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by bobcat2
Thu Dec 08, 2016 4:20 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Does the US treasury issue enough TIPs for this to be a viable strategy for all retirees and retirement savers? This is much like that perennial concern, what if everybody, or nearly everybody, invested in stock index funds? Or even better and closer, what if everybody overweighted small value, (wh...
by bobcat2
Wed Dec 07, 2016 8:38 pm
Forum: Investing - Help with Personal Investments
Topic: Inflation protection for retiree portfolio
Replies: 22
Views: 1638

Re: Inflation protection for retiree portfolio

There is no reason for retirees to inflation protect their portfolios. There is plenty of reason for retirees to inflation protect their annual income. Inflation protecting your income is quite different from inflation protecting your portfolio. See the following links about 3 fund portfolios and in...
by bobcat2
Mon Dec 05, 2016 11:58 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

A revised version of the original post in this thread is now available at the Bogleheads Blog. Barry Barnitz maintains the BH Blog on his personal blog at Financial Page. Here is a link to the revised version - A Three Fund Portfolio Tailored for Stable Retirement Income https://blbarnitz4.wordpress...
by bobcat2
Sun Dec 04, 2016 11:53 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Hi Bob, Does Paula Hogan currently recommend annuitizing a percentage of holdings starting at age 70 ... . Hi Sam, (aka SGM) Here are links to some articles on life annuities and other related topics on Paula Hogan's website. There is some overlap in the first two articles on life annuities. :wink:...
by bobcat2
Fri Dec 02, 2016 11:46 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Here's another article by Wade Pfau on the LDI three fund portfolio as envisioned by Merton. I meant to include this article earlier, but for whatever reason I was unable to access it on Monday. :? Link - http://www.advisorperspectives.com/newsletters12/pdfs/Life-cycle_Finance_and_the_Dimensional_Ma...
by bobcat2
Fri Dec 02, 2016 9:13 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Why not a simple TIPS ladder as discussed in this forum and proposed by many advisers that favor an LDI strategy. Would this not be cheaper since you save on fund costs? I believe I've already said this, but I'll say it again. I don't see any substantive difference between duration matching with a ...
by bobcat2
Fri Dec 02, 2016 7:39 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

A few observations after reading through and considering the comments and questions posted in this thread. 1) Typically until an investor is within 20 years of their targeted retirement year, there is no substantive difference between this three fund portfolio, which uses a LDI strategy, and the th...
by bobcat2
Wed Nov 30, 2016 12:34 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

I don't agree. Your example is wildly unrealistic. Someone with a million dollar portfolio would almost certainly have a relatively large SS benefit. So if $40,000 is the targeted floor income and $32,000 comes from SS, why shouldn't the investor put aside $8,000 in safe income to reach his targeted...
by bobcat2
Tue Nov 29, 2016 11:48 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Hi longinvest, I think the methods you propose both understate the risk in equity heavy portfolios in retirement and overstate the cost of LDI strategy portfolios. I simply don’t see the wisdom in stock heavy portfolios in retirement. The retiree is depending on withdrawals from the portfolio and wi...
by bobcat2
Tue Nov 29, 2016 3:28 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Bob, What are current real yields of tips? When you say long and short term, what durations are you talking about? How much principal can an investor expect to lose if (I should really say when) rates rise 1%? When you duration matching assets to income, you don’t lose anything in terms of income w...
by bobcat2
Tue Nov 29, 2016 2:54 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Of course life doesn't work out predictably. But what we are discussing with this three fund portfolio, using an LDI strategy, is basically making a DC savings plan more like a DB retirement plan. Namely, making a DC plan or IRA produce reliable retirement income the way Social Security or DB pensio...
by bobcat2
Mon Nov 28, 2016 10:58 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

How can one build the DFA portfolio with ETFs? You would need a global stock index ETF, a ST TIPS ETF, and a LT TIPS ETF at a minimum. Early on in lieu of the TIPS ETFs, you could add a nominal global bond ETF or a US bond ETF or both. I would want these ETFs to have a minimum duration of at least ...
by bobcat2
Mon Nov 28, 2016 6:09 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

The DFA target date funds use a global stock index fund and two TIPS funds. The DFA TDFs use a global nominal bond fund in lieu of the ST TIPS fund until the investor gets within a few years of their target retirement year. Here is a quote from the Wade Pfau article on DFAs target date funds, which ...
by bobcat2
Mon Nov 28, 2016 5:55 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

Bob, how does that change if one's Pension plus SS cover 100% of one's income needs?. Over time, as inflation slowly eats away at the pension, the portfolio will gradually need to pick up the slack. In the six years since retirement I can already see this approaching. Does someone in this situation...
by bobcat2
Mon Nov 28, 2016 5:46 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Re: Three fund portfolio for retirement

LT TIPS funds

I believe DFA has a LT TIPS fund and there are LT TIPS ETFs. In fact I own one offered by PIMCO. The last time I checked the PIMCO LT TIPS fund had a duration of just under 22 years. The PIMCO LT TIPS ETF has the ticker symbol LTPZ.

