Search found 1929 matches

by longinvest
Sun Jul 24, 2016 10:21 am
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

The loss is 7 times smaller than the gain of the reverse sequence of yield curves! Thanks for the detailed reply. It's late in this part of the world, so I'll try to digest it tomorrow morning :) But one thing I'm still struggling with maybe you can help with. Symmetric interest rate changes have a...
by longinvest
Sun Jul 24, 2016 8:48 am
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

Let me repeat my previous calculations , but with a huge 2% movement across the yield curve in a low-yield environment, just to see how good or bad it could get. Same yield curve assumptions and initial investment of $50 in each of the two bonds of our barbell. High Annual Return Start of year: 10-y...
by longinvest
Sun Jul 24, 2016 7:51 am
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

I'll quote a post of one of our leaders depicting the historical returns of Vanguard's Total Bond Market since inception. Its worst historical annual return was -2.7% in 1994. History of Total Bond Market Index Fund * Total Bond Market's worst annual loss was -2.7% in 1994 (It gained 18.5% in 1995)...
by longinvest
Sat Jul 23, 2016 10:20 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

I don't know where those inflation figures came from, but they are off (sometimes quite a bit) from Shiller's data relative to January of each year. Try the BLS's table 24 Historical Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, all items-Continued , December to December...
by longinvest
Sat Jul 23, 2016 9:43 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

I don't know where those inflation figures came from, but they are off (sometimes quite a bit) from Shiller's data relative to January of each year. Try the BLS's table 24 Historical Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, all items-Continued , December to December...
by longinvest
Sat Jul 23, 2016 7:42 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds at an historic high; time to get out?
Replies: 37
Views: 2888

Re: Bonds at an historic high; time to get out?

I am 68, semi-retired, and have 60% of my savings in bonds and bond funds. Since safety of principal is of primary importance I am staying away from all but short to intermediate term treasuries and high investment grade US corporates. However, as interest rates continue to fall and bond prices con...
by longinvest
Sat Jul 23, 2016 10:44 am
Forum: Investing - Theory, News & General
Topic: Trying the Impossible - Financing 30-Year Retirements with 40-Year Careers
Replies: 70
Views: 8498

Re: Trying the Impossible - Financing 30-Year Retirements with 40-Year Careers

Rethinking Retirement Basically, Merton says it boils down to this: “You either have to work longer or accept a lower standard of living. What you can’t do is work the same number of years as your parents, live longer and enjoy the same standard of living. That’s not feasible.” Link - http://www.re...
by longinvest
Sat Jul 23, 2016 9:11 am
Forum: Investing - Theory, News & General
Topic: Are you feeling uncomfortable? [with your investments]
Replies: 38
Views: 3454

Re: Are you feeling uncomfortable? [with your investments]

What have you done recently with your investments that has made you feel uncomfortable? Nothing, and I don't intend to do anything uncomfortable. I consider that a proper asset allocation (AA) is one such that, if my portfolio was converted to cash, I could invest it back immediately as a lump sum ...
by longinvest
Fri Jul 22, 2016 1:46 pm
Forum: Investing - Theory, News & General
Topic: Evaluating our investing performance - what indices and format?
Replies: 5
Views: 235

Re: Evaluating our investing performance - what indices and format?

SWBoarder wrote:1) are there existing posts showing other's reporting/tracking formats?

There's a Wiki page: wiki: Calculating personal returns.
by longinvest
Thu Jul 21, 2016 6:04 pm
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 175
Views: 22438

Re: Delay Social Security to age 70 and Spend more money at 62

I have read this many, many (many times) and I have a question. Why wouldn't you just take $63,182 out of your $1,000,000 every year for 8 years and then at age 70 reduce the amount you take out of your portfolio by $34,092? What's the point of taking out $272,736 and sticking it in a savings accou...
by longinvest
Thu Jul 21, 2016 12:53 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

With the way I combined VPW (keeping a fixed rate) and Prime Harvesting, the average withdrawal across all cycles I tested is indeed higher (hardly surprising as the average AA is a tad more aggressive than the initial 60/40 AA). BUT. The average withdrawal is *lower* for the really rosy years (fai...
by longinvest
Thu Jul 21, 2016 7:55 am
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

I don't understand why most of the above backtests are done with aggressive portfolios (over 50% in stocks). Is a retiree's goal really to maximize withdrawals? Shouldn't it be, instead, to reduce anxiety with a relatively boring nominal withdrawal schedule and low nominal portfolio volatility, whil...
by longinvest
Sun Jul 17, 2016 7:22 pm
Forum: Investing - Theory, News & General
Topic: How to spread the purchase to reduce risk?
Replies: 6
Views: 515

Re: How to spread the purchase to reduce risk?

