interesting article

bosco · 09-15-2006, 02:54 PM

I apologize in advance to Azanon if this has been posted before....

http://www.fpanet.org/journal/articl...p0806-art6.cfm

However, I was wondering if anyone here could shed any light on the following statement from the article

"An increase of almost a quarter-percentage-point in the withdrawal rate is afforded by increasing the rebalancing interval to 75 months, as shown in Figure 3"

I have read that rebalancing less frequently than once per year has benefits. But I've not seen it quantified like this and frankly, am a bit sketical. I'm not sure I'd trust that graph--seems like over-analysis to me. A quarter point SWR in the midst of a sea of data....seems lonely

any comments or insights?

brewer12345 · 09-15-2006, 02:57 PM

They don't say, but I bet taht the really long rebalancing interval requires you to accept a lot more volatility.

samclem · 09-15-2006, 03:00 PM

Quote:

Originally Posted by bosco

"An increase of almost a quarter-percentage-point in the withdrawal rate is afforded by increasing the rebalancing interval to 75 months, as shown in Figure 3"

Maybe my procrastination is going to pay off again!!

bosco · 09-15-2006, 03:02 PM

Quote:

Originally Posted by brewer12345

They don't say, but I bet taht the really long rebalancing interval requires you to accept a lot more volatility.

they do say that further down, the logic being the portfolio could get very overweighted in equities over this period.

mickeyd · 09-15-2006, 03:51 PM

Pretty interesting article. Thanks for posting it. I have saved it for further reference.

I think that the following, which happen to be the last 2 sentences in the piece, say it all*

Quote:

Thus, the risks of any withdrawal plan can be only approximately assessed. Any attempt to project a high degree of precision in these calculations promises more than any professional can reasonably expect to deliver to his or her clients.

. . . Yrs to Go · 09-15-2006, 07:04 PM

Quote:

The foundation withdrawal scheme assumes rebalancing of the portfolio once a year, at the end of every year. An increase of almost a quarter-percentage-point in the withdrawal rate is afforded by increasing the rebalancing interval to 75 months, as shown in Figure 3. But longer rebalancing intervals imply possibly significant departures from the initial asset allocation and greater portfolio volatility. As a result, this client elected a rebalancing interval of 57 months, which still adds an increment of 0.10 percent to the withdrawal rate, but provides for somewhat lower volatility.

Wow. This whole process has data mining written all over it. "A rebalancing of 57 months adds an increment of 0.10 percent to the withdrawal rate". Are you kidding me? These CFPs are going to "optimize" a whole batch of seniors into bankruptcy based on historical analysis presented as scientific fact.

Nords · 09-15-2006, 07:09 PM

Quote:

Originally Posted by 3 Yrs to Go

Wow.* This whole process has data mining written all over it.

Yup. I wonder if someone from a brokerage or a fund company was paying for this study... because after all, only a professional financial manager has the steely discipline to ignore shepherd your portfolio for 57-75 months.

Quote:

Originally Posted by bosco

they do say that further down, the logic being the portfolio could get very overweighted in equities over this period.

Gosh... a higher percentage of equities leads to a higher return, and over longer periods of time the volatility balances out? Imagine that!!

Maybe these guys should write a book. They could call it "Modern Portfolio Theory" or something like that...

. . . Yrs to Go · 09-15-2006, 07:21 PM

Quote:

Originally Posted by Nords

Yup.* I wonder if someone from a brokerage or a fund company was paying for this study... because after all, only a professional financial manager has the steely discipline to ignore shepherd your portfolio for 57-75 months.

Interesting though that daily rebalancing doesn't yield better results.

Nords · 09-15-2006, 07:26 PM

Quote:

Originally Posted by 3 Yrs to Go

Interesting though that daily rebalancing doesn't yield better results.

Just better commissions.

d · 09-15-2006, 08:05 PM

Quote:

Interesting though that daily rebalancing doesn't yield better results.

with daily rebalancing you will tend to miss the most of the buying-low, selling-high advantage that rebalancing brings. consider the extreme of rebalancing every hour!

donheff · 09-15-2006, 08:17 PM

The replies in this thread are helpful. When I looked at the graphs and read the very precise estimates of 12 month, versus 48 month, versus 57 month rebalancing I got uncomfortable. Where are these numbers coming from? But I forgot that this is an outfit that will be glad to manage our money for a fee to help us see the light.

. . . Yrs to Go · 09-15-2006, 08:28 PM

Quote:

Originally Posted by 3 Yrs to Go

Interesting though that daily rebalancing doesn't yield better results.

Quote:

Originally Posted by d

with daily rebalancing you will tend to miss the most of the buying-low, selling-high advantage that rebalancing brings. consider the extreme of rebalancing every hour!

