Sorry, I wasn't clear. This formula is used to determine the percent of liquid assets in EQUITIES. So you look at the 5-year TIPS yield and if it is zero then you determine the % equities accordingly. If the 5-year TIPS yield were 1 percent then all of the above numbers would be reduced by 15. In others words TIPS is one of the independent variables, not the dependent variable.Mel Lindauer wrote:I notice that your formula would never have an investor in TIPS, even at 60, right before retirement. I don't think that makes sense. Look at all the great TIPS returns you would have missed.fredflinstone wrote: I'm starting to draft a revised IPS. the formula I am tinkering with determines the percent in equities based on three factors: age, PE10, and the 5-year TIPS real yield:
min(100,(max(10,(144-(1.25*AGE)-(2*PE10)-(15*TIPS)))))
in the equation above, % equities can never be higher than 100 and never can be lower than 10. Keep in mind that I am somewhat more risk-averse than most investors and my need for growth is fairly low. Here are some sample values:
any constructive criticism is welcome.Code: Select all
PE10 age TIPS % equity 10 20 0 99 15 20 0 89 20 20 0 79 25 20 0 69 30 20 0 59 35 20 0 49 40 20 0 39 10 40 0 74 15 40 0 64 20 40 0 54 25 40 0 44 30 40 0 34 35 40 0 24 40 40 0 14 10 60 0 49 15 60 0 39 20 60 0 29 25 60 0 19 30 60 0 10 35 60 0 10 40 60 0 10
The rest of my money (anything not invested in equities) could be in TIPS, cash, munis, or whatever the IPS says. In general, I always have 100 percent of my retirement funds in long-duration TIPS and that will not change.