BobK
by bobcat2
Mon Nov 28, 2016 2:16 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 67
Views: 6534

Three fund portfolio for retirement

There is a long running thread about the three fund portfolio here at Bogleheads. The three funds in the proposed portfolio are a US total stock market index fund, an international stock market index fund, and a nominal US bond market index fund. The claim is that this portfolio is both simple and w...
by bobcat2
Sun Nov 27, 2016 11:58 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 1634
Views: 864607

Re: The Three-Fund Portfolio

If we are going to discuss the three fund portfolio it is reasonable to discuss what are the best funds to be in the best three fund portfolio. DFA's target date funds consist of a global stock market fund and two TIPS funds for the most part. Early in the process they include a global bond market f...
by bobcat2
Sun Nov 27, 2016 11:19 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 1634
Views: 864607

Re: The Three-Fund Portfolio

The addition of TIPS to the Three Fund Portfolio adds additional complexity that in my opinion is not needed. The Three Fund Portfolio is easy but very sophisticated. No. A three fund portfolio consisting of US Total Stock Market, International Total Stock, and US nominal Bond Market Index fund is ...
by bobcat2
Tue Nov 15, 2016 5:20 pm
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 86
Views: 19837

Re: Master thread for Washington DC Area Bogleheads

Rayandron wrote:Is there a DC Chapter meeting this Sunday? If so, where?

The meeting this coming Sunday, November 20, is from 3-5 at the Ballston library.

BobK
by bobcat2
Tue Nov 08, 2016 12:40 pm
Forum: Personal Consumer Issues
Topic: Ad Blockers Not Blocking
Replies: 24
Views: 1629

Re: Ad Blockers Not Blocking

I use Firefox and have added the extension "Yahoo mail hide ad panel" and that blocks ads in my Yahoo mail account.

BobK
by bobcat2
Fri Nov 04, 2016 7:02 am
Forum: Investing - Theory, News & General
Topic: What percentage of a portfolio should be in international stocks ?
Replies: 101
Views: 6378

Re: What percentage of a portfolio should be in international stocks ?

Holding some foreign stocks means that the greater diversification benefit outweighs the currency risk. But the benefit of the diversification compared to the risk of the currency fluctuations declines steadily as we increase the allocation to foreign stocks. Black and Litterman found that once the ...
by bobcat2
Thu Nov 03, 2016 2:26 pm
Forum: Personal Consumer Issues
Topic: Theo Epstein to the Cubs?
Replies: 13
Views: 1613

Re: Theo Epstein to the Cubs?

Great series. Hats off to both the Indians and the Cubs. The Indians played the series without their best hitter, Brantley, and their number 2 & 3 starters, Carrasco & Salazar. Can't help but wonder how series would have turned out, if all three had been healthy and the Cubs' best hitter and...
by bobcat2
Mon Oct 31, 2016 11:21 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

My calculation includes reinvestment of stock dividends. For bonds I simply made a 4% real return guess. I did no rebalancing. So I am missing the "magic" of the rebalancing bonus.