Nords, Dory, others . . .* the forum need a "sarcasm icon" so that such sentiment can be clearly marked.*

**REWahoo** · 09-15-2006, 08:37 PM

Quote:

Originally Posted by 3 Yrs to Go

Nords, Dory, others . . . the forum need a "sarcasm icon" so that such sentiment can be clearly marked.

I think we also need one of BMJ's "sarchasm" icons..

Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.

fire5soon · 09-15-2006, 08:58 PM

Quote:

Originally Posted by 3 Yrs to Go

Nords, Dory, others . . . the forum need a "sarcasm icon" so that such sentiment can be clearly marked.

Sarcasm? What sarcasm? I have absolutely no idea what you’re talking about…

Nords · 09-16-2006, 10:41 AM

Quote:

Originally Posted by 3 Yrs to Go

Nords, Dory, others . . .* the forum need a "sarcasm icon" so that such sentiment can be clearly marked.*

I seen icons as an abdication of one's ability to find the appropriate words...

Meadbh · 09-16-2006, 12:37 PM

Bengen's article is based entirely on probablility and mathematical projection of historical data. The same is true of FIRECALC. The scientist in me wants to know whether such projections have been validated by prospective cohort studies of real investors.* *

bosco · 09-18-2006, 03:06 AM

Quote:

Originally Posted by Nords

I seen icons as an abdication of one's ability to find the appropriate words...

I agree. It took mankind thousands of years to develop an alphabet in order to advance beyond drawing pictures on cave walls. Now we want to go back to that epoch? One reason I've never understood the Mac fanatics. I find a desktop or window littered with icons far more confusing than a nice alphabetical listing.

although I do still get a kick out of this one

reminds me of the old pouring spouts that used to come with a bottle of Kirin Beer.

astromeria · 09-18-2006, 05:41 AM

Some people are more/less visually oriented or for that matter, aurally oriented than others. Doesn't make one way right and the other way wrong. Smilies express emotion, not facts. My problem with them is that they aren't nuanced enough, hence I combine them. I can see why people might find them irritating, though.

donheff · 09-18-2006, 07:59 AM

Quote:

Originally Posted by Nords

I seen icons as an abdication of one's ability to find the appropriate words...

Yeah but most of us screw up the subtleties of the language now and then without realizing it. Or our readers don't understand irony and get POd for nothing. Better to use a visual sledge hammer to make sure they realize you are joking

09-15-2006, 02:54 PM	#1
bosco Full time employment: Posting here. Join Date: Jul 2005 Posts: 936	interesting article I apologize in advance to Azanon if this has been posted before.... http://www.fpanet.org/journal/articl...p0806-art6.cfm However, I was wondering if anyone here could shed any light on the following statement from the article "An increase of almost a quarter-percentage-point in the withdrawal rate is afforded by increasing the rebalancing interval to 75 months, as shown in Figure 3" I have read that rebalancing less frequently than once per year has benefits. But I've not seen it quantified like this and frankly, am a bit sketical. I'm not sure I'd trust that graph--seems like over-analysis to me. A quarter point SWR in the midst of a sea of data....seems lonely any comments or insights? __________________ I have an inferiority complex, but it's not a very good one.

09-15-2006, 02:57 PM	#2
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,248	Re: interesting article They don't say, but I bet taht the really long rebalancing interval requires you to accept a lot more volatility. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

09-15-2006, 08:17 PM	#11
donheff Thinks s/he gets paid by the post Join Date: Feb 2006 Posts: 2,694	Re: interesting article The replies in this thread are helpful. When I looked at the graphs and read the very precise estimates of 12 month, versus 48 month, versus 57 month rebalancing I got uncomfortable. Where are these numbers coming from? But I forgot that this is an outfit that will be glad to manage our money for a fee to help us see the light. __________________ Every man is, or hopes to be, an Idler. -- Samuel Johnson

09-16-2006, 12:37 PM	#16
Meadbh Thinks s/he gets paid by the post Join Date: Jul 2006 Posts: 1,555	Re: interesting article Bengen's article is based entirely on probablility and mathematical projection of historical data. The same is true of FIRECALC. The scientist in me wants to know whether such projections have been validated by prospective cohort studies of real investors.* *

09-18-2006, 05:41 AM	#18
astromeria Moderator Emeritus Join Date: Aug 2005 Posts: 1,375	Re: interesting article Some people are more/less visually oriented or for that matter, aurally oriented than others. Doesn't make one way right and the other way wrong. Smilies express emotion, not facts. My problem with them is that they aren't nuanced enough, hence I combine them. I can see why people might find them irritating, though. __________________ You can't always get what you want, but if you try sometimes, you might find you get what you need.