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Re: Variable Percentage Withdrawal Spreadsheet vs Firecalc.c

Ok, thanks. I tried using their "constant percentage withdrawal of remaining portfolio balance" option instead but it still seemed to show a lot of low years for withdrawal amounts. It would be nice if they had the 1/n widthdrawal option. You can get 1/n withdrawals with VPW by changing o...
by longinvest
Fri Aug 29, 2014 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal Spreadsheet vs Firecalc.com
Replies: 5
Views: 379

Re: Does anyone have 'Lazy Portfolios'?

I invest lazily in a Three-Fund Portfolio . Here is why I do so: Investing in Total Markets Are we hypocritical in choosing when it is and isn't okay to use past performance as a factor in our portfolios? I think that the article I referred to makes a pretty good theoretical argument for investing ...
by longinvest
Fri Aug 29, 2014 10:24 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone have 'Lazy Portfolios'?
Replies: 62
Views: 2747

Re: What are you up YTD?

How do you factor in recent contributions? Considering I only started saving 3 years ago, a significant percentage of my portfolio was invested after 1/1/14. My assets that were invested before 12/31/14 are up 7.4% (90/10 AA), but the money I invested on 7/1/14 isn't up very much. Search Bogle Wiki...
by longinvest
Fri Aug 29, 2014 6:23 pm
 
Forum: Investing - Help with Personal Investments
Topic: What are you up YTD?
Replies: 94
Views: 6070

Re: Does anyone have 'Lazy Portfolios'?

I invest lazily in a Three-Fund Portfolio.

Here is why I do so: Investing in Total Markets
by longinvest
Fri Aug 29, 2014 5:38 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone have 'Lazy Portfolios'?
Replies: 62
Views: 2747

Re: Variable Percentage Withdrawal Spreadsheet vs Firecalc.c

VPW spends a percentage of current portfolio every year. This leads to higher withdrawals when markets soar and lower withdrawals when markets dip. VPW's success rate is 100%, by design. Firecalc works differently. Firecalc asks for an initial withdrawal amount. Every year, Firecalc adjusts this wit...
by longinvest
Fri Aug 29, 2014 5:21 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal Spreadsheet vs Firecalc.com
Replies: 5
Views: 379

Re: The Three Fund Portfolio

* Automatic rebalancing within each fund. This is one of the benefits that Taylor sites for the 3 Fund Portfolio. If I use the 3 Fund Portfolio, wouldn't I simply rebalance between those three funds?. How could rebalancing "within each fund" have anything to do with my own yearly rebalanc...
by longinvest
Thu Aug 28, 2014 6:59 pm
 
Forum: Investing - Theory, News & General
Topic: The Three Fund Portfolio
Replies: 873
Views: 341181

Re: 100% stock AA-> At what age to add bonds?

I will go back and emphasize: The reason for our success is our savings rate while we were accumulating, not our Asset Allocation before, or after, retirement. L. I agree with Leeraar. It is having enough savings that enables one to have choices in retirement. There are many roads to a comfortable ...
by longinvest
Tue Aug 26, 2014 9:54 pm
 
Forum: Investing - Theory, News & General
Topic: 100% stock AA-> At what age to add bonds?
Replies: 58
Views: 3662

Re: The Worst Investment You Can Make: Buying a Home

Victoria, While I agree with most (if not all) of what you wrote, so far, I also think that you underweight the risks of renting. I might well be that you were lucky not to experience these risks, but they are very real. I have faced some of them in my life, and they led me to ownership (not my firs...
by longinvest
Tue Aug 26, 2014 11:46 am
 
Forum: Investing - Theory, News & General
Topic: The Worst Investment You Can Make: Buying a Home
Replies: 135
Views: 15752

Re: 100% stock AA-> At what age to add bonds?

