Grangaard Strategy

ferco · 05-14-2006, 07:28 PM

Has anyone heard of the Grangaard Strategy, specifically his 30 year retirement portfolio. He uses 2 buckets, consisting of a 10 year holding/ spending cycle. The income bucket consists of treasury bonds and CD's and the holding(long term) bucket consists of large and small cap stocks. He assumes a 7% return in the long term bucket and a 3.86% return in the short term income bucket which he draws down over 10 years.
Any thoughts on this strategy by Paul Grangaard, CPA

perinova · 05-14-2006, 07:47 PM

Haven't heard of that.
If I understand correctly he has 10 years worth of bonds and uses it to zero and start again thereafter?
Seems more dangerous than realocating every year sinc eyou sell stock only once every 10 years. Is this guy a real CPA?

One of those financial advisors we sometimes talk about?

mathjak107 · 05-15-2006, 02:11 AM

i prefer the 3 bucket method with 7 year time frames in 1 and 2 ...you gradually re-fill the buckets when markets are up gradually

Mysto · 05-15-2006, 04:30 AM

Similar strategy in Huxley and Burns "Asset Dedication" see the thread Buckets and Buffers.

I, like mathjak, have gravitated to a multiple bucket approach ala Ray Lucia and others. A second bucket helps keep you from withdrawing funds from your equities during down markets.

At the end of the day it is just asset allocation but the bucket approach makes it easier and the separation effect (having a guaranteed income bucket) allows for better sleep (for me ) over the long haul.

BTW - In todays current CD market your bucket #1 should get 5. something for 10 years.

ferco · 05-15-2006, 05:04 AM

I agree, I've read Lucia's 3 bucket theory 2 years ago and it made so much sense.It did not involve a lot of complex portfolio theory and calculus etc. Also, Retire at the Pie Shop does an equally excellent job of explaining the step by step process of asset allocation and safe withdrawal....many writers throw these terms around but don't detail how to do it, which to me is a half wasted effort on the part of the writer.

perinova · 05-15-2006, 06:58 AM

can you explain what is in the 3 buckets strategy more fully?
is it the fixed income portion which is in 3 buckets? is one of the buckets stoks? or are the buckets allcocated stocks/bonds?

how does it work?

Quote:

Originally Posted by perinova

Haven't heard of that.
If I understand correctly he has 10 years worth of bonds and uses it to zero and start again thereafter?
Seems more dangerous than realocating every year since you sell stock only once every 10 years. Is this guy a real CPA?

One of those financial advisors we sometimes talk about?

thanks

ferco · 05-15-2006, 01:51 PM

Go to raylucia.com. He has an excellent online video which explains the 3 bucket system. Basically, you divide your funds into 3 buckets. B I is in fixed income which you live off for 7 years. B II in in intermediate/moderate risk which grow over 7 years untouched. B III is the most aggressive risk holding. At the end of 7 years bucket I is depleted and you rebalance B II and III into a new 3 bucket system : B I, B II, and B III. So as you're spending B I down every 7 years Buckets II and III are allowed to grow in more progressively aggressive markets/holdings.

perinova · 05-15-2006, 08:15 PM

interesting and new to me
I am going to have to think about this 3 B system further and do some spreadsheet simulation to figure this out fully.
thank you for the link and explanation.

mathjak107 · 05-16-2006, 03:00 AM

you gradually fill buckets 1 and 2 over time,,,when ever the markets up you can channel into your other buckets....the idea is to never sell in a down market and the 14 year time frame between buckets 1 & 2 and bucket 3 leaves enough time to rest assured you probely will never have to sell stock in a down market...

perinova · 05-16-2006, 05:52 AM

It's not much different than realocating. when market is down you also don't sell stocks but put bonds into it. also for most Bucket 1 is only a 1 year bucket here it's 7 years.
In summary this system is strectching the realocation cycle from 1 year to 7 years. Which doesn't change much your return and prob. of success (based on past reading): 7 year cycle for Bucket 2 and 3 make it more aggressive, but Bucket 1 is also 7 times bigger. So... same end result.
MAybe not bad if you want to avoid looking at your portfolio every year.

05-16-2006, 07:20 AM

As far as Ray Lucia goes:

Do you really trust a guy that looks like this?

HFWR · 05-16-2006, 07:27 AM

"Better get a bucket..." - Mr. Creosote

brewer12345 · 05-16-2006, 07:29 AM

Yeah, I am definately getting Kiyosaki vibes...

samclem · 05-16-2006, 08:23 AM

HFWR,

Thanks! Nasal milk spray everywhere.

05-14-2006, 07:47 PM	#2
perinova Recycles dryer sheets Join Date: Apr 2006 Posts: 399	Re: Grangaard Strategy Haven't heard of that. If I understand correctly he has 10 years worth of bonds and uses it to zero and start again thereafter? Seems more dangerous than realocating every year sinc eyou sell stock only once every 10 years. Is this guy a real CPA? One of those financial advisors we sometimes talk about?

