Otar ORC "Tactical Investing" Anyone using this software?

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greger
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Otar ORC "Tactical Investing" Anyone using this software?

Post by greger » Sun Sep 01, 2019 4:55 pm

I'm using Jim Otar's calculator software for retirement planning. If you are using this same software, can you please check out this possible better outcome on your current scenario?

On the Assets worksheet using Otar Tactical investments, I have run the same scenario to find the highest "worst case" outcome with every Tactical securities split. I find that a 7.5%/60% split is higher than Jim Otar's recommendation of 30% for defensive/70%s for aggressive security investment years.

Thank you,
Greg

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by David Jay » Fri Sep 06, 2019 1:16 pm

Let me welcome you to the forum, even though I have no familiarity with Jim Otar.

At Bogleheads, we tend to recommend Asset Allocations that are selected based on an individual’s need, ability and willingness to assume risk. We resist dynamic asset allocations based on market conditions.

If the comments I read reflect the consensus, the two most popular retirement planners here on BH are FireCalc and iORP. Both are free (after all, this is Bogleheads, where almost everyone claims to drive a 12 year old Camry :wink:).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by greger » Tue Sep 10, 2019 4:40 pm

I too resist dynamic asset allocations based on market conditions. I found a few older references to Jim Otar's Retirement Calculator (ORC) on this forum, so I thought to check if anyone here is using it. I first saw the Otar Retirement Calculator mentioned by Michael Kitces CFP on his web site.

I'm using the Multi-asset version of the ORC and there are settings for a variety of securities investment tactics besides buy and hold forever. The software takes all your inputs and assumptions and tracks them over the history of the US or Canadian orJapan stock markets and finds the out come for the worst case, unlucky bottom 10%, median, and lucky top 10%. It allows for stress testing, annuity conversion, property rental & sales, downsizing or partial rental of home to name a few. Otar says to spend about 30 min a year to adjust your portfolio.

Working as an engineer, Jim Otar's wife asked him if they had enough $ for retirement. Long story short, he ended up as a CFP MA, writing a book and articles, giving talks, and made an Excel app to use all he learned to help others navigate the over estimation and rules of thumb of the Retirement Financial Industry.

Otar recommended another book I've just started "Living Off Your Money" by a computer scientist/problem solver Michael McClung. The book, like Otar's, is full of critical insights.

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by Wiggums » Tue Sep 10, 2019 5:33 pm

I don’t see many responses.

I have not used this software. Unfortunately, it is sold as is, with no support from the vendor and is dependent on Microsoft Excel and Macros.

In general, I think additional user input can be helpful for the near term planning, but it also makes it possible to enter the wrong value should you misunderstand the information the application is looking for.

You might be better off with a supported app. Perhaps you can compare the results with another tool.

Good luck to you...

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by greger » Wed Sep 11, 2019 2:58 am

Thanks for the replies. I’ll check those two fee SW mentioned above.

I guess I trust Jim Otar, experienced engineer CFP Better than the free SW trying to bring in customers for Complete financial planning. He has an extensive free user manual and a book “Unveiling The Retirement Myth”.

If you check out this book on Amazon, you will see his amazing CV and many CFPs praising his work.

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by wolf359 » Wed Sep 11, 2019 11:48 am

greger wrote:
Wed Sep 11, 2019 2:58 am
Thanks for the replies. I’ll check those two fee SW mentioned above.

I guess I trust Jim Otar, experienced engineer CFP Better than the free SW trying to bring in customers for Complete financial planning. He has an extensive free user manual and a book “Unveiling The Retirement Myth”.

If you check out this book on Amazon, you will see his amazing CV and many CFPs praising his work.
There was a discussion of Jim Otar's book on Bogleheads a long time ago, when it first came out. It was generally positive. See: viewtopic.php?t=42110&mrr=1251030588

There's even more discussions from time to time after that. See: https://www.google.com/search?sitesearc ... q=jim+otar

What software were you referring to? i-orp is a retired guy's life work, and is not currently monetized. firecalc is supported by ads and donations. I have not seen any other software mentioned in this thread.

