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fun with spreadsheets
Old 01-06-2014, 10:05 PM   #1
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fun with spreadsheets

A bit of self-centered musing:

Recently I hit a significant milestone in my FIRE portfolio. It so happens that in 1996, my then-SO introduced me to the concept of index investing, and I created my first spreadsheet projecting my net worth. It made assumptions about stock returns (I started out invested 100% in an S&P500 index fund and guessed 10% nominal annual returns), portfolio contributions, salary growth, etc. Now 18 years later, my net worth is within a couple percent of where that spreadsheet projected it would be this year!

How weird that all my (somewhat inaccurate in retrospect) assumptions canceled each other out and left me with a fairly accurate number. Or, it could just be my natural brilliance.
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Old 01-06-2014, 10:17 PM   #2
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Maybe it has something to do with the law of large numbers! Or things just average out. When I was working as an appraiser, 3 to 4% was tossed around as the 'long term inflation rate in the U.S.'. I have also heard similar WAG's, (Wild A$$ guesses) for the S&P, and other indexes. So your period of observation, 18 years, is long enough, or things actually averaged out, it may make since. Or you or naturally brilliant! I always pick the latter!
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Old 01-06-2014, 10:18 PM   #3
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Would you like to work up a projection for my "17 years hence" portfolio?
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Old 01-06-2014, 10:40 PM   #4
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I think the scientific term for the assumptions 18 years ago is called "warm and fuzzy feeling"
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Old 01-07-2014, 05:36 AM   #5
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For me, "fun with spreadsheets" is akin to "pizza with liver topping".
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Old 01-07-2014, 05:47 AM   #6
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As Wade Pfau has shown, it's one thing to be accurate in the accumulation side where over time things will average out, but on the withdrawal side, it's the sequence of returns that can make all the difference. But congrats at arriving where you thought you would.
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Old 01-07-2014, 08:45 AM   #7
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Quote:
Originally Posted by figner View Post
....How weird that all my (somewhat inaccurate in retrospect) assumptions canceled each other out and left me with a fairly accurate number. Or, it could just be my natural brilliance.
I spent my career in accounting and finance and saw it happen all the time with different types of projections. Colleagues and I jokingly coined the term "The Law of Multiple Errors" as "multiple errors tend to offset".
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Old 01-07-2014, 11:45 AM   #8
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Originally Posted by pb4uski View Post
I spent my career in accounting and finance and saw it happen all the time with different types of projections. Colleagues and I jokingly coined the term "The Law of Multiple Errors" as "multiple errors tend to offset".
I'm in accounting and finance also - I tend to call it "dumb luck"
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Old 01-07-2014, 11:56 AM   #9
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figner - I am close too, although with a slightly different figure.

In 2003, I projected out my investments/savings in retirement (as part of my whole retirement spreadsheet). 10 years later, I am actually within $10K of that number, which is pretty crazy given the ups and downs of the markets over that time.
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Old 01-11-2014, 07:28 PM   #10
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1995-2013 (19 yr): CAGR = 14.6%. GSD = 24.1%. vs 100% VTI: CAGR = 11.7% GSD = 20.2%.
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AA = 60/35/5. Expected CAGR = 5.7%. GSD (5y) = 7.8%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.5%. Net Port Yield = 1.7%. Term = 36 yr. FI Duration = 4.9 yr. Portfolio survival probability = 86%.
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