05-15-2006, 02:11 AM	#3
mathjak107 Thinks s/he gets paid by the post Join Date: Jul 2005 Posts: 2,399	Re: Grangaard Strategy i prefer the 3 bucket method with 7 year time frames in 1 and 2 ...you gradually re-fill the buckets when markets are up gradually

05-15-2006, 04:30 AM	#4
Mysto Recycles dryer sheets Join Date: Mar 2006 Posts: 169	Re: Grangaard Strategy Similar strategy in Huxley and Burns "Asset Dedication" see the thread Buckets and Buffers. I, like mathjak, have gravitated to a multiple bucket approach ala Ray Lucia and others. A second bucket helps keep you from withdrawing funds from your equities during down markets. At the end of the day it is just asset allocation but the bucket approach makes it easier and the separation effect (having a guaranteed income bucket) allows for better sleep (for me ) over the long haul. BTW - In todays current CD market your bucket #1 should get 5. something for 10 years. __________________ I'm trying to find myself.* Have you seen me anywhere today?

05-15-2006, 05:04 AM	#5
ferco Recycles dryer sheets Join Date: Sep 2004 Posts: 188	Re: Grangaard Strategy I agree, I've read Lucia's 3 bucket theory 2 years ago and it made so much sense.It did not involve a lot of complex portfolio theory and calculus etc. Also, Retire at the Pie Shop does an equally excellent job of explaining the step by step process of asset allocation and safe withdrawal....many writers throw these terms around but don't detail how to do it, which to me is a half wasted effort on the part of the writer.

05-15-2006, 01:51 PM	#7
ferco Recycles dryer sheets Join Date: Sep 2004 Posts: 188	Re: Grangaard Strategy Go to raylucia.com. He has an excellent online video which explains the 3 bucket system. Basically, you divide your funds into 3 buckets. B I is in fixed income which you live off for 7 years. B II in in intermediate/moderate risk which grow over 7 years untouched. B III is the most aggressive risk holding. At the end of 7 years bucket I is depleted and you rebalance B II and III into a new 3 bucket system : B I, B II, and B III. So as you're spending B I down every 7 years Buckets II and III are allowed to grow in more progressively aggressive markets/holdings.

05-14-2006, 07:28 PM	#1
ferco Recycles dryer sheets Join Date: Sep 2004 Posts: 188	Grangaard Strategy Has anyone heard of the Grangaard Strategy, specifically his 30 year retirement portfolio. He uses 2 buckets, consisting of a 10 year holding/ spending cycle. The income bucket consists of treasury bonds and CD's and the holding(long term) bucket consists of large and small cap stocks. He assumes a 7% return in the long term bucket and a 3.86% return in the short term income bucket which he draws down over 10 years. Any thoughts on this strategy by Paul Grangaard, CPA

05-15-2006, 08:15 PM	#8
perinova Recycles dryer sheets Join Date: Apr 2006 Posts: 399	Re: Grangaard Strategy interesting and new to me I am going to have to think about this 3 B system further and do some spreadsheet simulation to figure this out fully. thank you for the link and explanation.

05-16-2006, 03:00 AM	#9
mathjak107 Thinks s/he gets paid by the post Join Date: Jul 2005 Posts: 2,399	Re: Grangaard Strategy you gradually fill buckets 1 and 2 over time,,,when ever the markets up you can channel into your other buckets....the idea is to never sell in a down market and the 14 year time frame between buckets 1 & 2 and bucket 3 leaves enough time to rest assured you probely will never have to sell stock in a down market...

05-16-2006, 05:52 AM	#10
perinova Recycles dryer sheets Join Date: Apr 2006 Posts: 399	Re: Grangaard Strategy It's not much different than realocating. when market is down you also don't sell stocks but put bonds into it. also for most Bucket 1 is only a 1 year bucket here it's 7 years. In summary this system is strectching the realocation cycle from 1 year to 7 years. Which doesn't change much your return and prob. of success (based on past reading): 7 year cycle for Bucket 2 and 3 make it more aggressive, but Bucket 1 is also 7 times bigger. So... same end result. MAybe not bad if you want to avoid looking at your portfolio every year.

05-16-2006, 07:20 AM	#11
Cut-Throat Guest Posts: n/a	Re: Grangaard Strategy As far as Ray Lucia goes: Do you really trust a guy that looks like this?

05-16-2006, 07:29 AM	#13
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,151	Re: Grangaard Strategy Yeah, I am definately getting Kiyosaki vibes... __________________ "When caught between two evils I generally pick the one I haven't tried before." - Mae West "If dogs weren't meant to eat dental floss out of the garbage, why do they make it mint-flavored?"

05-16-2006, 08:23 AM	#14
samclem Thinks s/he gets paid by the post Join Date: May 2004 Posts: 2,751	Re: Grangaard Strategy HFWR, Thanks! Nasal milk spray everywhere. __________________ "Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein

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