Search found 1895 matches

by longinvest
Wed May 11, 2016 10:58 am
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

OK, here's the chart I wanted you to see: http://s32.postimg.org/4cf3zmqud/1899_vs_1871.png Look how the auto-correction is slowly working. While the 1899-start portfolio balance was barely 40% of the 1871-start portfolio balance in 1899, it was 80% of it in 2016. That means that the withdrawal amou...
by longinvest
Tue May 10, 2016 1:59 pm
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

Have fun playing with it. Try, for example, starting the fund in 1899. If you draw both the 1871 and 1899 portfolio balance path lines on the same chart, you'll be able to visualize the slow, but very real auto-correction of the smooth perpetual withdrawal method. Just look at how the distance betw...
by longinvest
Tue May 10, 2016 6:01 am
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

AlohaJoe, Thanks for the info about the laws governing endowments. Maybe the minimum threshold for stopping distributions, under the law, could be set at SPW's $356,278, instead of $1,000,000. I would be surprised if the law enforce the naive baseline model on endowments. Anyway, it's nice to learn ...
by longinvest
Mon May 09, 2016 6:32 pm
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

longinvest, There must be something I'm not modeling quite correctly. These look similar to your plots, but are subtlety different ... One Ping, Your charts look OK to me. You're probably using a different set of returns. As I said, I used the historical data in the VPW backtesting spreadsheet. Thi...
by longinvest
Mon May 09, 2016 4:13 pm
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point [When can you retire?]

Jjface and Azanon, The underlying risk that affects all constant and variable withdrawal methods is " insufficient market returns risk ", which I call "market risk" for brevity. It has nothing special to do with the the specific "sequence" of returns. If a portfolio ret...
by longinvest
Mon May 09, 2016 3:26 pm
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point [When can you retire?]

Azanon, You have probably not understood the answer I gave Jjface, in the quote I have included in my previous post. It is your right to define " sequence of returns risk " differently than it has traditionally been defined in the retirement literature (the 4% SWR literature, in particular...
by longinvest
Mon May 09, 2016 2:54 pm
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

Here's an additional chart, to complement the previous two. It displays the effective withdrawal rate.

    withdrawal rate = withdrawal amount / portfolio balance

Image
by longinvest
Mon May 09, 2016 11:48 am
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

Aloha, There's something wrong in your calculations. Are you, by any chance, displaying nominal amounts? Anyway, here's what I get with the VPW backtesting spreadsheet's historical data, for the recommended portfolio (except that, until 1971, US stocks are substituted to international stocks, becaus...
by longinvest
Mon May 09, 2016 9:28 am
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

This thread has occasionally been on my mind over the past few months, in the light of a recent retirement withdrawal method I've settled on for the time being. The original aim was stated as:- the goal of this new strategy is to keep an average trajectory of the portfolio centered on a predefined ...
by longinvest
Mon May 09, 2016 9:12 am
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

Second, I think that it is important to use the proper terms to describe things. I'm not interested in repeating a previous discussion, so here's a link to a post which explains how VPW exhibits "market" risk (in other words, adding enough bonds to the portfolio is important), but does no...
by longinvest
Sun May 08, 2016 7:00 pm
Forum: Investing - Theory, News & General
Topic: Smooth perpetual withdrawal from risky assets [endowment fd]
Replies: 113
Views: 17890

Re: Smooth perpetual withdrawal from risky assets [endowment fd]

I was asked, in a private message, to finally present my perpetual withdrawal method idea (in the context of endowment withdrawals for a charity). Note that the method outlined in this post will not work for retirement withdrawals. Let me explain it. BASELINE METHOD The main idea, to allow for perpe...
by longinvest
Sat May 07, 2016 8:17 am
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 599
Views: 173613

Re: Variable Percentage Withdrawal (VPW)