Jim Otar makes his money by selling books, pdfs, and a premium version of his retirement calculator and other software. He's also a CFP. I'm not sure where trust issues come into play?

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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by LadyGeek » Wed Sep 11, 2019 12:40 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).

The wiki has a comprehensive list of retirement planning tools (free and paid). See: Retirement calculators and spending
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Re: Otar ORC "Tactical Investing" Anyone using this software?

Post by greger » Wed Sep 11, 2019 6:52 pm

wolf359 wrote:
Wed Sep 11, 2019 11:48 am
    What software were you referring to? i-orp is a retired guy's life work, and is not currently monetized. firecalc is supported by ads and donations. I have not seen any other software mentioned in this thread.

    Jim Otar makes his money by selling books, pdfs, and a premium version of his retirement calculator and other software. He's also a CFP. I'm not sure where trust issues come into play?
    [ quote fixed by admin LadyGeek]

    I see I jumped to conclusions on the two SW noted in the article. The little I looked at the long form SW seems close to what Otar did.

    My trust comes from 1. My engineer dad who changed his career to Architect at age 42 so he could move his 3 kids out of LA smog. Engineer Jim Otar changing his carrier at about the same age to be sure he and his would have retirement money. He ended up training CFPS. 2. Having read every book and article Jim wrote as he debunked the then “Financial Rules of Retirement” believed by most planers.

    I think Jim Otar is currently retired at about 65yo. A couple of years ago I urged him to turn his Excel app into an actual application, he said he had tried that but the programmers he worked with couldn’t do it. I was recruiting a financial programmer from Advent but Otar didn’t want to try again.

    This may be where I read Otar’s articles a couple of years ago: https://www.advisor.ca/?s=jim+otar&post_type=post

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by LadyGeek » Wed Sep 11, 2019 9:04 pm

    ^^^ OK, that explains your enthusiasm for Jim Otar's software. I would take a step back. You are attempting to replicate performance that worked for one individual's situation and are assuming you can apply it to your own situation with the same results.

    I strongly encourage you to keep an open mind and try several approaches. You'll likely get several answers, but the aggregate might help you get a feel for your own situation.

    Since you've mentioned Excel, here's a planning spreadsheet that takes a different approach: Retiree Portfolio Model It's not a Monte Carlo simulation, but it can help with "what if" situations.
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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by Dude2 » Wed Sep 11, 2019 9:55 pm

    I think Otar's work is respected. For a brief window of time, (like W. Bernstein has done with some of his books), he gave away Unveiling The Retirement Myth for free. Ultimately, as others have said, the crux of his message can be observed by playing around with FireCalc. He gives a wake-up call to those who are absolutely convinced that stocks are the single answer, examining that, in fact, luck and timing have the most to do with a successful outcome. Therefore, dampen your risk, if possible. These are principles not-counter to Boglehead philosophy, but many probably feel that
    a) his advice pushes a person to be very conservative
    b) Bogleheads abhor market timing and Otar delves into these various strategies.
    So, you won't get much love here if you wish to discuss a spreadsheet that contains the magic formula for timing strategies
    Otar concludes, generally, that a passive investor should never be more than 50% stocks.

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by greger » Thu Sep 12, 2019 5:15 pm

    LadyGeek wrote:
    Wed Sep 11, 2019 9:04 pm
    ^^^... I would take a step back. You are attempting to replicate performance that worked for one individual's situation and are assuming you can apply it to your own situation with the same results.

    I strongly encourage you to keep an open mind and try several approaches. You'll likely get several answers, but the aggregate might help you get a feel for your own situation.

    Since you've mentioned Excel, here's a planning spreadsheet that takes a different approach: Retiree Portfolio Model It's not a Monte Carlo simulation, but it can help with "what if" situations.
    Thanks for the encouragement and link LadyGeek. I'm trying to figure out the most accurate retirement model for my fixed saved dollars, not duplicate anyone's results. Otar's calculator allows input of everything I know about myself and what I may do in the next 30 years. Then it runs those assumptions for my retirement span over every 30 span in a major stock market's history. It shows the historical worst outcome for every year of my retirement in the history of a market, the bottom 10%, the median, and top 10% outcomes. I can enter real estate rents and values with expected returns and every other type of asset, budget, and income. His calculator is extremely detailed and made to apply to anyone's situation.

