Slash your retirement Risk

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micknc19
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Slash your retirement Risk

Post by micknc19 » Sun Aug 19, 2018 10:15 am

Hey all has anyone read this book and folks that may have thoughts on his system as discussed in the book ?

Thanks

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Re: Slash your retirement Risk

Post by Call_Me_Op » Sun Aug 19, 2018 11:05 am

micknc19 wrote:
Sun Aug 19, 2018 10:15 am
Hey all has anyone read this book and folks that may have thoughts on his system as discussed in the book ?

Thanks
I have not read it, but the word "system" in this context gives me pause.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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k66
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Re: Slash your retirement Risk

Post by k66 » Mon Aug 20, 2018 8:23 am

micknc19 wrote:
Sun Aug 19, 2018 10:15 am
Hey all has anyone read this book and folks that may have thoughts on his system as discussed in the book ?

Thanks
Is this the book you are referring to?

"Slash Your Retirement Risk", Chris Cook
Slash Your Retirement Risk is your step-by-step guide to create a retirement portfolio that will provide true financial peace of mind, one that features:
The broad diversification essential in today's globally interconnected marketplace.
A built-in ability to capitalize on market upswings to generate growth.
Automatic protections against inevitable market downswings.
An investing strategy that minimizes fees and costs to maximize portfolio gains.
The highlighted features make it almost sound like a BH-style VPW (variable percentage withdrawal) methodology, but I am only speculating.
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Dottie57
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Re: Slash your retirement Risk

Post by Dottie57 » Mon Aug 20, 2018 9:58 am

It might be interesting read. But this not a buy and hold strategy. I suspect it is more factor based from reading the pages allowed by Amazon.

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willthrill81
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Re: Slash your retirement Risk

Post by willthrill81 » Mon Aug 20, 2018 10:03 am

k66 wrote:
Mon Aug 20, 2018 8:23 am
micknc19 wrote:
Sun Aug 19, 2018 10:15 am
Hey all has anyone read this book and folks that may have thoughts on his system as discussed in the book ?

Thanks
Is this the book you are referring to?

"Slash Your Retirement Risk", Chris Cook
Slash Your Retirement Risk is your step-by-step guide to create a retirement portfolio that will provide true financial peace of mind, one that features:
The broad diversification essential in today's globally interconnected marketplace.
A built-in ability to capitalize on market upswings to generate growth.
Automatic protections against inevitable market downswings.
An investing strategy that minimizes fees and costs to maximize portfolio gains.
The highlighted features make it almost sound like a BH-style VPW (variable percentage withdrawal) methodology, but I am only speculating.
It could be some kind of variable withdrawal strategy (there are many beside the VPW), it could be some kind of trend following system, or both. Or rather than a strict trend following system, it could be a dynamic AA system.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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nisiprius
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Re: Slash your retirement Risk

Post by nisiprius » Mon Aug 20, 2018 10:33 am

Glancing through the Amazon reader reviews and skimming over the (considerable parts) that can be read in "Look Inside the Book," I notice that:

--one of the three reader reviews describes it as "structured market timing."

--The author, Chris Cook, is the president and CEO of an advisory firm, Beacon Capital Management.

--He calls the strategy the "New ROI."

--Although he insists in one place that market timing is impossible, his strategy includes a "stop-loss" component.
with the right advisor, one who embraces the New ROI, stop-loss becomes a mathematically precise and scientific 24/7 portfolio monitoring process to maximize gains and minimize losses.
He does say he presents a simplified version you can do yourself, but that part of the book isn't visible in the preview so I can't tell how it works... but I assume that it is, in fact, a form of market timing.

--His strategy does seem to include a meaningful bond component, and a number of places where he suggests that fears of bonds are exaggerated and that investors should use them because losses are more painful than gains. I think the other components of the strategy do suggest using some kind of market timing or tactical asset allocation to reduce the drag on return from holding a steady bond allocation. There is a lot of the standard guff about diversification to reduce risk--I call that "guff" because IMHO even when all taken at face value, and when it all works, the risk-minimization from diversification across risky asset classes is at best relatively small compared to risk reduction from increasing bond allocation.
Last edited by nisiprius on Mon Aug 20, 2018 10:52 am, edited 1 time in total.
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nisiprius
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Re: Slash your retirement Risk

Post by nisiprius » Mon Aug 20, 2018 10:46 am

The Beacon Capital Management website includes a downloadable PDF describing the Beacon Stop-Loss Strategy.
Beacon Capital Management utilizes the Vantage 2.0 Benchmark Index to determine when traditional diversification may not be enough to protect investors from persistent market downturns. We automatically withdraw investors’ funds from equity positions when this proprietary index of 11 equally weighted Vanguard sector ETFs drops by a predetermined amount, bringing the stop-loss into effect. The goal of this strategy is to provide a safety valve that is designed to minimize losses during volatile market periods.
Because it is a "proprietary index" it is presumably necessary to be a Beacon client to follow the strategy as described.

