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Re: Guyton-Klinger Withdrawal Decison Rules

Scenario 9h is defined as 25% US stocks, 25% Int'l stocks, 50% bonds. Back to the fixed VPW rate, and no smoothing. And let's compare to the smoothed scenario from Step 3 (9e) with a more aggressive portfolio. I will let you draw your own conclusions (do check the detailed stats in the next post). ...
by longinvest
Sun Mar 29, 2015 2:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Siamond, What are your objectives? I still don't see the point of relying on market timing to artificially smooth lengthened portfolio withdrawal paths while reducing withdrawal efficiency (less money withdrawn in total) and increasing portfolio risk. Worse, I'm almost detecting a suggestion that a ...
by longinvest
Sun Mar 29, 2015 2:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Variable Percentage Withdrawal (VPW)

I do not endorse the smoothing methods presented in that thread, as: ⋅  they increase the risk of the portfolio doing badly in bad times, ⋅  some of these methods depend on timing the market (using valuations to estimate future returns), and ⋅  they require that one unn...
by longinvest
Sun Mar 29, 2015 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 537
Views: 147924

Re: More XIRR Questions

I like using this spreadsheet wiki:Calculating personal returns. It calculates both investor (internal) and portfolio (comparable) returns.
by longinvest
Sun Mar 29, 2015 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: More XIRR Questions
Replies: 17
Views: 1211

Re: Why Bonds With 20 Year Horizon?

William Sharpe defines risk as " doing badly in bad times ". A portfolio which includes both stocks and bonds is less risky, using this definition, than a portfolio that only includes either stocks or bonds. And this holds for both short-term and long-term investing. Put simply: it's not a...
by longinvest
Wed Mar 25, 2015 8:27 am
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 72
Views: 5121

Re: Guyton-Klinger Withdrawal Decison Rules

I'm still trying to understand how a retiree could have, one one hand, a high short-term portfolio volatility tolerance (able to loose half his nest egg in the mid 1975 with no emotions), and on the other hand have a low short-term withdrawal volatility tolerance (cutting withdrawals after a 50% por...
by longinvest
Sun Mar 15, 2015 4:49 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

I don't see much difference between the G-K and VPW+20 years, but maybe that's me. If you really want to smooth VPW's withdrawals, and you have a deep belief in reversion to the mean , why don't you simply allow for a 30% band and make 10% (of difference) adjustment each year (except when the band ...
by longinvest
Sun Mar 15, 2015 4:31 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Here's what smoothed VPW looks like for your suggested $30K S.S., $1.5M 35%US/35%INT/30%BND, age 60 to 119 withdrawals, for start years 1955, 1965, and 1975 Not quite sure that the first JPG file you included is relevant... Nice cartoon, though! :wink: Cool, sounds that you found an effective short...
by longinvest
Sun Mar 15, 2015 4:08 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Here's what smoothed VPW looks like for your suggested $30K S.S., $1.5M 35%US/35%INT/30%BND, age 60 to 119 withdrawals, for start years 1955, 1965, and 1975: http://i58.tinypic.com/9ifs4l.png http://i57.tinypic.com/2nv9g1x.png http://i60.tinypic.com/2rwurg7.png Now, one could easily think that this ...
by longinvest
Sun Mar 15, 2015 1:05 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: How do you structure/hold your Emergency Funds (EF)?

I've adopted Taylor Larimore's approach. As I have a significant amount of bonds in my portfolio, my portfolio is my emergency fund. If I have to sell investments due to an emergency, it will be a rebalancing opportunity. If it happens during a downtrun, I'll end up selling bonds, if it happens duri...
by longinvest
Sun Mar 15, 2015 10:02 am
 
Forum: Personal Finance (Not Investing)
Topic: How do you structure/hold your Emergency Funds (EF)?
Replies: 22
Views: 2488

Re: Guyton-Klinger Withdrawal Decison Rules

Not too sure about your modified VPW proposal, adjusting year over year by 10% isn't necessarily a good idea. 10% of $120k is $12k, hence $1k/month. This is significant. G-K is quite subtle in this respect, you need to get out of the bands created by the guardrails to trigger an adjustment. Which n...
by longinvest
Sun Mar 15, 2015 1:09 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Why don't you implement the Modified VPW and compare it to G-K (and plain VPW)? The advantage of VPW is the automatic course correction (due to the planned depletion) that is missing in G-K. I initially thought that you would simply suggest applying G-K rules to VPW; I am actually surprised that you...
by longinvest
Sun Mar 15, 2015 12:55 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

The problem is that a sequence of returns that would keep (for a long enough time) ModifiedWithdrawal barely below the upper 30% band of a decreasing PlainWithdrawal would harm the portfolio. The self correction of VPW would limit, somehow, the harm, but overall, I am pretty certain that the modifie...
by longinvest
Sun Mar 15, 2015 12:02 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

I don't see much difference between the G-K and VPW+20 years, but maybe that's me. If you really want to smooth VPW's withdrawals, and you have a deep belief in reversion to the mean , why don't you simply allow for a 30% band and make 10% (of difference) adjustment each year (except when the band r...
by longinvest
Sat Mar 14, 2015 11:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: If 2% is real, we are . . . . ?