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by greger » Thu Sep 12, 2019 7:49 pm

    Dude2 wrote:
    Wed Sep 11, 2019 9:55 pm
    I think Otar's work is respected. For a brief window of time, (like W. Bernstein has done with some of his books), he gave away Unveiling The Retirement Myth for free. Ultimately, as others have said, the crux of his message can be observed by playing around with FireCalc. He gives a wake-up call to those who are absolutely convinced that stocks are the single answer, examining that, in fact, luck and timing have the most to do with a successful outcome. Therefore, dampen your risk, if possible. These are principles not-counter to Boglehead philosophy, but many probably feel that
    a) his advice pushes a person to be very conservative
    b) Bogleheads abhor market timing and Otar delves into these various strategies.
    So, you won't get much love here if you wish to discuss a spreadsheet that contains the magic formula for timing strategies
    Otar concludes, generally, that a passive investor should never be more than 50% stocks.
    Thanks Dude. a) Yes, the outcome to not run out of money forces us to be conservative. Very conservative only looking at the Worst Case outcome.
    b) Since Otar made backtesting calculators, he was able to spend hours testing. He noticed that the market had a slight 4-6 year pattern over its history based on equities revision to mean. Investing with this market pattern, produced a slightly better outcome. The market is only bullish 47% of time.

    It's simple, once a year look at the past 6 year moving average of the equity index and compare it to last year's %. If last year's % was above or below the moving 6 year average, invest more defensively (bonds) or aggressively (stocks). Otar tested that 70/30 (stocks/bonds=aggressive) or 30/70 (stocks/bonds=defensive) worked out best. To sum it up, when things are going up have more stock investments, when not, have more bonds. Nothing at all like Norman Fosback's intricate timing strategies.

    c) I can't find his passive investor quote for "50% stocks", but he most certainly doesn't mean "index funds" is synonymous with "passive investor". He says if you invested $100,000 in the Dow index from 1965-1982 the return = $100,0072, but the Templeton Growth fund =$1,400,000.

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by greger » Thu Sep 12, 2019 8:01 pm

    David Jay wrote:
    Fri Sep 06, 2019 1:16 pm
    At Bogleheads, we tend to recommend Asset Allocations that are selected based on an individual’s need, ability and willingness to assume risk. We resist dynamic asset allocations based on market conditions.

    If the comments I read reflect the consensus, the two most popular retirement planners here on BH are FireCalc and iORP. Both are free (after all, this is Bogleheads, where almost everyone claims to drive a 12 year old Camry :wink:).
    Thanks David. I tried out iORP today and I got the same answer for all years I set as the starting year. 1870, 1928, 1936, 1949, 1989. The web site seemed to say it would run my assumptions for the span of my retirement starting at a year I set? What did I miss?

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by David Jay » Thu Sep 12, 2019 8:04 pm

    greger wrote:
    Thu Sep 12, 2019 5:15 pm
    I'm trying to figure out the most accurate retirement model for my fixed saved dollars, not duplicate anyone's results.
    One problem with this level of detail is that it can provide a false sense of precision.

    In the real world, future unknowns overwhelm the knowns. In my case I built my own spreadsheet with results by year to age 100. The problem? If I increase my annual portfolio return assumption 1 percentage point I may need to set up a charitable trust to give it all away. If I reduce my assumption 1 percentage point my kids get next to nothing. And +/- 1 percentage point is way below the range of possible future returns.

    [edited for clarity]
    Last edited by David Jay on Thu Sep 12, 2019 9:10 pm, edited 2 times in total.
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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by David Jay » Thu Sep 12, 2019 8:11 pm

    greger wrote:
    Thu Sep 12, 2019 8:01 pm
    David Jay wrote:
    Fri Sep 06, 2019 1:16 pm
    At Bogleheads, we tend to recommend Asset Allocations that are selected based on an individual’s need, ability and willingness to assume risk. We resist dynamic asset allocations based on market conditions.