If I liquidated my portfolio to cash today, I would be totally comfortable investing it back as a lump sum into my current asset allocation. If I was worried to invest a big amount of new money as a lump sum into my current asset allocation, I would not try to trick myself into a higher stock alloca...
by longinvest
Sun Jul 17, 2016 8:20 am
Forum: Investing - Theory, News & General
Topic: Maintaining 3-10 yrs expenses in fixed income in retirement rather than set %
Replies: 107
Views: 7418

Re: Maintaining 3-10 yrs expenses in fixed income in retirement rather than set %

I have a feeling that those who worry about rebalancing into stocks might have a lower allocation to bonds than their effective risk/volatility tolerance during a crisis would seem to suggest. Take, for example, a retiree with a 30/70 stocks/bonds portfolio. Stocks drop 50%, then comes the time to t...
by longinvest
Sat Jul 16, 2016 10:05 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

But, this fails the logical test of considering another retiree commencing retirement just after the stock market has dropped. This other retiree, if not dynamically/tactically allocating his assets, will have rebalanced into more stocks, unlike the already retired person. So both, even if they hav...
by longinvest
Sat Jul 16, 2016 7:28 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

(Note that I have not read the book; I am merely commenting based on what I read in this thread). This does make it hard to respond to your clarifications when I am trying to respond to what is in the book. Yet, it could be very valuable for readers of this thread that do not possess a copy of the ...
by longinvest
Sat Jul 16, 2016 7:12 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Kevin, I can add two data points to the conversation. For my own retirement, I don't use any withdrawal method, but I am in the fortunate position of having a very low withdrawal rate, ... I like your approach, given that you can afford it and you sleep well at night. At first sight, your approach l...
by longinvest
Sat Jul 16, 2016 6:40 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Its more of a nudge then anything else. We are talking a few tenths of a percent change (in the initial withdrawal rate) based on valuation. I don't have a problem with that. Even Bogle changed his asset allocation around 2000 due to valuations. If still not convenced then go with the conservative ...
by longinvest
Sat Jul 16, 2016 4:59 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

However, the high limit is based on the market valuation when you start. So someone starting in a high market can take less percentage then someone starting in a low market. I have personally no faith whatsoever in anybody's ability to properly valuate the stock market. If an investor has strong be...
by longinvest
Sat Jul 16, 2016 4:37 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Since you so dislike "methods with a memory," what is your suggestion for determining which harvesting method to use for your own retirement? I am a big fan of "percent of current portfolio balance" methods with rebalancing (e.g. rebalance while taking withdrawal, which leads to...
by longinvest
Sat Jul 16, 2016 12:52 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 263
Views: 27418

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

The thing that annoys me, in all the withdrawal methods that have a "memory of the past" (I'll explain later), is that we end up with a possibility of two retirees of the same age, with the same portfolio and same target allocation, in the same year, which must take different withdrawal/re...
by longinvest
Thu Jul 14, 2016 10:26 am
Forum: Investing - Theory, News & General
Topic: Active Managers having their worst year ever!
Replies: 19
Views: 2113

Re: Active Managers having their worst year ever!

By definition, active managers, in the aggregate, get the market return, minus expenses. Index investors get the same market return, but have lower expenses. I take issue with this oft repeated mantra. Tamalak, It is not a mantra ; it is a theorem proven by Nobel Laureate William Sharpe. Taylor Lar...
by longinvest
Tue Jul 12, 2016 3:50 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

^^^ Yes, there is no copyright on government sites. However... that's a general statement and exceptions may apply. Like for the data: Research Division Terms and Conditions Some Information contained on this site may be copyrighted by its owner, and permission to use such copyrighted materials mus...
by longinvest
Tue Jul 12, 2016 12:38 pm
Forum: Investing - Theory, News & General
Topic: Short Bond Index Funds - High Turnover.
Replies: 14
Views: 1077

Re: Short Bond Index Funds - High Turnover.

