Personal Investments • Aggressive Roth options for 16-year old

100% stocks. Maybe half in S&P 500. I'd also consider MGK if I was 16, with a 60+ year time horizon the volatility is not of any importance.

Why would a 16-year-old be better than someone older off chasing performance with MGK (megacap growth)?

Someone older cannot wait out another tech bubble burst, while someone who is 16 can. Yes its a bit of a sector bet, but given the dominance of technology and trends in the 21st century thus far I'd be more than willing to put 50% on it if I was 16 and had nothing but time.

There is no tech premium in the historical data

There is a value premium

They should be taking the opposite side of this bet

Past performance does not guarantee future results. Since the mid-90s technology has been the driving force in the US economy, and I'm willing to bet we have another few decades of that trend. The concept of risk premium implies you care about volatility, which a 16 year old really can ignore for a couple decades at least. Total return is really what matters. If I tell you you an have 15% return with a 0% risk premium or a 10% return with a 1% risk premium but you have 60+ years to invest you want the 15% because the difference in compounding is so large.

Statistics: Posted by rogue_economist — Tue Jul 23, 2024 10:45 am — Replies 50 — Views 4037

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