BobK
by bobcat2
Mon Oct 31, 2016 11:02 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Hi Engineer250, ... I could be wrong, but I suspect a possible source of the rabbits could once again be nominal vs real calculations. Our investor was anticipating the much ballyhooed 7% real return for stocks, not 2.6% real before expenses. BobK I think you are using real while the 630k number is...
by bobcat2
Mon Oct 31, 2016 10:55 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Homer here's the story, Imagine someone who was age 39 at the end of 1999. That investor already had $250,000 in her 401k by the end of '99 with 90% in stocks. She thought she was in great shape for retirement, believing that the 90% would grow about 7% real per year from then to now. But instead th...
by bobcat2
Mon Oct 31, 2016 10:24 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Hi Engineer250, I think you need to do more plugging. 90% of $250,000 is $225,000. So $225,000 in stocks at the beginning. $225,000 growing at 2.6% real for 16 years with no contributions is a straightforward TVM problem where n=16 i=2.6 pv = -$225,000 pmt=0 fv= ? Solving for fv we get fv= $339,266 ...
by bobcat2
Sun Oct 30, 2016 9:59 am
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Hi naha66, There are lots of threads here at Bogleheads where people advocate not 90% in stocks, but rather 100% in stocks. Below are links to three of those threads, but there are many more. The people who believe this are passionate about it. You can tell by the fact that these threads often becom...
by bobcat2
Sat Oct 29, 2016 9:24 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Get ready for sub-5% returns We should all be well prepared by now. Things will be looking up, if we get 4% stock returns going forward. :) Us Stocks Real Annual Returns 12/31/1999 thru 9/30/2016 2.6% Source for historical real annual return calculation - http://dqydj.com/wilshire-5000-return-calcu...
by bobcat2
Sat Oct 29, 2016 8:25 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Get ready for sub-5% returns We should all be well prepared by now. Things will be looking up, if we get 4% stock returns going forward. :) Us Stocks Real Annual Returns 12/31/1999 thru 9/30/2016 2.6% Source for historical real annual return calculation - http://dqydj.com/wilshire-5000-return-calcu...
by bobcat2
Sat Oct 29, 2016 3:36 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Get ready for sub-5% returns We should all be well prepared by now. Things will be looking up, if we get 4% stock returns going forward. :) Us Stocks Real Annual Returns 12/31/1999 thru 9/30/2016 2.6% Source for historical real annual return calculation - http://dqydj.com/wilshire-5000-return-calcu...
by bobcat2
Sat Oct 29, 2016 12:26 pm
Forum: Investing - Theory, News & General
Topic: Barron's article: Get ready for sub-5% returns
Replies: 43
Views: 6574

Re: Barron's article: Get ready for sub-5% returns

Get ready for sub-5% returns We should all be well prepared by now. Things will be looking up, if we get 4% stock returns going forward. :) Us Stocks Real Annual Returns 12/31/1999 thru 9/30/2016 2.6% Source for historical real annual return calculation - http://dqydj.com/wilshire-5000-return-calcu...
by bobcat2
Mon Oct 24, 2016 1:07 pm
Forum: Investing - Theory, News & General
Topic: A better measure of retirement security
Replies: 13
Views: 3050

Re: A better measure of retirement security

Sounds like plain old common sense to me. An important takeaway of the best measure of retirement security Once you realize that the chief retirement risk is standard of living risk, it naturally follows that the safest assets are not T-bills and other short-term fixed income, but rather long-term ...
by bobcat2
Mon Oct 24, 2016 9:42 am
Forum: Investing - Theory, News & General
Topic: A better measure of retirement security
Replies: 13
Views: 3050

Re: A better measure of retirement security

An important takeaway of the best measure of retirement security Once you realize that the chief retirement risk is standard of living risk, it naturally follows that the safest assets are not T-bills and other short-term fixed income, but rather long-term real bonds that are duration matched to yo...
by bobcat2
Sun Oct 23, 2016 8:56 pm
Forum: Investing - Theory, News & General
Topic: A better measure of retirement security
Replies: 13
Views: 3050

Re: A better measure of retirement security

Pajamas wrote:That article you linked to has a hard paywall.
Is this the same article?
https://assetbuilder.com/knowledge-cent ... t-security
Yes.

BobK
by bobcat2
Sun Oct 23, 2016 8:46 pm
Forum: Investing - Theory, News & General
Topic: A better measure of retirement security
Replies: 13
Views: 3050

A better measure of retirement security

Kenneth French paces in front of the auditorium. It is entirely filled with investment advisers from all over the world. He is in the process of telling them that everything they know about risk is wrong. The real measure of risk, he says, isn’t price volatility or any of the statistical tools in c...
by bobcat2
Wed Oct 19, 2016 8:20 pm
Forum: Investing - Theory, News & General
Topic: Hooked on investment-linked bonds
Replies: 4
Views: 624

Re: Hooked on investment-linked bonds

What Merton wrote was that at a certain point in time the payout of a real annuity might be 5%, and that another point in time the payout of a real life annuity might be 0.5%. So these were hypotheticals by Merton, attempting to show how the payouts of annuities can vary a lot if you concentrate on ...
by bobcat2
Wed Oct 19, 2016 2:50 pm
Forum: Investing - Theory, News & General
Topic: Hooked on investment-linked bonds
Replies: 4
Views: 624

Hooked on investment-linked bonds

Hooked on investment-linked bonds, or, practical duration matching for retirees. From Stephen Cranston writing in the Investor's Notebook on Financial Mail. Investment value and asset volatility are the wrong measures if the goal is to get a particular future income. There is a misguided view of ris...
by bobcat2
Tue Sep 27, 2016 5:51 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle investing: it depends on the insurance market being very efficient, right?
Replies: 17
Views: 2004

Re: Lifecycle investing: it depends on the insurance market being very efficient, right?