I think it is more correct to say that the VPW method manages sequence of return risk rather than eliminate it. It does this by reducing withdrawal amounts. This is only going to work if you can always cover essential spending as BahamaMan pointed out. The example decided on an inappropriate minimu...
by longinvest
Fri May 06, 2016 8:55 pm
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

The point is that life happens and there are no 100% guarantees on anything. I wish that a bell would ring and tell me the correct time to retire. It would also be cool if there was the "right" investment strategy, the "right" withdrawal strategy, and the "right" portf...
by longinvest
Fri May 06, 2016 2:56 pm
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

Thanks LI - I misread your prior post as you actually retired in 2000 and I couldn't reproduce the results. I see 1966, ouch, what a bad sequence. Jainn, Yes, it was a brutal return and mostly inflation sequence. P.S. Don't spread false rumors; I'm not retired! Still in my 40s in accumulation mode....
by longinvest
Fri May 06, 2016 10:30 am
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

Can you help me understand how your portfolio has lost 60% of its value in real terms, over past 16 years? I understand there are withdrawals during this period, so just trying to see what caused 60% depletion. Truly interested. Jainn, All along, the investor was taking withdrawals. Here's the full...
by longinvest
Fri May 06, 2016 8:08 am
Forum: Investing - Theory, News & General
Topic: Retirees: Who's not changing their AA, ever?
Replies: 46
Views: 3825

Re: Retirees: Who's not changing their AA, ever?

Not retired. Mortgage paid off a few years ago.

AA 50/50 with no plan to ever change it, because I find both stocks and bonds risky, but differently.
by longinvest
Fri May 06, 2016 7:55 am
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

Just for reference, using the default configuration of the VPW spreadsheet, a 65-years old 1966 retiree with a 25% US stocks / 25% international stocks / 50% US bonds $1,000,000 portfolio and a planned last withdrawal at age 99 (35-year withdrawal path) had his lowest inflation-adjusted withdrawal ...
by longinvest
Fri May 06, 2016 7:37 am
Forum: Investing - Theory, News & General
Topic: Why did Peter Bernstein denounce the 60/40 Solution
Replies: 27
Views: 3766

Re: Why did Peter Bernstein denounce the 60/40 Solution

Nisiprius, I personally think that the distinction between bonds and cash, in recommended portfolios, has been eliminated due to the advent of bond index funds. Before then, people bought individual bonds/Treasuries which, by nature, were not liquid investments, and probably resulted with a bond por...
by longinvest
Fri May 06, 2016 6:25 am
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

And, of course, how much flexibility is required varies dramatically between strategies. Here are some popular variable withdrawal strategies and, given a starting portfolio of $1,000,000 and a retirement in 1966, the lowest income they would provide in a single year: ⋅ $23,000 (5% Fixed ...
by longinvest
Thu May 05, 2016 11:06 pm
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

OK. I refrained from asking it sooner, but I can't resist anymore. What is risk ? Or, more exactly, what are the risks ? Which kinds of risk should I tolerate? Which risks should I try to completely avoid? Risk tolerance is not a simple subject. Also, solutions to manage risk can take different form...
by longinvest
Thu May 05, 2016 10:11 pm
Forum: Personal Finance (Not Investing)
Topic: The crossover point [When can you retire?]
Replies: 59
Views: 9674

Re: The crossover point

The point is that life happens and there are no 100% guarantees on anything. I wish that a bell would ring and tell me the correct time to retire. It would also be cool if there was the "right" investment strategy, the "right" withdrawal strategy, and the "right" portf...
by longinvest
Thu May 05, 2016 7:06 pm
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

One risk that we often forget about, is personal risk. Often, investors have goals for their money (retirement, college, etc.), yet life happens and sometimes objectives change drastically. That's when a portfolio can be tested. An 100% stock investor who lost his job in 2008 and needed to withdraw ...
by longinvest
Thu May 05, 2016 4:59 pm
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

What did you think of ruralavalon's suggestion? I replied that it could be added. Ruralavalon's addition would not remove the "expected return" term. Let me repeat: If you are willing to explain what "expected returns" mean, in a way that beginners and people like me can finally...
by longinvest
Thu May 05, 2016 4:26 pm
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

What did you think of ruralavalon's suggestion? I replied that it could be added. Ruralavalon's addition would not remove the "expected return" term. Let me repeat: If you are willing to explain what "expected returns" mean, in a way that beginners and people like me can finally...
by longinvest
Thu May 05, 2016 3:59 pm
Forum: Personal Finance (Not Investing)
Topic: I'm now debt free and...
Replies: 37
Views: 4766

Re: I'm now debt free and...

