Bogleheads.org

it looks like u have plenty of options here, but there's also US Mobile. they use the verizon network, and for seven dollars a month u get 2500 minutes and 2500 texts. it's not much more for unlimited call and text as long as there isn't much data involved. verizon network is probably the best, plus u get more than just meager amount of minutes per month.

Warren Buffett got so rich because he focused on value stocks and profitability. His record is more than a fluke given how long he lasted and even if his record is hard to match. It's all about profitability. The way many people on here would argue, is that his stocks should have had his stock's profitability muted when efficient markets devalue that profitability.

I don't think indexes that utilize a similar approach to his, are inherently different. It all boils down to profitability. It's fair to think some of the best small and value stocks will on balance be profitable, and more profitable than large caps. That's the nature of business in general, and that's the nature of what makes large small and value all different

I think it's more than just whether the market is efficient. Small cap have higher potential for profit given how fast it can structurally increase profit. Value stocks have lower price to earnings, higher potential return. The only way to argue that the efficiency of the market cancels out higher returns, is to argue that small and value should fir some reason have similar returns than large caps... that the price of all sizes and pe will equal out regardless of profitability. I see no reason to assume that. If a stock is structurally made to be more profitable, it should have higher returns given more money can be made on it. Maybe the efficiency of the stock cancels out based on risk on volatility where more risk means more profit, but I...

Maybe, it does boil down to market efficiency. If the market is inefficient, there could be a size premium if profits go up faster than expected. The risk is that the inefficiency is that profits lag expectations.

To me it was always intuitive that small caps should do better, cause they can more quickly double etc their profits. A lemonaid stand can quickly double its profits, which something like Walmart can't do. But I think the argument that counters mine is efficient market theory. The market knows the stand can double its profit so the market prices that into the price of the lemonaid stand stock. Even if profits double, the price of the stock does its own thing in anticipation and as time goes on. So is my only way of being right that small cap is better, due to mistakes or inefficiencies in the market? If a doubling of profit isn't factored into the stock price, there definitely could be a small premium. But is there more to it beyond ineffic...

By flexible rate I mean a constant percent that doesn't go up with inflation but fluctuates with the market

We'll use a forty year old retiree for this example.

On one hand, some folks say flexible rates can be higher given there's less pressure on the market to keep up with withdrawals. So maybe five percent instead of standard four. On the other hand, this might need to last five decades or six so maybe three or four is better.

What's the best rate to make it last? I know the standard response is that nobody knows nothin... so what rate would YOU use in this situation?

my proposal, variable withdrawal example: portfolio: 1,000,000 historic PE: 16 current stock market PE: 21. current S and P 500: 4200 what the million dollar portfolio would be worth if the PE sunk to historical valuation: 762,000 So if you retired in 1926, when P/E was 9, you'd withdraw $68,000 a year instead of $40,000. Even though the Great Depression was just 3 years away? How well do you think that is going to work out? that's why i said the following: "i suppose if the PE sunk below historical values, you could do your own thing, either four percent of whatever the market is at, or you could be extra cautious since times are bad and lower your withdrawal rate even still. (i've seen some argue that it might not be so bad to keep ...

just an idea i was considering, since everyone is always wondering about the right withdrawal rate. my proposal, variable withdrawal example: portfolio: 1,000,000 historic PE: 16 current stock market PE: 21. current S and P 500: 4200 what the million dollar portfolio would be worth if the PE sunk to historical valuation: 762,000 instead of taking four percent off a million, take four percent off the new normalized number. that comes out to 31000 instead of 40000. so, if you take 31000 out of the actual million dollar portfolio, your actual withdrawal rate that year would be 3.1% instead of four percent. what do ya'll think? that way you dont overdo it when things are frothy. i suppose if the PE sunk below historical values, you could do you...