Customer money flows, in and out, generate trades. Very short term investments kept on hand to anticipate money flows can trade daily. Right! Customer money flows and, probably, the occasional use of derivatives* to lower market impact might explain part of the additional turnover. * I remember rea...
by longinvest
Tue Jul 12, 2016 12:28 pm
Forum: Investing - Theory, News & General
Topic: Short Bond Index Funds - High Turnover.
Replies: 14
Views: 1077

Re: Short Bond Index Funds - High Turnover.

Wait a minute. Let's say that you take the 1-3 year fund. That's like a ladder-like fund with two rungs: a 3-year rung, and a 2-year rung. One year later, we end up with a 2-year rung and a 1-year rung. We sell the later and buy a new 3-year rung. Right there, we see a 50% yearly turnover. That's mu...
by longinvest
Tue Jul 12, 2016 12:19 pm
Forum: Investing - Theory, News & General
Topic: Short Bond Index Funds - High Turnover.
Replies: 14
Views: 1077

Re: Short Bond Index Funds - High Turnover.

Can anyone help explain why some short term bond index funds have a relatively high turnover. Examples: Vanguard Short Term Gov. (1-3 year) Turnover 65% (Morningstar) Vanguard Short Term Corp (1-5 year) Turnover 62% (Vanguard & M*) I would have expected more like 33% and 20% respectively. (Base...
by longinvest
Tue Jul 12, 2016 9:30 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

On the positive side, our ladder-like construction, even if we kept bonds until maturity, should have a pretty high duration, as all coupons are reinvested in new long bonds, tilting the weighting of maturities, within the ladder, towards longer maturities. So, it shouldn't be too bad an estimate of...
by longinvest
Tue Jul 12, 2016 9:19 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

Averages of daily data. Copyright, 2016, Moody's Investor Services. Reprinted with permission. Moody's tries to include bonds with remaining maturities as close as possible to 30 years. Moody's drops bonds if the remaining life falls below 20 years, if the bond is susceptible to redemption, or if t...
by longinvest
Tue Jul 12, 2016 9:08 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

I forgot that we have Shiller's 1-year rates. So, we can make a linear approximation!

The main thing to clarify is the copyright thing, though. Any idea?
by longinvest
Tue Jul 12, 2016 8:56 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

While we are at it... Midareff also suggested on the Simba thread to do something with corporate bonds based on: AAA Corporates going back to 1920: https://fred.stlouisfed.org/series/AAA Longinvest, any thought about that? Siamond, It says: " Averages of daily data. Copyright, 2016, Moody's In...
by longinvest
Tue Jul 12, 2016 8:13 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

The question was (from siamond): " Oh, and you were right, I didn't extend the LTGB (Long-Term Gov. Bonds) series to pre-1972 years. The current simulator can only do 1954+ though, which is why I didn't bother. If you have ideas on how to get to the earlier years, please discuss in the bond fu...
by longinvest
Tue Jul 12, 2016 7:48 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

https://fred.stlouisfed.org/series/IRLTLT01USM156N 1955 forward on the Ten from the FRED. Midareff, The bond fund contains all available * FRED 1, 2, 3, 5, 7, 10, 20, and 30-year yields (January average) since 1954, and uses them. You might want to inspect the bond fund simulator spreadsheet. A lin...
by longinvest
Mon Jul 11, 2016 7:39 am
Forum: Investing - Theory, News & General
Topic: What's your asset allocation and why?
Replies: 103
Views: 5361

Re: What's your asset allocation and why?

My asset allocation is 50/50 stocks/bonds. My stocks are divided 50/50 between domestic/international stocks. My bonds are 100% domestic, as I do not want to include derivative products in my portfolio (which would be necessary to hedge currency for including international bonds). I only use low-cos...
by longinvest
Sun Jul 10, 2016 5:09 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 129
Views: 10720

Re: Historical Bond Returns - Shiller: From Rates to Returns

Fryxell, Interesting. But, as to the accuracy of the simulator spreadsheet, please take the time to read my previous posts in this thread. While the 10-2 and 10-1 funds use approximate (linear aproximation) 2 to 9-year yields, they actually model a ladder construction with accurate cash flows (assum...
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: 18239

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: 18239

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: 18239

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: 18239

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: 10010

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: 10010

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: 18239

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: 18239

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: 18239

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: 10010

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: 18239

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: 607
Views: 178518

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: 10010

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: 10010

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: 10010

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: 4059

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.

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