I just paid off my mortgage today--two days short of my 40th birthday. Plan to use the increased cash flow to max out retirement accounts and Roth IRAs, contribute more to kids' 529 Plans, address home maintenance/improvement projects, and enjoy life with newly acquired debt freedom. Cheesehead, Yo...
by longinvest
Thu May 05, 2016 3:45 pm
Forum: Investing - Theory, News & General
Topic: Backtesting David Swensen Lazy Porfolio against Three Fund
Replies: 57
Views: 8384

Re: Backtesting David Swensen Lazy Porfolio against Three Fund

That $195,280 might make a difference. Or it might melt a few days later, and make no difference. That's the thing; we just don't know. Swensen's portfolio is good enough . The Three-Fund Portfolio is good enough . The most important is to have a solid mental framework not based on past returns , w...
by longinvest
Thu May 05, 2016 3:22 pm
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

Fallible, The term "expected return" should not be used in a text destined to be read by beginners. I've got a pretty good mathematical background, and I have been active on this site for a few years already, but I have been unable to entirely grasp its meaning , so far. Here's the clarifi...
by longinvest
Thu May 05, 2016 1:49 pm
Forum: Forum Issues and Administration
Topic: Revealing Usernames
Replies: 52
Views: 5020

Re: Revealing Usernames

I think that there is too much risk for an employee to disclose his identity when writing on public discussion boards; his employer might not like what was written and this could have a negative impact on one's career. Imagine someone disclosing his planned retirement date, for example. On the other...
by longinvest
Thu May 05, 2016 11:09 am
Forum: Personal Finance (Not Investing)
Topic: I'm now debt free and...
Replies: 37
Views: 4766

Re: I'm now debt free and...

Congratulations!
by longinvest
Thu May 05, 2016 11:01 am
Forum: Personal Finance (Not Investing)
Topic: Wiki article for new investors - Risk tolerance
Replies: 42
Views: 3199

Re: Wiki article for new investors - Risk tolerance

4. I would change this: Need to take risk is determined by the rate of return required to achieve financial objectives. If the goal requires a higher return, the investor needs to take more risk with the expectation that doing so will result in a higher return. to: Need to take risk is determined b...
by longinvest
Thu May 05, 2016 9:20 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 41
Views: 5250

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

Long invest, Agree, concentrated regarding term risk Concentration of quality risk irrelevant since the bond is riskless Dave, A government bond is not risk-less; it is default-less. :) The law of supply and demand also applies to investment-grade corporate and government bonds. If investors percei...
by longinvest
Thu May 05, 2016 8:46 am
Forum: Investing - Theory, News & General
Topic: Your age in bonds minus ten? Not according to Vanguard
Replies: 93
Views: 7984

Re: Your age in bonds minus ten? Not according to Vanguard

Now that's interesting. It would seem there is no advantage to be gained, regarding SWR, going past 40% or so equities. OTOH, it would seem you have to derive a chart like this from historical data and today's government bond is not your father's. Might not be your father's bonds, but might be your...
by longinvest
Thu May 05, 2016 7:45 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 41
Views: 5250

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

"Concentration risk" is not relevant with regard to treasuries since they are considered riskless. I guess you could consider intermediate term concentrated with regard to term risk. Dave, Yes it is relevant. Concentration in specific maturities makes the investor vulnerable to an unfavor...
by longinvest
Thu May 05, 2016 7:35 am
Forum: Investing - Theory, News & General
Topic: Your age in bonds minus ten? Not according to Vanguard
Replies: 93
Views: 7984