I split equity into large cap, large value, mid cap, mid value, small cap, small value, and REIT. These all have strong track record of beating the overall market average. Also includes the oft neglected mid caps, which is often called a sweet spot in investing. I think this portfolio helps in diversifying. Paul merriman has written a lot about these asset classes. With that said, there r folks who would contest every one of my points.

Thanks

I also just realized that Paul merriman has an online calculator that let's me compare 5 percent flexible and 4 percent with inflation.

It looks like I'd have a lot more even with a higher withdrawal rate, if it's flexible

4% is standard withdrawal advice. Maybe 3 percent if conservative. But these as standard advise is for a set amount that goes up with inflation.

What about if it doesn't go up with inflation? Constant flexible rate. How effective comparatively would a higher rate be? Say 5%? Take five percent a year no matter the balance, more if the balance goes up and less if it goes down. It's not like the withdrawals are going up with a inflation so it's not like you are taking out comparatively more in bad times. Wouldn't a higher rate then be a fair and reasonable trade off?

the author of this blog, mr money mustache, writes about living well below your means, and retiring early- FIRE. i'd say a common difference when you read his blog or look at their forum, is that they are often total equity, and they are more about living frugally or at least well below one's means. bogleheads are more standard 'invest a certain percent until retirement age' but less wild west than that other crowd.

do ya'll have any impressions of the author of the blog or the following he has, versus standard bogleheads?

i have a friend who buys thousands of stocks, but he's not an indexer. he just buys stocks that he thinks are good deals. the theory that says what he's doing may not be completely backwards, is that he's creating a diversified portfolio and reducing risk. what precisely is wrong with making your own fund like this instead of an index fund? i think the key is probably that groups of stocks only sky rocket when you happen to get the needle in the hay stack. if you stock pick, you are likely to miss those needles in the hay stack. as bogle said, why look for the needle in the hay stock when you can buy the whole stack, needle and all? do you guys agree that the may problem with his approach that he may be missing the needle? what else would y...

interesting article discussing which is the real bad guy, sequence risk or inflation. and whether sequence risk is as bad as is usually stated. i wasn't able to post the graphs but below is the text and the link if you want the graphs. Sequence of Returns Risk is overstated. If you spend any time at all in the retirement planning blogosphere you’ll get an earful about Sequence of Returns Risk. I’ve gradually come to believe that the way this is commonly discussed is misleading to the point of being wrong. I wrote about it once before… …but that post focused on Maximum Safe Withdrawal Rates (MSWR); I wanted to revisit it but with a different perspective. One of the common complaints about MSWR-type analyses is that they aren’t very reflectiv...

a lot of people say not to invest in total equity for your whole life in case equity drops. but what if you plan for or expect it? if i have a million dollars and can draw 40000 but plan for a situation where i would only need 500000 and 20000 in income. the downside, would be that you would have to plan for having twice as much money as you would otherwise need.... if you can live on half as much as the high amount you really only 'need' half that. that would entail working a lot longer, or at least a good seven to ten years typically. the upside to this, is that you dont have risk of low returns due lack of enough equity. you might get risk low returns, but not due to low equity, technically. probably, historically, when the market drops ...

I live in a low cost of living area. I am able to buy a fixer upper for 20k and I could have it functional for 10k extra, 30k total. (it would then probably be worth 60 or 70 thousand) My rent currently is 500. I would suppose it might cost about 300 a month to own the house, 70 property taxes, 70 water and trash, 40 insurance. 20 mowing and snow removal. 100 for extra gasoline and car expenses given the house is far from work and shopping/entertainment areas. (At my apartment the shopping areas and work is less than a mile away, all within walking distance. I prefer my apartment as far as the lifestyle goes, which is important) I have to pay cash for the house. That means I'd have to spend 30k cash. Do you think it's fair for me to value t...

everything has risk. not investing has risk. there's inflation and high living standards to compete with. in a way, a good index fund approach to investing is the least risky strategy out there. the alternative to that is even riskier

https://paulmerriman.com/lifetime-inves ... H50Q4D5_EQ

the calculator has a historical performance simulator from 1970 to today, with the s and p, various size and value tilts, international, various bond portfolios etc. contributions and / or withdrawals etc.

