the reason being because I have 70% of my vti is the S&P 500 70% of the S&P 500 is representing the top 100 companies so only it takes 7 time 749 % of my portfolio is the top 100 domestic companies which means 51% is the rest small mid and everything else and that's that's why youd want vti over vo in my humble opinion and if you want to diversify more you go to equated thing if you want to and again I don't know what the hell is going to happen you don't know but I just find it very very interesting especially given that we've had such a run for 10 to 15 years of the S&P 500 outperforming all things revert back to mean and I don't know if the mean is uh equal way to do better I don't know or if the mean is that the sb500 continues to do better I we don't know what the mean is we don't because you can look at any time frame in history so that's the mean I said well I look at a different time frame this is the mean oh yeah but my mean is better than your mean so no one knows you just something to think about for sure it definitely be looking at DTI if nothing else and again I can't tell you what to do I don't know you I don't know where your circumstances are but vti is absolutely more Diversified than Bo without question and it's still heavily vo don't get me wrong but something all right love to your thoughts God bless we'll see you