Re: Your age in bonds minus ten? Not according to Vanguard

Now that's interesting. It would seem there is no advantage to be gained, regarding SWR, going past 40% or so equities. OTOH, it would seem you have to derive a chart like this from historical data and today's government bond is not your father's. Might not be your father's bonds, but might be your...
by longinvest
Thu May 05, 2016 7:28 am
Forum: Investing - Theory, News & General
Topic: Your age in bonds minus ten? Not according to Vanguard
Replies: 93
Views: 7984

Re: Your age in bonds minus ten? Not according to Vanguard

Here's an international perspective on SAFEMAX: http://i66.tinypic.com/20sde2r.jpg Source: Pfau, Wade D. 2010. “An International Perspective on Safe Withdrawal Rates from Retirement Savings: The Demise of the 4 Percent Rule?" GRIPS Discussion Papers 10-12, National Graduate Institute for Policy...
by longinvest
Thu May 05, 2016 7:20 am
Forum: Investing - Theory, News & General
Topic: Your age in bonds minus ten? Not according to Vanguard
Replies: 93
Views: 7984

Re: Your age in bonds minus ten? Not according to Vanguard

Another example, all of the SWR research is based on annual reallocation to a fixed ratio. What SWR should you use if you're doing an "age in bonds" glide path? It turns out you to have use a much lower SWR, usually on the order of 1.5% less than a 60/40 portfolio with annual rebalancing:...
by longinvest
Thu May 05, 2016 6:19 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 41
Views: 5250

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

Based on this, why are most Bogleheads in the Total Bond Index instead of the Intermediate Bond Index? In addition to the reasons listed by others, could another reason be that the Intermediate Bond Index has a longer duration (6.5 vs. 5.7) which may be worrisome if rates go up? I think that's prob...
by longinvest
Wed May 04, 2016 9:11 pm
Forum: Personal Finance (Not Investing)
Topic: Leasing and renting vs buying cash
Replies: 14
Views: 1319

Re: Leasing and renting vs buying cash

I've always understood rent/own to generally be a lifestyle choice and expenses are generally a wash for a residence. Yes, there's definitely more to it than a purely financial decision. I'm realizing that it might have been the wrong choice, for me , to become an owner. I just don't like the respo...
by longinvest
Wed May 04, 2016 6:26 am
Forum: Investing - Theory, News & General
Topic: How many funds in your portfolio?
Replies: 99
Views: 6425

Re: How many funds in your portfolio?

3

VCN (Domestic Stocks, Canada, 25%)
VXC (International Stocks, ex Canada, 25%)
VAB (Domestic Bonds, Canada, 50%)
by longinvest
Tue May 03, 2016 10:49 am
Forum: Personal Finance (Not Investing)
Topic: Leasing and renting vs buying cash
Replies: 14
Views: 1319

Re: Leasing and renting vs buying cash

JJface, Yes you are pretty much paying for a service. Nothing wrong with that if you can afford it. A lot of people consider doing this precisely for the convenience as owning a house comes with a lot of responsibilities. Thanks for finding the proper way to express what I was trying to say. I would...
by longinvest
Tue May 03, 2016 10:35 am
Forum: Personal Finance (Not Investing)
Topic: Leasing and renting vs buying cash
Replies: 14
Views: 1319

Re: Leasing and renting vs buying cash

At some point you get to live "rent" free (no mortgage) with your housing costs limited to taxes and repairs. Plus all the tax breaks along the way. Danzangdc, Just for some context, we've been done with the mortgage for a few years already. I know all about the tax breaks (no tax on capi...
by longinvest
Tue May 03, 2016 10:13 am
Forum: Personal Finance (Not Investing)
Topic: Leasing and renting vs buying cash
Replies: 14
Views: 1319