do you like this calculator?
would you use it?
is it good to rely on?

i like that if you start your simulation at the start of 2000 and then it starts over at 1970, you can still do decent even though those are both two very bad decades, with 2000 being the worst where you might begin retirement and run a sequence of returns risk.

this thread may be heading to another factor / tilt / international/ small / value debate. the way i see it, maybe focusing on the top companies is the best route, but it may not be too. that's why i favor tilting to smaller and value companies where the PE ratio is reasonable, and the historical performance is good. and if REIT and international floats your boat, go for that too. what i'm getting at, is i think it's best to be diversified even beyond the s and p 500. of course, that's just my opinion that it's even more diverse to begin with, and that these tilts are better.

Fixed withdrawal rates are usually considered maybe four percent initial withdrawal with the amount going up with inflation.

Flexible is maybe four percent but it doesn't go up with inflation... If the portfolio goes up twenty percent then you still take four percent of total, and same if portfolio goes down twenty percent.

Some people suggest investing more than the twenty five times spending number for retirement (which traditionally allows four percent withdrawals) for flexible withdrawals. Do you agree? How much extra would you recommend having invested?

The s and p has well exceeded historical returns the last ten years. Value and small didn't do as good but they were good in their own right. If we assume mean reversion, it will wash out long term. I do value and size diversifying and I'm lagging s and p, but my returns r still historically average, which is a good thing. I also consider it more diversified, which i know some contest but it makes sense to me so that's what matters

It's also worth pointing out that smaller and value have lower pe ratios so everything is pointing to mean reversion and balancing out

Thanks, don't know how i missed that

This is more a curiosity than anything given I'm a buy and hold investor.

Im curious about vanguard's large mid and small value indexes for the pe ratio.

if you notice, the total stock market has had much higher returns than normal during the period shown, this bull market. the thing is, we should just assume the market will revert to the mean like it always does. if that is the case, the slice and dice recommended portfolio might actually be better. i think the total stock market is usually like 9.5 percent per year long term, so. then again, the bull market was probably there for the slice and dice portfolio, so it's possible history isn't binding any more and future returns will be sub par to the total market. my money is on everything reverting to the mean long term, and the slice and dice portfolio has always been superior long term, at least historically over long periods.

https://www.wsj.com/market-data/stocks/peyields

This link has trailing and future PE and dividend yield for russell and s and p but I don't think it's the same as
yours.

variable is where an investor keeps their withdrawals at a variable percent, such as three or four percent. if a balance goes down, take three percent that year... if the balance goes up, take three percent that year. for reference, they say the most common method is to take a fixed number at the beginning of retirement and then increase it with inflation every year. (this method does risk running out of money though cause it disregards bad market condition and keeps increasing)) they say a benefit of doing variable is that you would theoretically never run out of money. a percent of anything will never equal zero in theory.... i mean, it's nice to know i theoretically wouldn't run out of money if i have a thousand dollars left, but a thous...

so when you rebalance, you're taking from higher performing investments and putting it into lower performing investments.

the only real reason i can see to rebalance, is that the amount of risk gets out of whack over time. higher performing investments are usually riskier, so if one lets those run, the overall risk is increased.

i suppose i can see rebalancing every few years, but isn't it doing it yearly just limiting your growth?

i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?

they say that during crashes, the rate of return of typical boglehead investments increases substantially. and historically, that's always been true. that means if you normally are withdrawing three percent of your portfolio, and then the market crashes, it would be fair to start withdrawing say five percent while the market recovers. of course, this is counter intuitive as most people would want to cut back during a downturn. a big question, then, is how much should we rely on historical bounce backs to say it's probably okay to increase the withdrawal rate? of course, i'm asking people who use variable withdrawal rates. like four percent a year no matter where the market is, or maybe changing to three or five percent types of people. i un...