I would add a note to the effect that the graph, above, does not use (0,0) as a coordinate on its bottom-left corner, but (7,8). For many people, this can be quite misleading as it hides the magnification applied to the displayed curve. It would show as a small curve in the upper-right corner of a ...
by longinvest
Mon Aug 25, 2014 6:52 pm
 
Forum: Investing - Theory, News & General
Topic: 100% stock AA-> At what age to add bonds?
Replies: 58
Views: 3662

Re: The Worst Investment You Can Make: Buying a Home

Greenie wrote: Renting might free you of some obvious homeowner expenses but you really want to deal with landlords?


Great post!
by longinvest
Mon Aug 25, 2014 3:40 pm
 
Forum: Investing - Theory, News & General
Topic: The Worst Investment You Can Make: Buying a Home
Replies: 135
Views: 15752

Re: 100% stock AA-> At what age to add bonds?

Do a web search on "Efficient Frontier" and then contemplate the graphs / cartoons you might find. For example: http://www.youngresearch.com/wp-content/uploads/2012/08/Efficient-Frontier.jpg This is a graph of expected return (y axis) vs risk (x axis). If you like, you can use something l...
by longinvest
Mon Aug 25, 2014 3:34 pm
 
Forum: Investing - Theory, News & General
Topic: 100% stock AA-> At what age to add bonds?
Replies: 58
Views: 3662

"Don't Be Scared of Rising Interest Rates"

http://news.morningstar.com/articlenet/article.aspx?id=661823 This article analyses how portfolios perform when interest rates rize or fall (historically for periods of 6 months). Its findings on the short-term impact of even large variations are interesting: We find the returns of the conservative ...
by longinvest
Sun Aug 24, 2014 10:20 am
 
Forum: Investing - Theory, News & General
Topic: "Don't Be Scared of Rising Interest Rates"
Replies: 4
Views: 1056

Re: Is the Aggregate Index Too Heavy in Treasuries?

WIthin investment-grade bonds, the only glaringly obvious omissions are municipals, which are something like 10% of the market, and TIPS, which are something like 3-4%. So I think it represents 85% of the total investment-grade market, which is more than the S&P represents in the stock market. ...
by longinvest
Sat Aug 23, 2014 10:16 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2894

Re: Is the Aggregate Index Too Heavy in Treasuries?

Does the TSM and TISM include penny stocks? If not, why should TBM include junk bonds?
by longinvest
Sat Aug 23, 2014 10:06 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2894

Re: Smooth perpetual withdrawal from risky assets [endowment

Siamond and cjking, From my first post on this thread (see the bolded part): We will have to work under some constraints, though: ⋅  The assumed portfolio will be a normal Three-Fund Portfolio . (No annuities, no TIPS ladders, etc.) ⋅  The strategy should not impose undue constra...
by longinvest
Thu Aug 21, 2014 6:35 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Why aren't annuities better than investment drawdowns?

For lifetime income, I see no advantage to owning the backing asset (bonds) vs. owning just the annuity income. Not that QE will be seen again, but today's rates are not good for those who are renewing matured bonds. Note that Taylor L. bought annuity income in order to distribute his remaining oth...
by longinvest
Thu Aug 21, 2014 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Why aren't annuities better than investment drawdowns?

Beliavsky wrote:
longinvest wrote:I feel that it is unfair to pick a single sentence, out of context, to criticise my last post.

Sorry, it was not meant as criticism. I amended my post to quote a paragraph rather than a single sentence.


Thanks for the amended quote. :happy
by longinvest
Thu Aug 21, 2014 2:10 pm
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Smooth perpetual withdrawal from risky assets [endowment

Cut-Throat wrote:You don't have to spend the withdrawn money. I keep mine in a Cash Account. Leaving your withdrawal Invested in a Bubble, only subjects it to a Crash.

+1 :thumbsup
by longinvest
Thu Aug 21, 2014 12:28 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Why aren't annuities better than investment drawdowns?

I feel that it is unfair to pick a single sentence, out of context, to criticise my last post.
by longinvest
Thu Aug 21, 2014 11:57 am
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Why aren't annuities better than investment drawdowns?

