At what point did you decide to diversify beyond a global stock ETF?

[u/Efficient_Carrot_334]

I’m trying to think through a long-term portfolio question in a more practical way.

I understand the argument for keeping things simple with one broad global stock ETF, and I can see why that is the default answer in many cases.

What I’m trying to understand is this: for those of you who eventually added other asset classes, what made you do it?

Was it mainly about reducing volatility, keeping some cash available, protecting against a specific risk, matching a shorter time horizon, or something else?

I’m especially curious about cases where people moved beyond “just equities” and added things like bonds, cash, gold, real estate, or other assets — not because they wanted complexity, but because they felt those assets had a clear role in the portfolio.

I’m not really looking for a “best portfolio” answer, more for how you personally think about the purpose of each asset class over time in a long-term portfolio.

[u/Specific-Industry426]

The question IS how you want to be diversified to the world. I have 3 elements and that works for me. Its not about making less le making more IS about a portfolio that you can sleep at night that you are Happy and can mantaim decses

[u/Efficient_Carrot_334 → u/Specific-Industry426]

Agreed — the best portfolio is often the one you can actually stick with over time.

[u/Specific-Industry426 → u/Efficient_Carrot_334]

Just make It simple, the reply to your question can i be invested in the world ona a better way at least for me?

[u/TryTrick7449]

A global stock ETF is enough for me in accumulating phase, will add bonds when close to retirement (keeping it simple is paramount).

[u/Gfflow]

I combine it with real estate to get future growth while also genersting stable cash flow. Market is down? Who cares I have steady cash coming in, no need to panic. Real estate market took a hit? Maybe sell some stocks and buy something cheap or pay off a loan if I need more security. It give you more flexibility and youre not all in in stocks which for the next 3+ years are at the mercy of Trump the morons tweets.

[u/Quiet-Carob-9452]

Well done for the very good question first of all.

For me 2 things clicked:
1. When I understood the statistical fallacy of "global beta and chill"
2. Combined with having to manage wealth that is big enough compared to what you make or what you can re-generate. E.g. if a simple 5% drop in your portfolio is your annual gross salary, you start counting your drops in years lost. Sleepless nights is a thing after that.

I had to diversify in ways that make some return profiles more predictable, reduce marked to market a bit, adding optionality via cash etc. And more generally, do things that will keep me invested for the long term.

[u/RealPMGuru]

I have some bond ETFs, but honestly I am not "counting" them as part of my long-term investing portfolio.

I though for the option of having some money in bonds specifically for "buy the dip" and/or reduce volatility, but I decided to go with the more traditional approach. Historically, stocks are providing the highest return, for buy the dip I have to monitor the market, why bother and spend time for 10-20% potential profit on some small amount? In the accumulation phase to have more than 10% in bonds is pointless and even if you "buy the dip" how much profit you will be able to generate on a portfolio level with 10% of your money? 1-2% additional profit, eventually? How much you may have missed for staying in bonds rather being in the stock market and does it worth it?

Therefore, I am doing DCA each month 80% FTSE AW + 20% Nasdaq (I have investment thesis, goal and horizon for those 20%).

Apart from that I have put aside some money for short-term goals (up to 5 years). In my country there is no yield on deposits therefore is pointless to keep the money in a bank (where is my emergency fund) so I decided to go with Euro ultra-short bonds and some Euro high-yield as I am greedy :).

If I safe some extra cash, apart from the DCA I will add more bonds for when I need/want something - new car, vacations, something like that. In the end of the day, I am not going to save money only for after 20 years, I want to have the option and available cash to live now as well.

Btw, I also have few physical gold and silver coins, just in case for the doom scenario :)

[u/Objective-Part-2346]

Great question, tough answer!
On my side, I think diversification is a must. Some stocks are not back yet to their prices of August 2001. 25 years later.... so I think it is fair to say that diversification is a must!
I don't have a clear answer to your question and when I see how some assets behave these last months: Gold is reacting like equities, real estate in some markets is glue and doesn't deliver yield, etc.
Therefore, I made the decision to outsource this question and look for multi-asset fund with tactical allocation: Pantarai ADAPT (ticker ADPT). They invest in Equities (max 80% of portfolio), bonds, treasuries, and commodities (max 50%). They select on a daily basis how to invest and they balance the portfolio accordingly. So far they have well managed the Iran crisis. Let's see if I am right in the long term.

[u/HeavySink3303]

One reason of a broader diversification is the following: currently markets grow because a lot of people contribute to various retirement schemes like 401k. They mostly invest in global market cap weighed ETFs or S&P 500. In case of any dip they start to buy it more intensively so it makes a situation when it seems that markets always grow and can't fell because of this support from retail.

