This is exactly the point. Forget about the author of the article and focus on the real issue!
By the way, the answer is simple. The YTM of the Total bond is LESS than the present expected inflation (TIPs minus Nominal Treasuries).
This is exactly the point. Forget about the author of the article and focus on the real issue!
I hope Burton Malkiel is listening and repeating after you, because that's what he suggested on Rick Ferri's recent podcast. It's an absolutely ridiculous and dangerous suggestion for the overwhelming majority of people, IMHO.arcticpineapplecorp. wrote: ↑Thu Jul 30, 2020 3:05 pm stocks are not bonds.
say it with me.
stocks are not bonds.
say it again.
stocks are not bonds.
understand?
I can’t tell if you’re agreeing or disagreeing.ResearchMed wrote: ↑Fri Jul 31, 2020 3:20 pm Change this instead of a definite $.10 loss to: Dice are tossed, and if it comes up snake eyes, there is a loss of $X, otherwise <whatever else>.
There is nothing "definite" happening. There is, indeed a "risk" of your losing $X.
The actual probabilities are not important at this point.
I was reacting to this part of what you had written:vineviz wrote: ↑Fri Jul 31, 2020 4:03 pmI can’t tell if you’re agreeing or disagreeing.ResearchMed wrote: ↑Fri Jul 31, 2020 3:20 pm Change this instead of a definite $.10 loss to: Dice are tossed, and if it comes up snake eyes, there is a loss of $X, otherwise <whatever else>.
There is nothing "definite" happening. There is, indeed a "risk" of your losing $X.
The actual probabilities are not important at this point.
RM: Yes, I was!
if I place a bet on dice as your propose, the risk is the same as I described above: losing less than I expect to lose (or making less than I expect to make).
Let’s say that if snake eyes comes up I lose $10, and any other combination results in me winning $10.
This bet has a positive expected payoff for me (since I have a 35/36 chance of making money) but is still risky because there is a non-zero probability that I’ll gain less than I expect to gain(which is $9.44 if my math is right).
For sure it’s a risky scenario. My expected return is positive (so I play the dice game) but the actual return is uncertain.ResearchMed wrote: ↑Fri Jul 31, 2020 4:37 pm I was comparing that to a situation where whether you'd lose $.10 tomorrow was *not* certain, but rather, determined by some probability 0<p<1, vs. the p=1 in your version.
Isn't this dice scenario a "risk" for you?
I get that. My point is that the likelihood of bonds having substantially negative real returns is much higher with starting yields as low as they are now. And if one views risk as Buffett does, that makes them riskier than when starting yields had a robustly positive expected real return.
Dividend-oriented stocks have tended to underperform during times of accelerating inflation.willthrill81 wrote: ↑Fri Jul 31, 2020 11:41 amIf you view risk the way that Warren Buffett does, namely as the likelihood of not keeping pace with inflation, then yes, I'd say that bonds are riskier than stocks over the next decade, especially if you take taxes into account.nisiprius wrote: ↑Fri Jul 31, 2020 11:31 amUnlikely, unless you define "risk" in some unusual way.duffer wrote: ↑Fri Jul 31, 2020 11:13 amThe question is whether bonds are now the riskier investment.Sufferlandrian wrote: ↑Fri Jul 31, 2020 11:12 am Nisiprius hit the nail squarely on the head. My risk tolerance didn't change to favor risker investments in response to a crisis. I'll stay the course.
Viewing risk as being equivalent to only volatility has never made sense to me. It seems to stem from a desire to apply certain mathematical techniques to one's analysis more so than it being a close approximation to the reality that investors actually deal with.
You're definitely not the only investor who takes this view of risk. Indeed, when I went through my MBA and CFA curricula I don't think the topic was very well covered.willthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm I get that. My point is that the likelihood of bonds having substantially negative real returns is much higher with starting yields as low as they are now. And if one views risk as Buffett does, that makes them riskier than when starting yields had a robustly positive expected real return.
The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see the value in it, but I don't view uncertainty as entirely equivalent to risk. For instance, if I have an investment opportunity that will return anywhere from 5% real to 10% real annualized for the next 20 years, the dispersion of returns is high, but the outcome would be great for me even on the low end of that spectrum. I would not view this as a risky investment even though there is a lot of uncertainty regarding how much I'll have in the end, and I don't think that I'm the only investor that views risk this way.