EnjoyIt wrote:This fear mongering needs to stop as very little good can come of it. I for one will ignore the noise.

+1 :thumbsup
by longinvest
Wed Mar 11, 2015 10:19 am
 
Forum: Investing - Theory, News & General
Topic: If 2% is real, we are . . . . ?
Replies: 63
Views: 6239

Re: Rebalancing into a black hole

Crake, I have been considering a particular risk to the strategy of setting an AA and periodically re balancing. I'll use the three fund portfolio to demonstrate this particular risk. Using the three fund portfolio attracted our quick replies, as any of the three funds getting to zero would probably...
by longinvest
Tue Mar 10, 2015 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing into a black hole
Replies: 12
Views: 1294

Re: Rebalancing into a black hole

If you rebalance only once a year, how many lifetimes will it take your portfolio to reach $0 ? :)

Hint: Just don't rebalance too frequently, and don't invest into things that go to zero. Then, stay the course!
by longinvest
Tue Mar 10, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing into a black hole
Replies: 12
Views: 1294

Re: BOGLEHEADS 13 VIDEOS

Rich, thanks so much!
by longinvest
Tue Mar 10, 2015 6:30 am
 
Forum: Investing - Theory, News & General
Topic: BOGLEHEADS 13 VIDEOS
Replies: 9
Views: 2442

Re: Bernstein: 2% investment returns over next 20 years

Trader Joe wrote:Tune out the noise.

+1 :thumbsup

Nobody knows nothin!
http://youtu.be/A0gQiz0pCyI
by longinvest
Tue Mar 10, 2015 6:21 am
 
Forum: Investing - Theory, News & General
Topic: Bernstein: 2% investment returns over next 20 years
Replies: 216
Views: 22897

Re: Retirement Withdrawals

ourbrooks, I am glad that you found a plan that works for you.
by longinvest
Sun Mar 08, 2015 9:36 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2020

Re: Retirement Withdrawals

I've looked at VPW and decided it doesn't fit my needs at all, but, perhaps, I'm not interpreting it correctly. Suppose that I started retirement in 2007 with a 60/40 portfolio. That year, I'd withdraw 4.8%. The next year, the stock market dropped 39% so my overall portfolio dropped by 23%. In 2008...
by longinvest
Sun Mar 08, 2015 9:09 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2020

Re: Retirement Withdrawals

I'm planning on delaying Social Security and will have bigger withdrawals in the early years, very small withdrawals during both Social Security and Pension payment periods, and then larger withdrawals when the last person is standing and pension and Social Security payments decrease. So far, the o...
by longinvest
Sun Mar 08, 2015 6:56 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2020

Re: interest rate increase looming. what you gonna do ?

with interest rate expected to increase this year, what should be the strategy to handle that while our money is sitting in etfs/stocks ? Interest rates change every day; they go up and down. Sometimes they go up more, sometimes they go down more. So, instead of trying to guess the future, I'll go ...
by longinvest
Sat Mar 07, 2015 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: interest rate increase looming. what you gonna do ?
Replies: 65
Views: 6229

Re: Guyton-Klinger Withdrawal Decison Rules

G-K is certainly simple enough for me. I don't think I would find your system any simpler, and possibly I would find it more complex. A constant withdrawal approach is certainly simpler, but it produces such a different set of results that it really isn't comparable. Simplicity is not an important ...
by longinvest
Thu Mar 05, 2015 1:19 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Longinvest-- G-K appears ideal for my purposes, and not very difficult to implement, especially once one has done it for a few years. (Your multi-handed plan seems more complex to me, e.g., constant withdrawal for some money, VPW for other money, CD ladders, etc.) But, different strokes is how it S...
by longinvest
Thu Mar 05, 2015 10:19 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Now, it would be interesting to look at the portfolio balance path and withdrawal path in nominal terms. Inflation is very volatile, yet it is mostly felt on longer time periods (therefore the money illusion that fools so many people). In the short term, most people simply adapt their spending patt...
by longinvest
Thu Mar 05, 2015 9:59 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Thank you all for these excellent posts--they are very helpful. Does the following seem like a fair summary? In regard to my original question, the consensus here is that Guyton-Klinger is a very acceptable set of decision rules that will tend to maximize the safe withdrawal rate, even permitting u...
by longinvest
Thu Mar 05, 2015 9:04 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