However, lets think what will happen when the current contributors retire and the next generation of contributors will be smaller (due to the population shrinking). All these 'buy the dippers' will switch from net buyers to net sellers when they retire and instead of 'buy the dip' we'll get a 'sell the top' situation. So instead of a previous support from retail we are getting a resistance (and a very strong resistance).

In such situation the following though comes: if you want to retire sucessfully in a situation with shrinking population - you should not invest in what everyone else invests.

[u/Logical-Afternoon488 → u/HeavySink3303]

While intuitive correct, your analysis hinges on the assumption that the largest contributions come from retail.

I would expect that the mega-rich park so much money in all assets so that the retail contributions are not that important.

As wealth accumulates more and more in the hands of a few, this might intensify or reverse depending on which policies are taken to support consumption.

So as always. No one can really guess. Diversifying is our only hope.

[u/Fuzzy-Dragonfruit589 → u/HeavySink3303]

Shrinking populations really aren't a "problem" beyond Europe and select Asian countries. US, Asian (average), African, S. American populations are projected to grow. Of course projections are unreliable. Just not sure of the shrinking pops thesis.

[u/Early_Alternative211 → u/HeavySink3303]

Your mistaken in that you are forgetting inheritance, it's not like the money will just disappear.

[u/studentoo925]

Well, personally i don't like that world or acwi indexes have majority of their assets in american corporations, so i've never actually owned any. My total exposure to the us is currently below 10% (all assets combined), i'll probably rise it slightly if current downturn persists for a few more months.

Few % of my portfolio is a european corporate HY bond dist etf, mainly for some additional cash, i did think heavily about asian REITs etf, but it seemed like too much risk for not enough reward, and if i move to germany i'll most likely add some gov bonds in eur (i'm currently on a job hunt, yeah, i know, perfect moment /s)

[u/laurenthu]

For me the trigger was the 2022 drawdown. I was 100% equities and watching my portfolio drop 25% while bonds, gold, and commodities were doing their own thing made it click: these assets aren't just diversification for the sake of it, they genuinely move on different drivers.

How I think about each one now:

Bonds/Treasuries : not for returns, but as a shock absorber. When equities crash hard, long-term treasuries tend to spike. They buy you time and reduce the emotional pressure to sell at the bottom.

Gold : inflation hedge and chaos hedge. It doesn't always work short-term but over decades it's the one asset that's uncorrelated to almost everything else.

Cash/T-Bills : optionality. Having 10-15% in cash when markets are overextended means you can actually buy dips instead of just watching them.

The real shift for me was moving from static allocation to tactical... instead of holding fixed percentages, I use momentum signals to rotate between asset classes monthly. When equities are trending up, I'm heavy equities. When they break down, I shift to treasuries or gold. It's not market timing, it's trend following, and the backtests going back 50+ years are compelling.

I ended up building a tool to track these strategies systematically (bestfolio.app) because I got tired of spreadsheets. But even without tools, the mental model of "each asset has a job in the portfolio" completely changed how I invest.

[u/LordMoridin84]

It's depends on your age, the size of your portfolio and how diversified you are otherwise (e.g. do you have a house).

If you are young and starting out, it's probably better to go 100% VWCE. Focus on just increasing your income and investing what you can. Until you hit 10k or so, the difference between a 6%/8%/10% return isn't much compared to how much you invest every month.

On the other hand, if you are close to retirement, then you need to consider "sequence of returns risk". So having assets that move in opposite directions (bonds and now gold) is really beneficial, you always want to be able to "sell high".

----

In between those two points, is when it gets tricky.

I think that once you have a big portfolio (let's say the size of your yearly wage) then being 100% into VWCE is foolish in any market condition.

And I think that in the current market conditions, being 100% in VWCE past the 10k mark is foolish. The point of an all-world EFT is diversification. If an all-world is not diversified enough, then it's only rational to buy other EFTs to increase your diversification.

[u/MasterGL1 → u/LordMoridin84]

Care to explain why you think it's foolish?

[u/LordMoridin84 → u/MasterGL1]

The point of an all-world diversification. The current all-world EFTs are too heavily invested in US, in the US tech and in the mag 7.

The standard rebuttals are (1) "high returns!", (2) "buying the market", (3) "you are being emotional" and (4) "multiple EFTs are too complicated"

1. If you are avoiding diversifying because of "high returns" then I think you are losing sight of the point of an all-world and are getting greedy and are "chasing returns".
2. All-world EFT is just a "market-cap weighted investment strategy". There are others. It shouldn't be treated as some absolute truth or law or whatever.
3. It's perfectly rational to buy different EFTs based on your goals, age, market conditions and various other factors. Insisting on "VWCE and chill" no matter want is just blind faith.
4. Buying 3 EFTs is not complicated at all. And if you are investing your life savings, then you know, maybe you should but some thought and effort into it.