i realize we could be at the lowest point we'll see for the market for the next several decades or longer... but it's still a fact that the market is at one of the most elevated levels that it's ever been, at least if you look at price to earnings. https://www.multpl.com/s-p-500-pe-ratio if we're not overvalued now, then we're almost never over valued. i realize whether it's over valued or fair valued or whatever shouldn't change our strategy, but the prices are still abnormally elevated. i also realize that there is a play on words here...if we're at the lowest point we'll ever see again indefinitely, then relatively speaking a person could say we're not over valued. or if we continue getting historical returns in the near and long term, t...

i liked two points i heard... -that i myself am choosing to act in a lump sum fashion being already invested myself- i could choose to withdraw the money and invest again over time, but i intuitively think that would produce inferior results. so that is like a vote from me for lump sum. -i can also point out that it really boils down to whether a person is more fearful of not making as much or more about possibly losing as much. i did note a couple interesting points in that link to the boglehead wiki. lump sum investing is superior only two thirds of the time. that means that it is usually superior, but given how expensive we are, it might be more likely a time when that one third possibility prevails of dollar cost averaging being better....

i've been teaching a coworker about boglehead principles given she's about to get a large settlement. is it better for her to go all in with a lump sum, or to dollar cost average over a number of years? i know i saw a video where warren buffett recommended dollar cost averaging into a market with a lump sum, cause he characteristically said he wasn't smart enough to know what the market would do next. of course, that amounts to someone very notable who goes against mainstream indexer advice which is to go all in and hope for the best, which is statistically usually the best approach. i know that for theory, it's almost always better to go all in... but this market might be different given it's so over valued. of course, there is risk either...

i suppose a person could hold a third in wellesley if that's what they wanted for fixed income.. or instead they could hold 22 percent in an intermediate corporate bond fund, and just have eleven percent extra stock in that remaining spot where wellesley would have been. this way, the person could hold bonds that dont have high risk of crashing, if they want to access those funds during a stock crash. this way the whole fund isn't tainted by any stocks that crash. i can't deny this approach seems much more reasonable, but it's hard to pass on the power of just wellesley for fixed income.

What you're really asking is "stocks instead of bonds?" or "more stocks?". I wouldn't count on any kind of stocks - no matter how selected - to be a bond substitute. it is playing with fire a little, but only if history doesn't repeat itself. the five year rolling return of the s and p is sometimes low. the five year rolling return of wellesley last i checked only ever dipped below 7% during the great recession and then quickly recovered. i should double check the rolling return of wellington, cause that fund goes back a hundred years, whereas wellesley only goes back to the 70s. point being, if i'm relying on historical performance, wellington might give more indication of what could be expected. 50 year look back vers...

wellesley is already two thirds bonds. its rolling returns over a five year period is very rarely less than seven percent. bonds on the other hand have low returns. i realize wellesley can sink lower in a down turn, but it still has a good rolling return average. plus, if someone is getting much higher returns over the long haul, they can afford to have occasional dips that are bigger than bonds, cause they've already or will get such higher returns. i suppose it should also be said... i know wellesley probably won't do as good as it has in the past, but its long term CAGR has been over nine percent a year

this website graphs a safe withdrawal rate versus price to earnings ratio.
http://plottingforjailbreak.com/safe-wi ... l-markets/

it looks like based on the historical data, 4% is safe, but if you follow the trends to what's possible, then 3% is more so hard to fail you.

it also makes the counter intuitive point that a person could increase their withdrawal rate during recessions and such. given the prospect of growth is much higher during rough times. most folks would rather cut back during down times, not increase their rate of withdrawal.

thoughts?