Just to clear up any ambiguity; I tried to express deep concerns over the OP showing off attractive nominal annuity rates for a 65 years-old. This retiree could easily survive 30 years. At 3% inflation, this would lead to a loss of 60% (.97^30 = .4) in purchase power over the period (inflation-adjus...
by longinvest
Thu Aug 21, 2014 10:52 am
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Defining "Stay the Course"

I'm merely curious why it's ok to deviate from one's IPS if there is a change which impacts only the deviatee but not ok if there is some kind of change which impacts the community in general. I've never heard it discussed. No hidden agenda with me. Because, if you change your asset allocation (red...
by longinvest
Thu Aug 21, 2014 8:47 am
 
Forum: Investing - Theory, News & General
Topic: Defining "Stay the Course"
Replies: 41
Views: 3649

Re: Why aren't annuities better than investment drawdowns?

Also I get what you're saying about nominal annuities, but don't there exist annuities that index for inflation too? Yes, they exist, but they don't offer a 6.3% rate; annuities indexed to the CPI offer a much lower rate. In other words, they are much more expensive. And even so, I don't follow you...
by longinvest
Thu Aug 21, 2014 7:57 am
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Why aren't annuities better than investment drawdowns?

The problem is inflation. Here's a chart of a retirement drawdown from a 50% stocks / 50% bonds portfolio (taken from http://www.bogleheads.org/forum/viewtopic.php?f=10&t=120430&p=2087700#p2087700): http://i61.tinypic.com/6eloqt.jpg The start rate is 4.8%. The blue line follows nominal withd...
by longinvest
Wed Aug 20, 2014 8:51 pm
 
Forum: Investing - Theory, News & General
Topic: Why aren't annuities better than investment drawdowns?
Replies: 46
Views: 2901

Re: Smooth perpetual withdrawal from risky assets [endowment

Siamond, I think that you are starting to increasingly use my mathematical approach. :happy Yet, I probably have an even more mathematical approach than you currently think. I don't have time, right now, to answer all your latest posts, but let me share with you a drawing to let you think about it. ...
by longinvest
Wed Aug 20, 2014 1:05 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

Now, if we use your 2.3%, instead (should probably be a little different, as I don't know 1929's PE10):[ The peak was in September 1929, the market fell by nearly a third by the end of December. I'm not sure if starting 1929 means from the beginning or end, but it looks like it wouldn't have made m...
by longinvest
Mon Aug 18, 2014 6:11 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

I may be missing the point of this thread, but it seems like the OP is trying to solve a problem that is well-known, and for which a number of prototypical solutions exist (that are applied to many mult-billion-dollar portfolios in the real world). A popular example seems to be the (modified) Tobin...
by longinvest
Mon Aug 18, 2014 9:10 am
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

I'm saying that if you choose 100% equities, you might as well accept the volatility that goes with it. Here's what would have happened if someone retired in 1929, at the top of the bubble, using VPW's default rate (5.2%): http://i57.tinypic.com/33k66bl.jpg http://i60.tinypic.com/a47954.jpg http://i...
by longinvest
Mon Aug 18, 2014 8:52 am
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

cjking, I must fix an error I made in my reply. You actually use 2.3% (not 3.5%) as internal rate: For 100% equities starting in the year 2000, expected return is 1/PE10 = 1/44 = 2.3% . I would (if I were silly enough not to find a higher-yielding asset) take 80%/44 = 1.8% as a perpetual yield, howe...
by longinvest
Sun Aug 17, 2014 6:24 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

Dear Bogleheads,

Due to the time it took me to write my latest two posts, above, I will delay my next update on Smooth perpetual withdrawal until next weekend. You can consider the content of these two posts as my contribution for this weekend. :happy

Cheers,

longinvest
by longinvest
Sun Aug 17, 2014 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