The failing of "traditional" finance isn't so much in using volatility or variance as a risk measurement, IMHO. Instead, the failing is that it tends to treat volatility as a risk per se instead of connecting the volatility to the possibility of the investor failing to meet an objective. I suspect that you have sensed this as well, because you've keenly noted that "uncertainty [is not] entirely equivalent to risk".Definition
The formal definition of Risk (adopted by ISO 31000) accepts that risk is the effect of uncertainty on objectives and the deviation of actual outcomes from expectations.
1+vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmYou're definitely not the only investor who takes this view of risk. Indeed, when I went through my MBA and CFA curricula I don't think the topic was very well covered.willthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm I get that. My point is that the likelihood of bonds having substantially negative real returns is much higher with starting yields as low as they are now. And if one views risk as Buffett does, that makes them riskier than when starting yields had a robustly positive expected real return.
The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see the value in it, but I don't view uncertainty as entirely equivalent to risk. For instance, if I have an investment opportunity that will return anywhere from 5% real to 10% real annualized for the next 20 years, the dispersion of returns is high, but the outcome would be great for me even on the low end of that spectrum. I would not view this as a risky investment even though there is a lot of uncertainty regarding how much I'll have in the end, and I don't think that I'm the only investor that views risk this way.
Nonetheless, let's leave aside any finance-specific meaning for a second. Risk management is a crucial function in many fields of business, and is a field of study in it's own right. So when I said earlier that Buffet's definition of risk is "non-standard" I wasn't being figurative: there's an ISO definition of risk, which is "the effect of uncertainty on objectives". You can find a decent treatment of the vocabulary in the Open Risk Manual.
The failing of "traditional" finance isn't so much in using volatility or variance as a risk measurement, IMHO. Instead, the failing is that it tends to treat volatility as a risk per se instead of connecting the volatility to the possibility of the investor failing to meet an objective. I suspect that you have sensed this as well, because you've keenly noted that "uncertainty [is not] entirely equivalent to risk".Definition
The formal definition of Risk (adopted by ISO 31000) accepts that risk is the effect of uncertainty on objectives and the deviation of actual outcomes from expectations.
Some risk management authors use the shorthand that risk = probability x impact, and I think that's a decent framework. An important risk is an uncertain event that, if it should occur, will result in a significant loss relative to your objective.
We generally call zero-coupon Treasury bonds "risk-free" in the sense that, if you need a certain number of dollars at some point in the future you know EXACTLY how much to invest today to secure that. If I need $10,000 on 12/15/2027 I know exactly how many zero-coupon US Treasury bonds to buy today to ensure that I meet that $10,000 objective. Whether it costs me $11,000 today or $9,000 today has no bearing on the riskiness of that investment. If I need $10,000 in real dollars instead of nominal dollars in 2035, substitute TIPS for nominal Treasuries.
In many ways, I think the combination of two factors has broken the intuitive link between fixed income as an asset class (the purpose of which is right there in the name fixed income) and the investor objective that it satisfies. One factor is the rise of Vanguard's Total Bond Market fund, which strips bonds of their role as being a predictable source of income and paints them as merely a low volatility fund to mix with stocks. The second factor is the historically high yields that investors had been experiencing since the 1970s, in which conservative portfolios had returns nearly as high as aggressive ones. Now that real yields and inflation expectations are both low, investors seem to not know why they might want to own bonds at all. My fear is that this confusion will lead to some really poor choices, like ramping up risk in a pursuit of yield.
I was able to read this using w3m, a text-based browser with no Javascript support. Fuss manages an active bond fund, Loomis Sayles, which specializes in looking for bargains in corporate bonds. Normally in a downturn he would be able to find lots of these, but the Fed intervention has spoiled his fun.palanzo wrote: ↑Thu Jul 30, 2020 3:38 pm I guess that is why they invented the search engine.
https://www.barrons.com/articles/the-fe ... 1595615578
Perhaps now we can discuss what Dan Fuss actually said.
I don't have any kind of overview, certainly not a statistical sample, but I do have one quotation from 1969: Source
Of course, Benjamin Graham's 75-25 rule is an opinion about bonds, but much too sensible and evenhanded to appeal to partisans. This is from the 1973 edition of The Intelligent Investor; I don't know if it appeared in, or was phrased identically, in earlier editions:The bond market as we know it is dead. We can only have a bull market in bonds if the nation returns to the days of McKinley and sets up Calvinism as its national philosophy. Now what are the chances of that happening?--S. Coe Scruggs, 1969
We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds. There is an implication here that the standard division should be an equal one, or 50–50, between the two major investment mediums.