    If the comments I read reflect the consensus, the two most popular retirement planners here on BH are FireCalc and iORP. Both are free (after all, this is Bogleheads, where almost everyone claims to drive a 12 year old Camry :wink:).
    Thanks David. I tried out iORP today and I got the same answer for all years I set as the starting year. 1870, 1928, 1936, 1949, 1989. The web site seemed to say it would run my assumptions for the span of my retirement starting at a year I set? What did I miss?
    I ran iORP once on the default settings just to see if it was “in the ballpark”, I can’t help with the advanced settings. Have you searched for iORP threads?
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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by LadyGeek » Thu Sep 12, 2019 8:48 pm

    greger wrote:
    Thu Sep 12, 2019 8:01 pm
    David Jay wrote:
    Fri Sep 06, 2019 1:16 pm
    At Bogleheads, we tend to recommend Asset Allocations that are selected based on an individual’s need, ability and willingness to assume risk. We resist dynamic asset allocations based on market conditions.

    If the comments I read reflect the consensus, the two most popular retirement planners here on BH are FireCalc and iORP. Both are free (after all, this is Bogleheads, where almost everyone claims to drive a 12 year old Camry :wink:).
    Thanks David. I tried out iORP today and I got the same answer for all years I set as the starting year. 1870, 1928, 1936, 1949, 1989. The web site seemed to say it would run my assumptions for the span of my retirement starting at a year I set? What did I miss?
    For perspective, we often recommend asset allocation in steps of 5%. Anything more precise (like 1%) is a lot more work for very little added benefit.

    What is the sensitivity to changing your asset allocations by 5%? If 1% makes a significant difference, I'd say your long-term projections may not be as reliable as you think.

    Update: Added post which I was referring to.
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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by Dude2 » Thu Sep 12, 2019 10:24 pm

    greger wrote:
    Thu Sep 12, 2019 7:49 pm
    c) I can't find his passive investor quote for "50% stocks", but he most certainly doesn't mean "index funds" is synonymous with "passive investor". He says if you invested $100,000 in the Dow index from 1965-1982 the return = $100,072, but the Templeton Growth fund =$1,400,235.
    Unveiling the Retirement Myth, in the Final Word chapter.
    Otar wrote:
    • If following a buy and hold strategy, never allocate more than 50% of your assets to equities in any portfolio, ever.
    Some other (conservative) Boglehead concepts:
    Otar wrote:
    • Emergency funds: put aside a minimum of one year's living expenses in the bank. Do not touch it for travel, hobbies or other "important" expenses. This is for emergencies only. Yes, it will sit there for years doing nothing. That is OK.
    • Keep your life simple. Stick to stocks, bonds, inflation-indexed bonds, cash. That is all you need. Complicated investments can blow up in your face.
    • The average person has little or no hope of achieving anywhere close to index returns. Most mutual fund managers are either no different than the average investor, or worse. There are plenty of ETF's available. You can put together a well-diversified portfolio with four or five different ETFs. I prefer broad based fundamental index funds.
    Some advice/strategies are too much for me, i.e. not my cup of tea.
    Otar wrote:
    • If you have the time, discipline and inclination, you may want to follow a few simple technical analysis signals. If you can avoid large losses, markets take care of growth. I use moving averages, MACD, RSI. You don't need anything more complicated than that
    MACD
    RSI

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by greger » Fri Sep 13, 2019 3:55 am

    David Jay wrote:
    Thu Sep 12, 2019 8:04 pm

    In the real world, future unknowns overwhelm the knowns. In my case I built my own spreadsheet with results by year to age 100. The problem? If I increase my annual portfolio return assumption 1 percentage point I may need to set up a charitable trust to give it all away. If I reduce my assumption 1 percentage point my kids get next to nothing. And +/- 1 percentage point is way below the range of possible future returns.

