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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 10:09 AM   #41
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Re: Desparately Trying To Understand SWR?

By definition, this analysis considers valuation of the markets...

My recollection is that the REHP study was published in 1996. How many times has intercst updated his SWR number since then to reflect the effect of changes in valuation levels? The answer is "zero."

Ny guess is that Martha's husband will be something less than convinved of the study's analytic validity for purposes of reporting what withdrawal rate is "100 percent safe" when Martha fills him in on that little piece of helpful background information.
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 10:22 AM   #42
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Re: Desparately Trying To Understand SWR?

Use of a hedge fund(in commodities) done very vary carefully 'might' have a spot in a well constructed multiple asset class portfolio - provided you have a intimate grasp of correlations among asset classes. Raddr's Early Retirement site has threads on this.

I'm intrigued but have no plans to try anything yet. I'm not sure what I don't know. Not for the average investor - you'd better be an advanced slicer and dicer.



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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 10:30 AM   #43
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Re: Desparately Trying To Understand SWR?

Quote:
By definition, this analysis considers valuation of the markets...

My recollection is that the REHP study was published in 1996. How many times has intercst updated his SWR number since then to reflect the effect of changes in valuation levels? The answer is "zero."

Ny guess is that Martha's husband will be something less than convinved of the study's analytic validity for purposes of reporting what withdrawal rate is "100 percent safe" when Martha fills him in on that little piece of helpful background information.
*****'s recollections are as faulty as his understanding of arithmetic.

The REHP study has been updated through 2003. The results haven't changed.

The worst case 30-year period for a January start date is 1966 to 1996. For a 60% S&P500/40% fixed income portfolio, a 4.12% withdrawal rate would have survived 30 years with $1 left in the account.

intercst
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 10:35 AM   #44
 
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Re: Desparately Trying To Understand SWR?

unclemick opines a "hedge fund" might be okay for
a "slicer and dicer". Maybe. But, if you invest
you might find your "hedge" clipped or trimmed

Anyway, I agree that the garden variety ER should just
stay away.

John Galt
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 11:13 AM   #45
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Re: Desparately Trying To Understand SWR?

The results haven't changed.

Valuation levels have changed. And the take-out number that you claim is "100 percent safe" has not.

The worst case 30-year period for a January start date is 1966 to 1996. For a 60% S&P500/40% fixed income portfolio, a 4.12% withdrawal rate would have survived 30 years with $1 left in the account.

"Would have" are key words here. The valuation levels that applied in 1966 do not apply today. So an informed analyst of the historical data would not declare the number that "would have" worked at the 1996 valuation levels to be "100 percent safe" for a retirement beginning today. Make an adjustment for changes in valuation levels, and the SWR you get for a high-stock portfolio today is 2.5 percent.
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 11:18 AM   #46
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Re: Desparately Trying To Understand SWR?

For those newer arriver's - heh, heh, heh --- De Gaul and the Norwegian widow --- one more time:

age 61 (ER'd 1993 at 49)

Income : 60% defined pension, 1998
40% (15% of
portfolio)Norwegian widow
utilities, REITs, baby bells, oils, drugs, - 40 DRIP stocks.

The stretch: SS available at 62.

The 800 pound gorilla behind the curtain: IRA - 75% Lifestrategy and 10% REIT Index - aka De Gaul as in balanced index with a kicker. If we make to 70 1/2 - RMD instead of SWR.

'God looks after Drunkards, Fools, and The Untied States of America.'
Charlies De Gaul

Balanced index will rebalance itself - hold your asset mix - AND

'Press on regardless,' or 'don't just stand there, do nothing.' - Bogle.

And for those investor's who can't wait for winter:

"90% of the game is half mental"
Yogi Berra
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 01:51 PM   #47
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Re: Desparately Trying To Understand SWR?

Quote:
The results haven't changed.

Valuation levels have changed. And the take-out number that you claim is "100 percent safe" has not.

The worst case 30-year period for a January start date is 1966 to 1996. For a 60% S&P500/40% fixed income portfolio, a 4.12% withdrawal rate would have survived 30 years with $1 left in the account.

"Would have" are key words here. The valuation levels that applied in 1966 do not apply today. So an informed analyst of the historical data would not declare the number that "would have" worked at the 1996 valuation levels to be "100 percent safe" for a retirement beginning today. Make an adjustment for changes in valuation levels, and the SWR you get for a high-stock portfolio today is 2.5 percent.
There are literally thousands of factors that effect stock market returns. PE ratio (what ***** calls 'valuation') is only one.

The strength of historical analysis is that all those thousands of factors are reflected in the historical data --- the 25% unemployment during the 1930's is in there, the 10% annual inflation during the 1970's is in there, all the wars since the US Civil War are in there.

Anyone that tells you that they can predict the future by looking at one factor doesn't have much credibility.

That goes double when you hear it from someone who doesn't understand arithmetic.

intercst
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 02:00 PM   #48
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Re: Desparately Trying To Understand SWR?

Quote:

*****'s recollections are as faulty as his understanding of arithmetic.

The REHP study has been updated through 2003. The results haven't changed.

The worst case 30-year period for a January start date is 1966 to 1996. For a 60% S&P500/40% fixed income portfolio, a 4.12% withdrawal rate would have survived 30 years with $1 left in the account.

intercst

PLEASE stop feeding the troll.
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Re: Desparately Trying To Understand SWR?
Old 08-24-2004, 02:05 PM   #49
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Re: Desparately Trying To Understand SWR?

The strength of historical analysis is that all those thousands of factors are reflected in the historical data

Bernstein discusses this in Chapter Two of his book "The Four Pillars of Investing." He says that the returns sequence data that you look at in your study can be used to examine all of the factors OTHER than changes in valuation levels. But he treats the "Expected Return" factor as a SEPARATE factor.

This is why the number he reports as the SWR is so far off from the one you report as the SWR, intercst. This is why he says that your methodology is "highly misleading" at times of high valuation.

It is clear that when you developed the study you believed that valuation was just one more factor like all the rest. But you are wrong about this.

Anyone that tells you that they can predict the future by looking at one factor doesn't have much credibility.

The Data-Based SWR tool takes into account every factor taken into account in the REHP study PLUS ONE.
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