It wasn't covered in my MBA curriculum either.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmYou're definitely not the only investor who takes this view of risk. Indeed, when I went through my MBA and CFA curricula I don't think the topic was very well covered.willthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm I get that. My point is that the likelihood of bonds having substantially negative real returns is much higher with starting yields as low as they are now. And if one views risk as Buffett does, that makes them riskier than when starting yields had a robustly positive expected real return.
The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see the value in it, but I don't view uncertainty as entirely equivalent to risk. For instance, if I have an investment opportunity that will return anywhere from 5% real to 10% real annualized for the next 20 years, the dispersion of returns is high, but the outcome would be great for me even on the low end of that spectrum. I would not view this as a risky investment even though there is a lot of uncertainty regarding how much I'll have in the end, and I don't think that I'm the only investor that views risk this way.
Yes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmThe failing of "traditional" finance isn't so much in using volatility or variance as a risk measurement, IMHO. Instead, the failing is that it tends to treat volatility as a risk per se instead of connecting the volatility to the possibility of the investor failing to meet an objective. I suspect that you have sensed this as well, because you've keenly noted that "uncertainty [is not] entirely equivalent to risk".
I agree that it's a good framework, and that is the one I remember from my risk management course in my undergrad.
I entirely agree, especially regarding how TBM appears to be viewed by many.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmWe generally call zero-coupon Treasury bonds "risk-free" in the sense that, if you need a certain number of dollars at some point in the future you know EXACTLY how much to invest today to secure that. If I need $10,000 on 12/15/2027 I know exactly how many zero-coupon US Treasury bonds to buy today to ensure that I meet that $10,000 objective. Whether it costs me $11,000 today or $9,000 today has no bearing on the riskiness of that investment. If I need $10,000 in real dollars instead of nominal dollars in 2035, substitute TIPS for nominal Treasuries.
In many ways, I think the combination of two factors has broken the intuitive link between fixed income as an asset class (the purpose of which is right there in the name fixed income) and the investor objective that it satisfies. One factor is the rise of Vanguard's Total Bond Market fund, which strips bonds of their role as being a predictable source of income and paints them as merely a low volatility fund to mix with stocks. The second factor is the historically high yields that investors had been experiencing since the 1970s, in which conservative portfolios had returns nearly as high as aggressive ones. Now that real yields and inflation expectations are both low, investors seem to not know why they might want to own bonds at all. My fear is that this confusion will lead to some really poor choices, like ramping up risk in a pursuit of yield.
One could also keep holding bonds and hope for the best.Always passive wrote: ↑Fri Jul 31, 2020 11:58 pm No matter how many opinions I read, the bottom line for a retiree (or for that matter anyone that holds a high bond allocation) is simple. Bonds are in the toilet (negative real return) , so to preserve buying power, one needs enough of the risky stuff to make up for that and hope for the best, since given present valuations it is far from a picnic.
Is anything else that I should add?
I've never heard of this guy, but the list of "bond kings" and "renowned bond guys" is comically long. AFAICT, it's a bunch of fellas whose entire careers happened to take place during the great bond bull market, and now they're looking for ways to expand their customer base.
Why is the opinion of this bond investor relevant, although he is highly regarded among those that invest in bonds.drk wrote: ↑Sat Aug 01, 2020 12:07 amI've never heard of this guy, but the list of "bond kings" and "renowned bond guys" is comically long. AFAICT, it's a bunch of fellas whose entire careers happened to take place during the great bond bull market, and now they're looking for ways to expand their customer base.
This is true. What should one do if they prefer to preserve their risk tolerance rather than preserve their buying power? Accept the toilet returns and stay the course. The choice will be as unique to every individual as asset allocation.Always passive wrote: ↑Fri Jul 31, 2020 11:58 pm so to preserve buying power, one needs enough of the risky stuff to make up for that and hope for the best, since given present valuations it is far from a picnic.
Is anything else that I should add?