For 100% equities starting in the year 2000, expected return is 1/PE10 = 1/44 = 2.3%. I would (if I were silly enough not to find a higher-yielding asset) take 80%/44 = 1.8% as a perpetual yield, however PMT(2.3%,45,-1) = 3.5%, so on that date VPW would have given significantly higher income for th...
by longinvest
Sun Aug 17, 2014 1:23 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

Yeah, here, I totally agree with you. At the top of speculative bubbles, taking the same fixed % of a stock-heavy portfolio than in rough times does NOT seem sensible to me. So, as I posted earlier, you could either adjust the portfolio number entered in a PMT formula or equivalent (e.g. normalize ...
by longinvest
Sun Aug 17, 2014 11:58 am
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Math question: how to combine two return series?

Me, I just the the weighted average of the geo means, knowing that the result underestimates, somewhat, the the correct geo mean.

As I use the result as a crude estimate, precision is not important to me. It all depends on what you intend to use it for.
by longinvest
Sun Aug 10, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: Math question: how to combine two return series?
Replies: 13
Views: 1121

Re: Smooth perpetual withdrawal from risky assets [endowment

I'm afraid this is introducing some confusion to speak of endowment. Of course, we're speaking of a withdrawal method for retirement. Even if you're quite right that the resulting methodology would work well for an endowment too, and other applications. But that wasn't the point. Siamond, It doesn'...
by longinvest
Sun Aug 10, 2014 11:58 am
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Math question: how to combine two return series?

Go back to the source numbers. In other words, use the weighted average of the arithmetic means. Then, combine the StdDevs (I don't remember if it's the weighted average, again, or something else).

Finally:

GeoMean = ArithMean - (StdDev^2)/2

That last formula is a good approximation.
by longinvest
Sat Aug 09, 2014 11:37 pm
 
Forum: Investing - Theory, News & General
Topic: Math question: how to combine two return series?
Replies: 13
Views: 1121

Re: Smooth perpetual withdrawal from risky assets [endowment

siamond wrote:So... longinvest, when are you going to start unveiling the great mystery of your new idea? Can't wait... Even if I plan to live long... :wink:


Hi Siamond,

Have you read viewtopic.php?f=10&t=144089&p=2150352#p2149960 ? That's the main building block.
by longinvest
Sat Aug 09, 2014 8:58 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

Doc, I'm really sorry for the confusion. I tried to make the objective explicit by naming the thread "Smooth perpetual withdrawal from risky assets", but I can imagine how a quick read of my long first post could be confusing, as I explained the background where the problem was first broug...
by longinvest
Sat Aug 09, 2014 7:04 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets [endowment

If you start with a $1,000,000 portfolio, you withdraw $0? Great! No you withdraw based on the ending balance for the year not the beginning balance. :wink: You can develop all kinds of scenarios where the simple declining balance doesn't work exactly. Just develop some simple rules. Like I will wi...
by longinvest
Sat Aug 09, 2014 4:34 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets

You're missing something completely. Is this what I'm missing? I think that there is a misunderstanding; keeping an approximate $1,000,000 forever is a goal of this withdrawal method (see the first post) Simply subtract the $1,000,000 from the balance before calculating the withdrawal. Or if you wa...
by longinvest
Sat Aug 09, 2014 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets

Instead of a constant $1,000,000 ending portfolio balance, why not a decreasing ending balance such as in the amortization of a mortgage loan. You could develop a schedule (ie spreadsheet) with a target ending balance for each of the 30 (or whatever) years. This could then be the amount from which ...
by longinvest
Sat Aug 09, 2014 2:08 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets

Some fun facts: ⋅  If the growth trend is 3.5%, and the withdrawal is (3.5/1.035)% of current portfolio, withdrawals will drop to $0 if the portfolio gets down to $360,623.22. This would imply a withdrawal of $12,194.99 and an identical correction to patch the $651,571.77 hole. ⋅ ...
by longinvest
Sat Aug 09, 2014 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets

Here's a hypothetical setup. We want a portfolio of risky assets (3-fund portfolio) to maintain (over the long run) an approximate inflation-adjusted value of $1,000,000. Does this mean you'll have a $1,000,000 estate left when you die ? 1210 It's a perpetual portfolio, think of an endowment fund, ...
by longinvest
Sat Aug 09, 2014 1:20 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Smooth perpetual withdrawal from risky assets

1- We want a self-correcting strategy*. My main idea is actually centered around this. It is to let the correction happens slowly over a period of many years. Hi, It's time to attack this first idea. Here's a hypothetical setup. We want a portfolio of risky assets (3-fund portfolio) to maintain (ov...
by longinvest
Sat Aug 09, 2014 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 93
Views: 7199

Re: Changing Asset Allocation in a bear market

So , to finally ask my question: How many people here agree with this statement: " in a severe bear market, if my portfolio goes below X dollars, I would change my desired asset allocation to be more conservative". If I couldn't live with my current asset allocation below X dollars in a b...
by longinvest
Thu Aug 07, 2014 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: Changing Asset Allocation in a bear market
Replies: 23
Views: 1605

Re: Adding more funds.

Sharpe's paper is the paper I got the quote from. I still don't follow. If I'm a passive manager, I'm (theoretically) tracking the market as a whole, so I'll earn the market return for the period of time measured (which is the weighted average of the returns of all the securities in the market). If...
by longinvest
Thu Aug 07, 2014 3:05 pm
 
Forum: Investing - Theory, News & General
Topic: Do I need a small cap index if I already have total market ?
Replies: 58
Views: 5397

Re: Adding more funds.

I'm having trouble following that article, in particular: Over any specified time period, the market return will be a weighted average of the returns on the securities within the market, using beginning market values as weights3. Each passive manager will obtain precisely the market return, before ...
by longinvest
Thu Aug 07, 2014 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: Do I need a small cap index if I already have total market ?
Replies: 58
Views: 5397

Re: When is a 3.75% load worth it?

All non-total-market-index investors make the same gross returns, in the aggregate, than total-market-index investors. That's a basic, undisputed mathematical fact . Taking your statement at face value, I'm not buying it. I don't buy something so ambiguously specified as being undisputed, and I don...
by longinvest
Wed Aug 06, 2014 5:52 pm
 
Forum: Investing - Theory, News & General
Topic: When is a 3.75% load worth it?
Replies: 79
Views: 5265

Re: When is a 3.75% load worth it?

So let me ask this: are you saying there is no research/data, anywhere, as in zero, to support active funds (which can probably be defined in different ways)? Maybe that's true, I just don't know. But it does seem odd that active funds would continue to exist over all these decades if there were su...
by longinvest
Wed Aug 06, 2014 4:16 pm
 
Forum: Investing - Theory, News & General
Topic: When is a 3.75% load worth it?
Replies: 79
Views: 5265

Re: Starting a Lazy Portfolio Now

Hi, I know you can never time the market - but with S&P 500 at it's all time peak, but quite a long way, is now a good time to start a lazy portfolio? I guess if you are holding 10-20+ years it won't make much difference, but still, it's hard to pull the trigger on a massive peak? Nkje1, Welcom...
by longinvest
Wed Aug 06, 2014 3:28 pm
 
Forum: Investing - Theory, News & General
Topic: Starting a Lazy Portfolio Now
Replies: 21
Views: 3527

Re: Risk and Return of Tilted and Market Balanced Funds

The opposing views, above, remind me of two articles I have read: The Great Commodities Debate - Part I and The Great Commodities Debate - Part II. It is interesting to look at the actual behavior of commodities in the years that followed this debate.
by longinvest
Wed Aug 06, 2014 9:38 am
 
Forum: Investing - Theory, News & General
Topic: Risk and Return of Tilted and Market Balanced Funds
Replies: 19
Views: 2484
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