It is my personal opinion that the most effective tool, for lowering withdrawal volatility, is the addition of bonds in a portfolio (VPW), instead of using smoothing methods (G-K). Most smoothing methods require markets to recover quickly enough, as they tend to hurt the portfolio in bad times by k...
by longinvest
Thu Mar 05, 2015 8:01 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Let me add that, in a worse than worst-historical scenario, G-K still carries a risk of premature depletion. VPW doesn't carry such risk, but it will lower withdrawals more-or-less proportionally to the loss in value of the portfolio; it can seem brutal, but that's still better than dropping withdr...
by longinvest
Thu Mar 05, 2015 7:23 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

Thanks, Siamond. Your charts expose very clearly the trade-offs in volatility-of-withdrawals and spending-level of G-K and VPW. Let me add that, in a worse than worst-historical scenario, G-K still carries a risk of premature depletion. VPW doesn't carry such risk, but it will lower withdrawals more...
by longinvest
Wed Mar 04, 2015 9:22 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Dollar cost averaging calculator

Here's a nice web site to backtest regular investments in a portfolio (when selecting the appropriate "Annual Adjustment"):
https://www.portfoliovisualizer.com/bac ... allocation

I think that it is partly based on the data compiled in wiki:Simba's backtesting spreadsheet.
by longinvest
Wed Mar 04, 2015 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: Dollar cost averaging calculator
Replies: 7
Views: 659

Re: Guyton-Klinger Withdrawal Decison Rules

VPW is 100% safe, as it would not fail long before the other methods being discussed would fail. Nope. The 1966 VPW retiree fails after 9 years of retirement (technically year 5 was also a failure year by a couple hundered dollars) and continues to fail for the next 12 years. The 4% SWR fails after...
by longinvest
Wed Mar 04, 2015 5:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: Guyton-Klinger Withdrawal Decison Rules

I've played around with the VPW spreadsheet, and I see minimum withdrawals that are as low as 64% of the initial withdrawal in the backtesting worksheet. That's a pretty large variation IMO. Are you saying that the withdrawals started at $48,000 and dropped to $30,720 (e.g. 64% of $48K)? That's bar...
by longinvest
Wed Mar 04, 2015 5:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 117
Views: 7813

Re: What is the risk of currency hedging? [International Bon

The OP question/critique is more about how the concept is carried out. Currency hedges produce some credit risk other than that of the bonds held, that's true, but it's pretty marginal. The fund would be dealing on a collateralized basis, holding cash or high grade bonds of the counterparty if the ...
by longinvest
Fri Feb 27, 2015 6:50 pm
 
Forum: Investing - Theory, News & General
Topic: What is the risk of currency hedging? [International Bonds]
Replies: 5
Views: 494

What is the risk of currency hedging? [International Bonds]

Vanguard's Total International Bond Index Fund (TIBM) uses currency hedging to protect its investors against currency variations. In my portfolio, the role of bonds is to provide stability. I can easily understand how using a domestic, market-weight, and all-maturities fund of investment-grade nomin...
by longinvest
Fri Feb 27, 2015 11:50 am
 
Forum: Investing - Theory, News & General
Topic: What is the risk of currency hedging? [International Bonds]
Replies: 5
Views: 494

Re: [favorite] Boglehead quotes

I think that this thread is about great (favorite) quotes created by forum members , not about all favorite quotes. Isn't Jack a forum member? Yes, he is, and I really love his quotes, but he wrote that in his books. I really thought that the initial intent of this thread was to collect original qu...
by longinvest
Tue Feb 24, 2015 3:29 pm
 
Forum: Investing - Theory, News & General
Topic: [favorite] Boglehead quotes
Replies: 42
Views: 3923

Re: [favorite] Boglehead quotes

I think that this thread is about great (favorite) quotes created by forum members, not about all favorite quotes.
by longinvest
Tue Feb 24, 2015 2:39 pm
 
Forum: Investing - Theory, News & General
Topic: [favorite] Boglehead quotes
Replies: 42
Views: 3923

Re: [favorite] Boglehead quotes

Old quote, partial credit to Zotty, and part to Epictetus:

"A simpler portfolio keeps smart people from doing stupid things"

Thanks go to fishndoc for remembering it: viewtopic.php?f=10&t=159204&p=2390793#p2390793
by longinvest
Tue Feb 24, 2015 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: [favorite] Boglehead quotes
Replies: 42
Views: 3923

Re: Why Bonds With 20 Year Horizon?