I am surprised no one has brought up unlocking home equity as part of the life-cycle solution to retirement funding, but here is Robert Merton to remind us. In a keynote address this month, Dr. Robert C. Merton, distinguished professor of finance at the MIT Sloan School of Management and 1997 Nobel ...
by bobcat2
Sun Sep 25, 2016 11:52 am
Forum: Investing - Theory, News & General
Topic: Lifecycle investing: it depends on the insurance market being very efficient, right?
Replies: 17
Views: 2004

Re: Lifecycle investing: it depends on the insurance market being very efficient, right?

Both Bodie and Merton have written suggestions on how to implement what they propose -- not as specific as the "three-fund portfolio", but close! :) That's not true. :wink: Merton uses a three-fund portfolio - it's just a different three funds than the Boglehead three fund proposal. In Me...
by bobcat2
Thu Sep 15, 2016 12:11 pm
Forum: Personal Finance (Not Investing)
Topic: Keys to a Successful Retirement
Replies: 55
Views: 7025

Keys to a Successful Retirement

Here are several ways Americans in their early 50s or older could better secure a financially sound retirement, particularly in a low return environment. A successful retirement here is defined as being able to sustain the standard of living in retirement that the household had obtained in the sever...
by bobcat2
Mon Sep 12, 2016 1:36 pm
Forum: Investing - Theory, News & General
Topic: Two Different Worlds
Replies: 12
Views: 1744

Two Different Worlds

Two Different Worlds Divide the last nearly 34 years of real annual total returns in the US stock market into approximately two halves. The first 17 years (12/31/1982 - 12/31/1999) And the last 16 years & 8 months (12/31/1999 - 8/31/2016) Real Annual Total Return US Stock Market 12/31/1982 - 12...
by bobcat2
Fri Sep 02, 2016 9:26 am
Forum: Investing - Help with Personal Investments
Topic: Fee only financial planner in Milwaukee-Madison area
Replies: 4
Views: 429

Re: Fee only financial planner in Milwaukee-Madison area

Paula Hogan - She is one of America's top financial planners. She is also one of the leaders in napfa - the organization of fee only financial planners. Links to websites - http://findanadvisor.napfa.org/Members.aspx/View/2894/5429 http://hoganfinancial.com/ BobK
by bobcat2
Sun Aug 21, 2016 2:39 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

...[the]Siegel take is based on actual long-term empirical evidence--what has actually happened in 25 different countries for two hundred years . What data set is being used that has 200 years of data on 25 different countries? The Triumph data has results for about 25 countries, but that data begi...
by bobcat2
Sun Aug 21, 2016 2:26 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

Hi Patrick, Here are my back of the envelope estimates of Japanese stock and bond returns 1989-2015 combining Yearbook data and last year's update. This was a quick and dirty estimate, but I think it's reasonably close to the actual results. annual real return 1989-2015 Japanese stocks -1.5% Japanes...
by bobcat2
Sun Aug 21, 2016 1:55 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

You can believe as Seigel does that stocks are relatively safe high return assets in the LR. Or you can believe, as most financial economists believe, that stocks are risky investments regardless of the holding period. Obvious example - Japanese stocks from 1989 to the present, where the real retur...
by bobcat2
Sun Aug 21, 2016 12:59 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

LDI ? LR ? LDI - liability driven investing This is sometimes called goal-based investing. Liability-driven investment policies and asset management decisions are those largely determined by the sum of current and future liabilities attached to the investor, be it a household or an institution. As ...
by bobcat2
Sun Aug 21, 2016 12:44 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

duffer - You can believe as Seigel does that stocks are relatively safe high return assets in the LR. Or you can believe, as most financial economists believe, that stocks are risky investments regardless of the holding period. Obvious example - Japanese stocks from 1989 to the present, where the re...
by bobcat2
Sun Aug 21, 2016 9:49 am
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

And one quick observation about Zvi Bodie, I confess I like the guy. His viewpoints are interesting, even if nothing else. He also seems quite charming, and would probably be fun to hang around. That being said, it would be an understatement to say his views towards investing and portfolio manageme...
by bobcat2
Sun Aug 21, 2016 9:28 am
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

BobK Your (and Nisiprius's) account of the implications of the Pastor-Stambaugh work for this debate is quite misleading. Pastor and Stambaugh have specifically declined to see any implication of their present work for asset allocations. The reason they do not is that the point they are arguing abo...
by bobcat2
Sun Aug 21, 2016 8:47 am
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 115
Views: 7780

Re: Are there other reasons besides volatility to avoid 100% equities?

Duffer - Looking at stock returns of 15 years or more in only the US stock & bond markets tells us little reliably about the relative LR returns of equities vs.bonds. US stock market data is at best dubious before 1890. That leaves us with 8 independent samples of 15 year returns, which is not ...

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