I certainly remember legendary bond king Bill Gross, whose sound bites were often cited in this forum as reasons for taking action. From some web searches I learn that he and Dan Fuss were considered as rivals and bracketed together as, let's call them, "bond-pickers" seeking out value in individual bonds, and thus in tune with the "go-anywhere" unconstrained bond funds which were emerging as a fad in 2012-2013. Thus, we read in 2012,
The "go-anywhere" approach, be it noted, was founded on gurus spewing confident rhetoric about being clever and anticipating Fed actions: Bond Investors Aim to Break Index ChainsOne potential avenue are so-called "unconstrained" bond funds, also called "go-anywhere" funds, that invest in any part of the bond market... any maturity point, average duration, or average rating... in some ways these funds also mimic the approaches of bond fund titans such as Dan Fuss of Loomis Sayles and Bill Gross of Pimco, whose behemoth funds have built long-term stellar track records by eschewing benchmarking and seeking out relative value in disparate patches of the bond market.
In 2014, there were big headlines:As the bond market falters, investors are seeking shelter in funds that aren't tied to indexes. These bond funds are known as "unconstrained," "go-anywhere," "absolute return" or "flexible" funds, and they are gaining in popularity ... as investors anticipate the Federal Reserve reducing, or tapering, its bond-purchase program.
And here is how it has performed; Gross's unconstrained fund, which unshackled him to use all of his legendary skills, in blue; Vanguard Total Bond in yellow. In February, 2019, Gross retired, and the fund was renamed Janus Henderson Absolute Return Income Opportunities Fund.In a move that stunned Wall Street, bond guru Bill Gross is joining Janus Capital Group... Shares of Janus surged on the news, rising nearly 40 percent.... Gross, 70, will manage the recently launched Janus Global Unconstrained Bond Fund...
There's more hope with stocks than with bonds. Seemingly high valuations are not necessarily a precursor to poor returns; earnings can rise enough to reduce the valuations, for instance. But interest rates declining even further is the only chance bonds have of achieving a meaningfully positive real return over the next ten years.000 wrote: ↑Sat Aug 01, 2020 12:01 amOne could also keep holding bonds and hope for the best.Always passive wrote: ↑Fri Jul 31, 2020 11:58 pm No matter how many opinions I read, the bottom line for a retiree (or for that matter anyone that holds a high bond allocation) is simple. Bonds are in the toilet (negative real return) , so to preserve buying power, one needs enough of the risky stuff to make up for that and hope for the best, since given present valuations it is far from a picnic.
Is anything else that I should add?
I tend to agree. As such I currently hold no bonds. However I feel that if everyone starts feeling the same way, stock returns may be muted with more risk to boot.willthrill81 wrote: ↑Sat Aug 01, 2020 10:27 amThere's more hope with stocks than with bonds. Seemingly high valuations are necessarily a precursor to poor returns; earnings can rise enough to reduce the valuations, for instance. But interest rates declining even further is the only chance bonds have of achieving a meaningfully positive real return over the next ten years.000 wrote: ↑Sat Aug 01, 2020 12:01 amOne could also keep holding bonds and hope for the best.Always passive wrote: ↑Fri Jul 31, 2020 11:58 pm No matter how many opinions I read, the bottom line for a retiree (or for that matter anyone that holds a high bond allocation) is simple. Bonds are in the toilet (negative real return) , so to preserve buying power, one needs enough of the risky stuff to make up for that and hope for the best, since given present valuations it is far from a picnic.
Is anything else that I should add?
Most people already agree that U.S. stocks are likely to return less than their historic average over the next decade or so. But I agree that low interest rates already have and will likely continue to push more retail investors from bonds into stocks. Whether that will be enough to really move the needle for stocks is something I have no clue about.000 wrote: ↑Sat Aug 01, 2020 4:11 pmI tend to agree. As such I currently hold no bonds. However I feel that if everyone starts feeling the same way, stock returns may be muted with more risk to boot.willthrill81 wrote: ↑Sat Aug 01, 2020 10:27 amThere's more hope with stocks than with bonds. Seemingly high valuations are necessarily a precursor to poor returns; earnings can rise enough to reduce the valuations, for instance. But interest rates declining even further is the only chance bonds have of achieving a meaningfully positive real return over the next ten years.000 wrote: ↑Sat Aug 01, 2020 12:01 amOne could also keep holding bonds and hope for the best.Always passive wrote: ↑Fri Jul 31, 2020 11:58 pm No matter how many opinions I read, the bottom line for a retiree (or for that matter anyone that holds a high bond allocation) is simple. Bonds are in the toilet (negative real return) , so to preserve buying power, one needs enough of the risky stuff to make up for that and hope for the best, since given present valuations it is far from a picnic.