Re: Leasing and renting vs buying cash

Just to clarify, I am talking about a way of life. So, one would be renting and leasing indefinitely, paying more (most probably) in the process than someone buying. I am not asking whether it is less expensive, but about if it makes sense when one can afford it and would rather have fewer responsib...
by longinvest
Tue May 03, 2016 9:58 am
Forum: Personal Finance (Not Investing)
Topic: Leasing and renting vs buying cash
Replies: 14
Views: 1319

Leasing and renting vs buying cash

Assume that someone had the money (in his portfolio) to buy a new car and a house. Generally, I consider that buying costs less than leasing or renting (sometimes much less). At least, that's what I get with the conservative assumptions I put into any crude calculation I make involving an unknowable...
by longinvest
Tue May 03, 2016 7:23 am
Forum: Investing - Theory, News & General
Topic: Withdrawal Efficient Rate (WER) of Variable Percentage Withdrawal (VPW)
Replies: 11
Views: 1015

Re: Withdrawal Efficient Rate (WER) of Variable Percentage Withdrawal (VPW)

Thanks, AlohaJoe.

It's nice to get some confirmation bias about my preferred portfolio withdrawal strategy. :wink:

Could you briefly describe the two other strategies (Constant Failure Percentage and Mortality Updating Failure Percentage)? They sound intriguing.
by longinvest
Mon May 02, 2016 10:45 am
Forum: Investing - Theory, News & General
Topic: Reasonable Firecalc Assumptions and Results?
Replies: 22
Views: 2595

Re: Reasonable Firecalc Assumptions and Results?

However, the recent Bogleheads thread on the Mckinsey report that suggests returns could be lower the next 20 years brought me to retry my Firecalc numbers using 2.5% worse returns. Don't forget to also read Barry Ritholtz's take on that report (referenced in this post on the same thread). :wink:
by longinvest
Mon May 02, 2016 8:53 am
Forum: Investing - Theory, News & General
Topic: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe
Replies: 77
Views: 6109

Re: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe

Let me restate , yet again, that Sharpe's theorem is about time-weighted returns, which are not (by definition) sensible to cash flows. From Sharpe, as quoted above: A passive investor always holds every security from the market, with each represented in the same manner as in the market. Thus if se...
by longinvest
Mon May 02, 2016 7:58 am
Forum: Investing - Theory, News & General
Topic: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe
Replies: 77
Views: 6109

Re: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe

Here's my post showing how active investors can beat passive investors who are in more than one market (aka you). https://www.bogleheads.org/forum/viewtopic.php?f=10&t=188773#p2866228 Yes, I know it breaks Sharpe's rule that passive investors never ever trade, but that breaks the real world fac...
by longinvest
Mon May 02, 2016 7:42 am
Forum: Investing - Theory, News & General
Topic: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe
Replies: 77
Views: 6109

Re: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe

It's problematic I think to say the definition is holding all stocks in market proportion but that you can slice the market to hold any group of stocks you want. In_reality, After all this thread, you have already forgotten this sentence extracted from Sharpe's theorem?! First a market must be sele...
by longinvest
Mon May 02, 2016 6:56 am
Forum: Investing - Theory, News & General
Topic: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe
Replies: 77
Views: 6109

Re: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe

So I agree Investopedia's definition misses the mark. I also think your definition ("total-market indexing") misses the mark. Note Sharpe's emphasis on selecting a market. Bertilak, "Total-market indexing" in most of the uses I've seen, seems to refer to following a market-weigh...
by longinvest
Mon May 02, 2016 5:52 am
Forum: Investing - Theory, News & General
Topic: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe
Replies: 77
Views: 6109

Re: "Indexed Investing: A Prosaic Way to Beat the Average Investor" by W. Sharpe

JoMoney, Some corrections. Passive investing does not equal total market investing. Passive investing is just limited transactions, "buy and hold". It's not a statement about anything in your portfolio. But the math is such for any portfolio, that the group of people actively trading the c...

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