    [edited for clarity]
    In Otar's retirement calculator for my assumptions, +/- 1% return makes a sizable difference over 30 years but isn't as drastic as yours. The dividends/outcome for mine are 1.5%/3.6m, 3%/5.1m, 4%/6.3m, 5%/7.7m. And yes, +/-1% is way below the knowable spread of future returns.

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    Re: Otar ORC "Tactical Investing" Anyone using this software?

    Post by greger » Fri Sep 13, 2019 3:57 pm

    I found this 2011 blog while while digging around yesterday which may help someone:

    By Steve Thorpe. (chair of the Research Triangle Park, NC area chapter of the "Bogleheads” 2011)


    Jim Otar’s Pearls of Wisdom from the book “Unveiling the Retirement Myth: Advanced Retirement Planning based on Market History” by Jim C. Otar

    I share a few quotes that epitomize the reality-based themes and critical insights woven throughout Otar's text:


    •Risks

    • Proper retirement planning requires planning for the worst.
    • This book is based on my research of retirement planning involving one hundred and nine years of market history. What you read will be depressing.
    • When it comes to retirement finances, the three main risk factors are longevity risk, market risk, and inflation risk. A retirement plan must minimize each of these three risk factors to be considered a well-designed plan.
    • Disregard any financial research, any words of wisdom, any gibberish from financial gurus in the media that "markets eventually recover in the long term." They are not telling you the full story: Yes, markets did always recover in the past, but your distribution portfolio retained a permanent loss for the rest of your life.
    • Many strategies that sound logical end up failing the test of time because markets are seldom logical.
    • Keep in mind that these findings are based on market extremes of the last century. The current century may create market extremes beyond those extremes.
    • If the marketing material of an investment says something like "our sophisticated propriety computer model…", then avoid that fund. Either they are lying … or if their model is indeed "sophisticated", it may eventually backfire with your money in it.
    • Portfolio management expenses can significantly reduce portfolio longevity. Like inflation, its effect is not readily apparent in a short period of time.
    • Your lifelong savings are "shared" between you and the financial industry.
    • [Regarding borrowing money to invest]: Do you really think you have any chance, especially if the underlying premise of leveraging is: "Win, we share. Lose, we don't care!"

    • Fixes

    • In a distribution portfolio, the withdrawal rate is the most important contributor of portfolio longevity.
    • If you thought you were safe withdrawing 4% starting at the beginning of 2008, you are likely in for a rude awakening.
    • The concept of "long-term" exists only in accumulation portfolios. There is no such thing as "long term" in a distribution portfolio. As soon as your periodic withdrawals start, "long-term" ceases to exist, and the "luck factor" takes control of the outcome.
    • The most important element during the seed money formation years [generally, the range is between the ages of 20 and 40] is to invest with discipline, month after month, year after year.
    • A high PE ratio is an indicator of overvalued equity prices. Eventually, such trends go through a correction. If you are just retiring, this correction will create a bad sequence of returns in your portfolio.
    • The answer to the question, "How much can I take out of my portfolio?" is not a pleasant one: "A lot less than you think".
    • If it turns out that the client's assets appear insufficient for lifelong income, then my first suggestion is delaying his retirement. In some cases, working two extra years can turn an unsuccessful plan into a successful one. My next best suggestion is to reduce withdrawals to below the sustainable withdrawal rate.
    • Stay out of debt.
    • Work: do what you love and love what you do.
    • Trust others only as much as you need to and only after they fully earn it.
    • Keep your life simple. Stick to stocks, bonds, inflation-indexed bonds, cash. That is all you need. Complicated investments can blow up in your face.
    • Investment education: make this an ongoing process.
    • If you don't have the time or inclination to do it yourself, then find a good advisor.
    • Luck
    • Luck is by far one of the most important factors in retirement planning. It is second only to the withdrawal rate for influencing the portfolio life.
    • Plan on being unlucky and if it turns out that you are lucky, only then increase withdrawals. Believe me; it works much more safely that way.

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