Is anything else that I should add?
Have you looked at this thread?ResearchMed wrote: ↑Sat Aug 01, 2020 4:57 pm That TIAA Traditional with a minimum return of 3% is looking better and better!
[Yes, I'm ignoring whether it is the illiquid or the currently wonderful liquid version...]
Is there a graph anywhere of the actual "guarantee" (minimum plus that mysterious "extra" in many/some years) over time?
In particular, what was the accumulation rate back in 1980/81, when money market funds briefly hit 17-18%?
(And mortgages weren't very far behind )
(I guess I've used the wrong search terms; yes I did try Google...)
Many thanks!
RM
I started feeling this way last year, and made the disastrous decision to start considering international stock funds, which were paying a 3% yield, to be a reasonable proxy for bonds. Then the pandemic hit.dave1054 wrote: ↑Thu Jul 30, 2020 2:07 pm Yes, I know there are multiple threads about bonds.
This may be slightly different twist and would love your opinions.
There was interview with Dan Fuss, one of most renowned bond guys for decades. Jist of article which I cannot copy is due to artificial low rates of bonds due to Fed intervention, he cannot find any value or mispriced bonds with significant upside potential. He has been purchasing high quality dividend stocks which he feels is less risky.
Yes I know Vanguard mantra is total bond fund and forget about it. Bonds did well the past 10-20 years. What does that have to do with next decade.
All opposing viewpoints welcome.
Or hard assets such as gold and real estate.willthrill81 wrote: ↑Sat Aug 01, 2020 4:14 pm But I agree that low interest rates already have and will likely continue to push more retail investors from bonds into stocks...
Maybe I wasn't clear (apologies). Or I'm missing something in the linked thread (also apologies ).willthrill81 wrote: ↑Sat Aug 01, 2020 5:02 pmHave you looked at this thread?ResearchMed wrote: ↑Sat Aug 01, 2020 4:57 pm That TIAA Traditional with a minimum return of 3% is looking better and better!
[Yes, I'm ignoring whether it is the illiquid or the currently wonderful liquid version...]
Is there a graph anywhere of the actual "guarantee" (minimum plus that mysterious "extra" in many/some years) over time?
In particular, what was the accumulation rate back in 1980/81, when money market funds briefly hit 17-18%?
(And mortgages weren't very far behind )
(I guess I've used the wrong search terms; yes I did try Google...)
Many thanks!
RM
I think I understand what you're looking for now, but I don't believe that the data are available, as noted by The Wizard in this thread.ResearchMed wrote: ↑Sat Aug 01, 2020 5:46 pmMaybe I wasn't clear (apologies). Or I'm missing something in the linked thread (also apologies ).willthrill81 wrote: ↑Sat Aug 01, 2020 5:02 pmHave you looked at this thread?ResearchMed wrote: ↑Sat Aug 01, 2020 4:57 pm That TIAA Traditional with a minimum return of 3% is looking better and better!
[Yes, I'm ignoring whether it is the illiquid or the currently wonderful liquid version...]
Is there a graph anywhere of the actual "guarantee" (minimum plus that mysterious "extra" in many/some years) over time?
In particular, what was the accumulation rate back in 1980/81, when money market funds briefly hit 17-18%?
(And mortgages weren't very far behind )
(I guess I've used the wrong search terms; yes I did try Google...)
Many thanks!
RM
I'm not seeing any graph over time (or even a table with multiple years) comparing the Trad Ann accumulating rate with the then-current... Ooops - I see that I managed to leave out "COMPARED WITH bond index fund rates" or such.
My bad!
RM
[ quote fixed by admin LadyGeek]willthrill81 wrote: ↑Fri Jul 31, 2020 9:41 pmYes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmwillthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see
We have multiple layers of objectives, some more critical than others. The most critical is that we have enough assets to provide us with the means to buy what we consider to be the essentials in retirement. Less critical but still important to us is that we have enough assets to provide us with the means to spend on discretionary categories, such as travel, in retirement. Even less critical is that we leave behind a nice bequest to our daughter.qwertyjazz wrote: ↑Sun Aug 02, 2020 8:30 am[ quote fixed by admin LadyGeek]willthrill81 wrote: ↑Fri Jul 31, 2020 9:41 pmYes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmwillthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see
( not sure of coding text - what follows is me)
What do you mean by not meeting by my objective? You either fully meet it or are off by 10 cents as an exaggeration. There is something about quick risk heuristics as being binary that bothers me. I am not sure though how to conceptualize that and more importantly operationalize it. This seems to have more import ant in a risk free zero or negative yield world.
