Episode summary
All-In on the S&P 500 Worked for 18 Years | Jared Dillian on Why It's Still Wrong
Excess Returns
· · 57 min · Hosts: Matt Zeigler · Guests: Jared Dillian
Summary
Jared Dillian argues that putting an entire life savings into the S&P 500 is popular but wrong because it leaves investors exposed to volatility they may not be able to tolerate. He says the goal is not to maximize excitement or chase the highest return, but to build a portfolio that investors can actually stick with through bad markets and bad years in their own lives.
His answer is the Awesome Portfolio: 20% each in stocks, bonds, gold, cash, and real estate. Dillian says adding real estate improves Harry Browne’s Permanent Portfolio by lifting return while lowering volatility, and he emphasizes that many investors already have real-estate exposure through home equity without counting it. He also argues that cash is not dead money but an option on future opportunities, and that annual rebalancing is essential to keep the risk profile intact.
A major theme is psychology. Dillian says checking a volatile portfolio too often increases stress and bad decisions, while the “life hedge” matters because portfolios often rise and fall alongside careers and incomes. He is skeptical of the idea that investors should simply endure huge drawdowns, especially after his own net worth was cut in half during the financial crisis.
Key takeaways
- Jared Dillian says the S&P 500-only approach has worked for years, but it is still the wrong framework for most people because volatility drives bad decisions.
- Jared Dillian’s Awesome Portfolio is 20% each in stocks, bonds, gold, cash, and real estate, with real estate the key difference from the Permanent Portfolio.
- Jared Dillian says cash is valuable because it dampens volatility and gives investors optionality to buy assets or meet spending needs without selling at the wrong time.
- Jared Dillian argues that investors should think about the “life hedge” because jobs and portfolios often decline together in recessions and crises.
- Jared Dillian says 2022 exposed the weak spot in the portfolio—rapidly rising rates—but the drawdown was still much smaller than the S&P 500 or a traditional 60/40 mix.
Notable quotes
“Volatility is the enemy. The purpose of volatility is to make people make stupid decisions”
“I don't want to trust my entire life savings to the stock market”
“cash is an option. It's an option to buy something else cheaper in the future, right”
How the episode opens
You're watching Excess Returns, a channel that makes complex investing ideas simple enough to actually use where better questions lead to better decisions. Who's with me today? Well, we've got, let's see, from Lehman to Daily Dirtnapping to DJ Stchicking with 18 books, four billion blog posts along the way.
Here to discuss the newest book and what we can apply from it even today in these wacky markets. It's the awesome portfolio author himself. Hold it up, Mr.
Jared Dillian.
Yes. Yes. I I have the same birthday as Ed McMahon, so I can go. Yes.
It is your birthright, your god-given birthright, sir, to Ed McMahon. So, it's a great book. I'm just gonna start.
I want to start here. This is a great book. This is one of the better portfolio books that I think has come out in a while.
I'm not saying like the psychology of money and those things sort of took us all in this other direction, but this is like a really really good portfolio book. Do you realize what you did with this?
I really don't actually. Like it's funny because um I the so when No worries came out, god I did I did like a billion podcasts and maybe maybe not a billion but I did like 75. It was a lot and
75 is a billion in podcast years. It's like a dog ear conversion. You just got — So like I got a lot of feedback on the book. Like I haven't done as many podcasts this time. Not that many people have read it. I really don't know. Like I don't have a lot of feedback on it. I don't I don't I mean people tell me it's good but I you know I don't know.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- s&p 500 concentration
- awesome portfolio allocation
- portfolio rebalancing
- life hedge job and investment correlation
- volatility and drawdowns
Companies and tickers mentioned
- S&P 500
- Harry Browne
- Charlie Munger
- Bitcoin
Watch the episode
Watch “All-In on the S&P 500 Worked for 18 Years | Jared Dillian on Why It's Still Wrong” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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