The US stock market is now a little over 60% of global market capitalization - not about 70%.
Link to 60% source - https://www.aaii.com/etf/ticker/VT#:~:t ... %20stocks.
BobK
The US stock market is now a little over 60% of global market capitalization - not about 70%.
Yes. In general put I-bonds in your taxable account and TIPS in your tax advantaged accounts.Mel Lindauer wrote: ↑Wed Feb 07, 2024 9:23 pm For those espousing TIPS instead of I Bonds, I would argue that a combination of BOTH would be ideal. Remember, TIPS can lose money if redeemed prior to maturity whereas I Bonds can never lose principle, and thus offer greater flexibility since they can be redeemed anytime between one and thirty years. Thus, someone who owns both TIPS and I Bonds could use the I Bonds for their flexible/unforeseen needs which would allow them to hold their TIPS to maturity, thus eliminating any possible loss. So the combination of the two offers the best of both worlds (a higher TIPS real rate at present and the flexibility of the I Bonds.)
dcabler wrote: ↑Sun Jan 07, 2024 6:45 amInstead of a multiple of expenses which, as the title of this thread suggests is tied to a 4% withdrawal rate, adjusted for inflation I'd suggest googling the "funded ratio". It looks at all sources of future spending from your portfolios to SS and/or pension.
Hi Victoria,
Yes. When the real yield on TIPS changes the expected return on stocks changes in lockstep with that change in real yields. Which obviously isn't true.Ben Mathew wrote: ↑Fri Nov 24, 2023 1:43 pm Re: fixed vs dynamic asset allocation, the assumption that would support a fixed asset allocation is that our best guess of the equity risk premium (relative to risk) is constant.
Yeh, I read that. So are you supposed to settle for 1/3 of the total improvement or not? They don't say.Ben Mathew wrote: ↑Mon Nov 20, 2023 8:53 pmAlso, if we capped his equity exposure at 100%, i.e. using no leverage at all, he could get about one third of the total improvement available.
Presumably they are, but the way they have set up their model that model doesn't do that. If they have done that, it should have been stated explicitly - not implicitly presumed. Because that's an extremely important point.Ben Mathew wrote: ↑Mon Nov 20, 2023 7:26 pm Haghani and White discourage leveraging, so presumably they are capping at 100% or less.
I agree. This is a useful way to think about things, but one shouldn't simply plug in (1/CAPE)/gamma*var) and set that as your allocation to equities without thinking about what you are doing.Horton wrote: ↑Mon Nov 20, 2023 7:36 pm The future is obviously uncertain but so also are the input parameters. However, that doesn’t mean that the model has no use. You can examine a range of parameters and the subsequent forecasts to determine the effectiveness of your strategy and, importantly, the conditions under which your plan may fail.
I didn't write that only risk aversion matters. Here's what I did write.Ben Mathew wrote: ↑Mon Nov 20, 2023 4:51 pm [
So only risk aversion matters? The equity premium doesn't feature in any way?
Yes. Any estimated value of the equity risk premium is not to be expected.exodusing wrote: ↑Mon Nov 20, 2023 4:30 pmThe problem is we don't know the equity premium in advance; we just have estimates. I don't believe we have estimation methodologies that are nearly good enough to make allocation decisions. I'm fond of the Ken French quote "Chance dominates realized returns", as well as the entire https://www.dimensional.com/us-en/insig ... -investing.
I would think that for a 65 year old to hold less than 25% equities they would have risk aversion above average, say at least nearly 3. I don't think it's that unusual for people 60 & up to have less than 25% in equities, but that's mainly because they have high risk aversion. For a person at age 65 to hold less than 25% equities and have average risk aversion strikes me as unusual.Ben Mathew wrote: ↑Mon Nov 20, 2023 2:39 pmWhy do you think this? Does it relate in any way to an expectation of an equity premium?