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Re: What evidence would prove the Boglehead mentality wrong?

You would have to define what the 'Boglehead mentality' actually is...because different people have a different opnion of what that would be. The Bogleheads mentality might not be defined, but the OP was probably referring to the Bogleheads investment philosophy , which is defined: 1 Develop a work...
by longinvest
Fri Sep 19, 2014 3:45 pm
 
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 109
Views: 7445

Re: Bond Index Conundrum

If an organization issues too much debt, its bond rating will fall and the interest rate demanded by the market will rise. TBM only includes investment-grade nominal bonds, in market weight. As a bond loses value (due to downgrading) its market weight is reduced accordingly. This is quite similar to...
by longinvest
Thu Sep 18, 2014 9:24 am
 
Forum: Investing - Theory, News & General
Topic: Bond Index Conundrum
Replies: 9
Views: 699

Re: An Efficient Frontier for Retirement Income

A big problem of this study is that it is based on an inflexible withdrawal model, like all other SWR studies. You might want to also give a look at the flexible VPW withdrawal model.
by longinvest
Thu Sep 18, 2014 9:12 am
 
Forum: Investing - Theory, News & General
Topic: An Efficient Frontier for Retirement Income
Replies: 4
Views: 700

Re: What evidence would prove the Boglehead mentality wrong?

I'm 26 and hopefully should have a long time of investing ahead of me. The benefits of holding a mix of stocks and bonds index funds in a passive investing style is relatively new relative to the length of developed human history. While unlikely, it's entirely possible that at some point during my ...
by longinvest
Wed Sep 17, 2014 8:19 am
 
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 109
Views: 7445

Re: The dangerous practice of rebalancing...

YDNAL, Thanks for giving me the opportunity to illustrate the complete reasoning of my post (that was cut out from the citation in your above post). I'll rephrase your question: Given that L is willing to live with a post-correction non-rebalanced portfolio of $250,000 stocks + $500,000 bonds = $75...
by longinvest
Sat Sep 13, 2014 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 188
Views: 12876

Re: The dangerous practice of rebalancing...

If someone does not intend to rebalance after a stock correction, my opinion is that this person has an inappropriate asset allocation (AA) with too much stocks in it. Investor L (longinvest :) ), who is 65yo and retired, hast $1M in savings split 50% Equities and 50% Fixed Income. 1. L determined ...
by longinvest
Sat Sep 13, 2014 12:53 pm
 
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 188
Views: 12876

Re: The dangerous practice of rebalancing...

If someone does not intend to rebalance after a stock correction, my opinion is that this person has an inappropriate asset allocation (AA) with too much stocks in it. Let me explain how I came to that conclusion: If one is willing to hold a smaller proportion of stocks in his portfolio after a corr...
by longinvest
Sat Sep 13, 2014 11:49 am
 
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 188
Views: 12876

Re: Are there any real total bond funds?

Vanguard's Total Stock Market doesn't include penny stocks, either, so it is not truely a total stock market fund. Are you going to ask for one, too?

TBM includes investment-grade nominal bonds. It doesn't include junk and inflation-protected bonds.
by longinvest
Fri Sep 05, 2014 9:27 pm
 
Forum: Investing - Theory, News & General
Topic: Are there any real total bond funds?
Replies: 65
Views: 2938

Re: Let me get this straight about SCV & factor diversificat

There's been much discussion about factor investing, which is advocated by Larry Swedroe. In many comments, he has argued that one should not put all one's eggs in one factor basket, but diversify invest across factors: beta, value, size, and momentum. Am I correct that he advocates a high tilt tow...
by longinvest
Fri Sep 05, 2014 8:32 am
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8965

Re: Let me get this straight about SCV & factor diversificat

Almost any small group of stocks will be more diversified in terms of the number of factors because of the way factors are defined. Factors, except for beta, are defined such that the market always has a zero loading, so it's almost a tautology. SCV might out-perform the total market. It might even...
by longinvest
Thu Sep 04, 2014 9:12 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8965

Re: Surprising AA findings - comments?

So, are we having another 100% stocks thread, yet again?

Just in case you cared about my opinion: I think that 100% bonds and 100% stocks are both riskier (but in different ways) than a mixed portfolio of stocks and bonds.
by longinvest
Wed Sep 03, 2014 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: Surprising AA findings - comments?
Replies: 12
Views: 694

Re: Surprising AA findings - comments?

It would make sense for 100% bonds to have trouble pacing inflation over long periods. It is a well known fact that adding at least 20% stocks in a portfolio usually improves returns (and even lowers volatility). This seems to be confirmed by your numbers. I also see in your numbers that you could h...
by longinvest
Wed Sep 03, 2014 11:59 am
 
Forum: Investing - Theory, News & General
Topic: Surprising AA findings - comments?
Replies: 12
Views: 694

Re: Surprising AA findings - comments?

VA_Gent wrote:Drawdown= percent below the high water mark.
Underwater= Still in drawdown
CAGR= GEOMEAN of annual real returns

High water mark = highest withdrawal so far?
by longinvest
Wed Sep 03, 2014 11:28 am
 
Forum: Investing - Theory, News & General
Topic: Surprising AA findings - comments?
Replies: 12
Views: 694

Re: Surprising AA findings - comments?

VA_Gent, could you explain what you mean by: drawdown, underwater, CAGR (of what)?
by longinvest
Wed Sep 03, 2014 11:22 am
 
Forum: Investing - Theory, News & General
Topic: Surprising AA findings - comments?
Replies: 12
Views: 694

Re: Variable Percentage Withdrawal (VPW)

Just in case there was any ambiguity: I intend to use VPW. If I am lucky, I'll have way more than planned during retirement. If I am unlucky, I might only get what I planned for. It would take a pretty disastrous scenario for me to get much less than planned over a long period. Yet, even then, I sho...
by longinvest
Wed Sep 03, 2014 6:53 am
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 471
Views: 53620

Re: Variable Percentage Withdrawal (VPW)

FYI, I personally use:

myNumber = (myYearlyGenerousExpenses - floor) / 3.5% + buffer + YearsUntilFloor * floor

for my 50/50 portfolio. I expect to be able to cut into the "generous" part without feeling deprived.
by longinvest
Wed Sep 03, 2014 12:01 am
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 471
Views: 53620

Re: Variable Percentage Withdrawal (VPW)

Up until now, I've been using a SWR of 3% to forcast my number... myNumber = myYearlyExpenses / 3% I was all excited about having a new formula til I attempted to to adjust it for a 50% loss on a 50/50 stock / bond AA .75 (50% loss on 50/50 s/b AA) * .041 = .03075 right? Or, roughly 3% Seems I'm ri...
by longinvest
Tue Sep 02, 2014 11:45 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 471
Views: 53620

Re: Variable Percentage Withdrawal (VPW)

Ken, I like Cut-Throat's rule of thumb. Personally, I am very much in favor of, first, building a solid floor using delayed Social Security, and using a CD or TIPS ladder to bridge the gap between retirement and Social Security, and, second, build on top of that using VPW. I have very low confidence...
by longinvest
Tue Sep 02, 2014 10:52 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 471
Views: 53620

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: 667

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: 85
Views: 6546

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: 101
Views: 7835

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: 85
Views: 6546

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: 667

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: 895
Views: 352504

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: 3763

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: 16075

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: 3763

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: 16075

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: 3763

"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: 1088

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: 3284

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: 3284

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: 7701

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: 2971

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: 2971

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: 7701

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: 2971

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: 2971

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: 3741

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: 2971

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: 2971

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: 7701

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: 7701

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: 7701

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: 7701

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: 7701

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: 7701

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: 7701

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: 7701
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