So how do you operationalize those objectives balancing risks without fixed numeric goals?willthrill81 wrote: ↑Sun Aug 02, 2020 9:57 amWe have multiple layers of objectives, some more critical than others. The most critical is that we have enough assets to provide us with the means to buy what we consider to be the essentials in retirement. Less critical but still important to us is that we have enough assets to provide us with the means to spend on discretionary categories, such as travel, in retirement. Even less critical is that we leave behind a nice bequest to our daughter.qwertyjazz wrote: ↑Sun Aug 02, 2020 8:30 am[ quote fixed by admin LadyGeek]willthrill81 wrote: ↑Fri Jul 31, 2020 9:41 pmYes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.vineviz wrote: ↑Fri Jul 31, 2020 7:23 pmwillthrill81 wrote: ↑Fri Jul 31, 2020 5:40 pm The 'standard' definition of risk is what you're referring to, equating volatility with risk. I partly see
( not sure of coding text - what follows is me)
What do you mean by not meeting by my objective? You either fully meet it or are off by 10 cents as an exaggeration. There is something about quick risk heuristics as being binary that bothers me. I am not sure though how to conceptualize that and more importantly operationalize it. This seems to have more import ant in a risk free zero or negative yield world.
We have a mostly fixed numeric goal for funding our essential spending, a less fixed numeric goal for discretionary spending, and a very fluid goal for a bequest.qwertyjazz wrote: ↑Sun Aug 02, 2020 1:58 pmSo how do you operationalize those objectives balancing risks without fixed numeric goals?willthrill81 wrote: ↑Sun Aug 02, 2020 9:57 amWe have multiple layers of objectives, some more critical than others. The most critical is that we have enough assets to provide us with the means to buy what we consider to be the essentials in retirement. Less critical but still important to us is that we have enough assets to provide us with the means to spend on discretionary categories, such as travel, in retirement. Even less critical is that we leave behind a nice bequest to our daughter.qwertyjazz wrote: ↑Sun Aug 02, 2020 8:30 am[ quote fixed by admin LadyGeek]willthrill81 wrote: ↑Fri Jul 31, 2020 9:41 pmYes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.
( not sure of coding text - what follows is me)
What do you mean by not meeting by my objective? You either fully meet it or are off by 10 cents as an exaggeration. There is something about quick risk heuristics as being binary that bothers me. I am not sure though how to conceptualize that and more importantly operationalize it. This seems to have more import ant in a risk free zero or negative yield world.
I have divided the savings in 3 buckets.willthrill81 wrote: ↑Sun Aug 02, 2020 2:05 pmWe have a mostly fixed numeric goal for funding our essential spending, a less fixed numeric goal for discretionary spending, and a very fluid goal for a bequest.qwertyjazz wrote: ↑Sun Aug 02, 2020 1:58 pmSo how do you operationalize those objectives balancing risks without fixed numeric goals?willthrill81 wrote: ↑Sun Aug 02, 2020 9:57 amWe have multiple layers of objectives, some more critical than others. The most critical is that we have enough assets to provide us with the means to buy what we consider to be the essentials in retirement. Less critical but still important to us is that we have enough assets to provide us with the means to spend on discretionary categories, such as travel, in retirement. Even less critical is that we leave behind a nice bequest to our daughter.qwertyjazz wrote: ↑Sun Aug 02, 2020 8:30 am[ quote fixed by admin LadyGeek]willthrill81 wrote: ↑Fri Jul 31, 2020 9:41 pm
Yes, not meeting my objectives is a far bigger risk to me than 'mere' uncertainty of my terminal portfolio value.
( not sure of coding text - what follows is me)
What do you mean by not meeting by my objective? You either fully meet it or are off by 10 cents as an exaggeration. There is something about quick risk heuristics as being binary that bothers me. I am not sure though how to conceptualize that and more importantly operationalize it. This seems to have more import ant in a risk free zero or negative yield world.
Meeting the first objective is most critical but also easiest, while the others are less critical and more difficult.