I would personally describe this as "market timing based on a single derived from a proprietary indicator."

They present a single backtested example showing that the strategy would have worked well in 2008-2009.

The first capture of their website by the archive.org Wayback Machine was in 2006 so it is possible that the strategy was developed and used in real life during 2008-2009--but I can't find any obvious reference to the stop-loss strategy in a December 2007 capture of the website. Their website at the time contains references to "Beacon DFA Portfolios."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Theoretical
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Re: Slash your retirement Risk

Post by Theoretical » Mon Aug 20, 2018 8:01 pm

This looks like a long/flat equal sector trend following system. Stop-losses are at least as important to trend following systems as the averages or stats that are used.

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willthrill81
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Re: Slash your retirement Risk

Post by willthrill81 » Mon Aug 20, 2018 8:08 pm

Theoretical wrote:
Mon Aug 20, 2018 8:01 pm
This looks like a long/flat equal sector trend following system. Stop-losses are at least as important to trend following systems as the averages or stats that are used.
Not all trend following systems use stop-losses. Many do not, including the one I use.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Slash your retirement Risk

Post by AlohaJoe » Sun Aug 26, 2018 6:54 am

I've read the book, here's my takeaway:

The author actually says a lot of things that Bogleheads would agree with. The need to watch costs, to be very clear on how your advisor gets compensated (if you aren't going the DIY route), that "hot picks" and even "hot fund managers" are generally bad ideas, and so on. However, I don't think Bogleheads will be too keen on his plan. It has 4 parts:
  • The recommended stock percentages start out significantly higher than most Bogleheads would be comfortable with. He suggests a 65-year old should be at 96% equities. There is a glidepath provided and it is pretty steep -- by age 73 it is already down to just 40% equities. Throughout the book, the author makes clear that he doesn't think bonds are especially useful anymore, given low yields.
  • You should not buy a market cap index fund. Instead you should split your equity portfolio equally among 11 sectors. That is 9.01% in healthcare, 9.01% in consumer staples, and so on. The author doesn't believe that "traditional diversification" carries much benefit anymore and thinks this approach lowers risk. The author doesn't think you need to bother with international investing per se. (Though if you could get a global fund for those 11 sectors at a reasonable cost, I have a feeling the author would be okay with that.)
  • Use a stop-loss: if the S&P 500 (price index) drops -10% then sell out everything and put it in bonds.
  • When the S&P 500 rises 15% from the bottom, buy back in.
That's really the entire system.

The book has a few things that were a bit aggravating to me that made me feel like the author wasn't being entirely upfront & fair.

Early on he's trying to make the case that traditional investing as practiced in the 1950-2000 period isn't good enough for retirement anymore due to lower yields, higher volatility, increased longevity, and so on. Which he kinda sorta maybe has a point about. But then he gives an example about a guy who retires the year 2000 with a 6.5% withdrawal rate and runs into trouble.
"Lou had done his homework and determined that if he built a $500,000 nest egg and invested it in a balanced portfolio--split evenly between stocks and bonds--he could generate an income of $32,500 (6.5 percent) annually."
Look. His problem isn't low yields or high volatility. It is the 6.5% withdrawal rate. Especially because later in the book he says you'd have to be crazy to use a withdrawal rate higher 4%.

The other really aggravating part is whenever the author talks about low yields he throws around phrases like "in the past you used to be able to invest in Treasuries and CDs that had double-digit returns". Really? Like double-digit returns for CDs were the default from 1950-2000? Not to mention inflation..... :oops:

Anyway, the book doesn't really seem worth buying. Not many people are going to be super-convinced about equal-weighting sectors. And beyond that it is just a straight-forward stop-loss & buy-back-in suggestion.

One good part: in the last chapter the author lays out succinctly how to do it all in practice. (This isn't all of it, just quoting a part to give a flavor of it.) I appreciated that he gave very concrete steps on his system. Too many system authors get a bit handwavy on things.
Step 2: Look up the most recent month-end closing price for the S&P 500 Index (ticker symbol: GSPC).

Write down the most recent month-end closing price for page provides the closing price for each trading day. Find the most recent month-end price. That’s your starting point.

Step 3: Calculate your stop-loss price.

Multiply the most recent month-end closing price for the S&P 500 by 0.90. That number represents the equivalent of a 10-percent drop in the S&P 500. This is your current stop-loss price. For example, if the month-end price for the S&P 500 is 2,100, then your stop-loss price is 1,890 (2,100 x 0.90).

Step 4: Wait one month and again look up the month-end closing price for the S&P 500.

On the first day of each month, look up the S&P 500’s closing price for the month that just ended.

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Re: Slash your retirement Risk

Post by UpperNwGuy » Sun Aug 26, 2018 7:05 am

Yikes! The month-end closing price of the S&P 500 could be a high, or a low, or somewhere in between. Seems like a bad idea to use such a random number as the baseline for all future actions.

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