Risk-adjusted returns remained an abstract concept for me until I found a different name for it: Sleep-adjusted returns. ;)
by longinvest
Tue Feb 24, 2015 1:52 pm
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 72
Views: 5121

Re: Rebalancing vs. Timing the market

While many advocate the use of rebalancing bands (like +/-5%), I personally prefer calendar rebalancing for behavioral reasons. In order to use rebalancing bands, I would have to keep monitoring the value of my portfolio. With calendar rebalancing, I just need to monitor the value on the rebalancing...
by longinvest
Tue Feb 24, 2015 1:18 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing vs. Timing the market
Replies: 23
Views: 915

Re: Value investing doesn't even beat the S&P 500

Above my computer, I have posted a quote from a wise Boglehead, posted here many years ago (sorry, I don't have name to give credit): "A simpler portfolio keeps smart people from doing stupid things" A simple portfolio reduces the odds of investors making behavioral mistakes, which for mo...
by longinvest
Tue Feb 24, 2015 1:04 pm
 
Forum: Investing - Theory, News & General
Topic: Value investing doesn't even beat the S&P 500
Replies: 55
Views: 5620

Re: Risk--Again. The common stepping stone

When I start reasoning about something, I tend to go back to basics. So, let me try and see if this helps. In the following text, I informally use the following approximate meaning for the word risk (at a high level): the chance that future events break expectations. BONDS A bond is a promise (contr...
by longinvest
Sun Feb 22, 2015 2:21 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 57
Views: 3405

Re: Sequence of Returns Risk

I invite you to put "VPW" in the search box and learn about previous work on this subject.
by longinvest
Sun Feb 22, 2015 11:51 am
 
Forum: Investing - Theory, News & General
Topic: Sequence of Returns Risk
Replies: 9
Views: 769

Re: Risk of Rebalancing

I really hope that one of you chart geniuses out there actually runs these numbers. I would love to see what a BH approach would have looked like for a Japanese investor through the boom and malaise. You can thank bpp: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=23036&p=2380927#p2...
by longinvest
Sun Feb 22, 2015 10:59 am
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

Come to think of it, Sharpe's rebalancing scheme is equivalent to both rebalancing and not rebalancing. On one hand, it is like not rebalancing during sudden big market moves, but it is like rebalancing over the long term (it won't let stocks outgrow bonds in your portfolio if they don't in the mark...
by longinvest
Sat Feb 21, 2015 6:45 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

Countmein, I'm just trying to dispel the myth that rebalancing is riskier than not rebalancing. It is true that there exist other ways to set an AA, that would not necessarily involve rebalancing. For example, a very rich person could buy a liability matched TIPS ladder covering all anticipated liab...
by longinvest
Sat Feb 21, 2015 6:14 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

Vanguard's Target Retirement Income fund uses a 30/70 allocation. Most Target Retirement funds have a similar ending level for stocks. Vanguard Target Retirement 2015 is 50% stocks. Vanguard Target Retirement Income Fund (VTINX) https://personal.vanguard.com/us/funds/snapshot?FundId=0308&FundIn...
by longinvest
Sat Feb 21, 2015 3:45 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

I showed that one reduces "tail risk", when rebalancing, by selecting an appropriate AA in the first place. Now, the goal of an AA is to smooth the ride. But, I agree with you that it leads to a portfolio that is less exposed to the potential upside (but also potential short-term downside)...
by longinvest
Sat Feb 21, 2015 3:44 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

In general, the rebalanced portfolio approaches -100% loss while the unrebalanced portfolio approaches a total loss of only the equity side of the allocation. Again, this is self-evident. The speed/slope of the approach is quicker/steeper for higher equity allocations. So yes, you could show that i...
by longinvest
Sat Feb 21, 2015 3:03 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931

Re: Risk of Rebalancing

This makes no sense. You are comparing a 20/80 portfolio with a 50/50. Try my apples-to-apples experiment above: 50/50 rebalanced every other year vs 50/50 not rebalanced and -10% pa equity returns for 30 years. Wrong! You say that the investor is ready to start with a 50/50 non-rebalanced portfoli...
by longinvest
Sat Feb 21, 2015 2:22 pm
 
Forum: Investing - Theory, News & General
Topic: Risk of Rebalancing
Replies: 63
Views: 3931
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