I applaud you for being so frugal and prioritizing quality of life over long working hours. Even if it's not for everybody, I think there's a lot many people could learn from your expense, such as that it doesn't necessarily take gobs of money to live a decent life, as happiness and contentment are really mostly just states of mind. That being said, I agree with the previous commenter about the danger of unforeseen expenses. While it's true that people don't necessarily need to drive a Mercedes to live well, someone expecting to drive a Mercedes has the margin in their budget to drive a Honda instead in the event of a downturn or other such circumstances. As you go lower and lower in total living expenses, you start to cut down to the bone...

What do you do for housing and transportation? Do you own your home outright or rent? Not knowing the nature of your disability, will working one day a week vs. two improve your quality of life significantly? It's certainly possible given the numbers, but I would be concerned about any large jump in expenses if you dropped to one day a week sooner than later. Personally, I'd want a little more buffer. For instance, in my neighborhood, people were just hit with almost 10K in assessments for road improvements. This was totally unexpected because it was due to a complete redesign of the road, not regular maintenance. We've also had huge property tax increases in recent years that hit our budget more than we thought it would. Dental bills can ...

When can i switch to one day a week of work and still meet my retirement goal?  I currently work two days a week. At some point, I would like to move to one day a week of work, and then stay with that schedule until I reach my retirement goal. It would be nice to retire within 15 years, but if I had to work for another 20, that would be tolerable. I just turned 39. Retirement income goal: 24000 a year in today's dollars from disability payments and from my portfolio Current income: 11k disability, 12k work income from working two days a week. 6k would be working one day a week Current expenses: 20k, so any extra money in the future would be surplus. Currently invested: $264000 invested (I also have 11k in crypto and cash). Current dividends...

inflation protected securities https://investor.vanguard.com/mutual-funds/profile/VIPSX total bond market https://investor.vanguard.com/mutual-funds/profile/VBTLX both these links look at the past 1, 3, 5, 10, and about 20 years to inception, and it looks like securities have been better. it looks like the question of when bonds are better than those securities, is when inflation is low. we can see the graph from the bond website above, showed little growth when inflation was low earlier in the decade. but i suppose inflation must have picked up, and now it looks like those securities are better. it's worth noting, we are in an environment when interest rates are rising, which is bad for bonds, which is opposite of the last several decades ...

i've heard some people say it's more diversified, and some say less.

with value, if you tilt, i suppose you are focusing on one sector and ignoring another, which could be said to be less diversified. with small caps, it'd seem like more diversificiation, given you are doing like those equal weighted indexes and focusing more on owning more companies regardless of market share and then see what happens. i'm not sure if this even makes sense what i'm saying.

what are your thoughts?

my dad says it makes sense to buy when stocks are good and sell when stocks are bad. it's a terrible approach that means he's buying high and selling low. but one thing he says sort of makes possible sense. what if you knew that the market was going to go down so you sell? i think a lot of people do this, that's why sell offs often lead to more sell offs. and then you buy back in once the index is starting to go back up.

i dont think this is a good approach and stick to buy and hold, but it does have a certain logic to it. but, for one thing, youd have to have an almost absolute certainty the index was going to tank, which isn't always possible. that's my main hang up. what are your thoughts?

this is an ABLE account for people with disabilities, as was mentioned. this is a vanguard fund, and the base fee is around what i think it is outside the ABLE account, .03%. then there's the .2% management fee. this is a total stock market fund from vanguard. i'm in the ten percent tax bracket for any income that's taxable. the able account is 15000 a year that can be invested, and it can be withdrawn any time it is needed. i'm not sure all that info is necessary though. the question i think would boil down to, would you give up .2% of your investments per year over several decades to get tax free earnings? the calculators i put it in show you lose tens to hundreds of thousand over decades. but you can also save a lot in tax free earnings....

i'm investing in an account for those with disabilities. I think these sorts of accounts also open for educational investment savings. the gains are tax free. but, they add a 0.2 management fee, on top of the base fee. do you think getting tax free withdrawals is worth the loss in gains? I might think so, but when I put the numbers into a compound interest calculator, it looks like I might get less in savings than id get in gains without the fee. i'm not sure i'm looking at it properly, though.

thoughts?