ray lucia refined strategy

mathjak107 · 10-09-2006, 05:32 PM

On rays show today he talked about the refinements and the nuts and bolts of managing the buckets that will be discussed in his new book.

The problem with the 1st book was it didnt cover the manipulation between buckets in much detail and you were kind of left to your own design.

So heres a little bit of what will be in the book:

Value Averaging: Lets say you need an average of 7% a year long term to make the numbers work. well at the end of year 1 your up 7%, year 2 up 9% and year 3 up 25%.

You sell off everything over that yearly 7% average and move it to bucket 2.

Okay you say what if your down in a year and below 7%. Well now his plan is to have you take some money from bucket 2 and buy back in to the stock bucket again. Havent really followed this thru yet as ill wait for the book and the details..

astromeria · 10-09-2006, 05:41 PM

The real kicker is robbing bucket 2 to pay bucket 3 when the market's getting hammered. That will take...courage! I hope I'm up for it.

mathjak107 · 10-09-2006, 05:44 PM

Lets call it a loan. ha haha

donheff · 10-09-2006, 06:08 PM

Quote:

Originally Posted by mathjak107

Lets call it a loan. ha haha

Hydroman · 10-09-2006, 07:35 PM

Quote:

Originally Posted by mathjak107

Lets call it a loan. ha haha

Lets call it "rebalencing".

So when do you move bucket 2 money into bucket 1?

Brat · 10-09-2006, 09:39 PM

When bucket 1 is nearing empty. The object is to let buckets 2 and 3 grow.

mathjak107 · 10-10-2006, 02:34 AM

you move it when your behind what you should be. if your looking for a 7% average and you have 100,000 in bucket 3 then what ray is saying is after 3 years you should have about 121,000 not figuring compounding so i can do this in my head.

If the market is down and your only at 119,000 then move 2,000 into bucket taking advantage of the drop. you can do this once a year

by the same token if your up to 125,000 move 4,000 at years end into bucket 2

donheff · 10-10-2006, 05:46 AM

Quote:

Originally Posted by mathjak107

If the market is down and your only at 119,000 then move 2,000 into bucket taking advantage of the drop. you can do this once a year

If the market stays down you will exhaust 1 on spending and 2 filling 3. You won't get your 14 years insurance.

73ss454 · 10-10-2006, 07:28 AM

This 3 bucket thing just seems to make things 3 times harder. If you have X amount of $ and take out X amount to live off what's the difference how many buckets one has? One would still take out X $ and end up at the same #.

RASAP · 10-10-2006, 09:09 AM

It seems (maybe too) obvious to me but...

Bucket 1, and to some extent, Bucket 2 is there to tide you over during an extended market downturn which could happen at any time. So, while the market is up, one should keep Buckets 1 and 2 full so that when the day comes that the market is down for an extended period, your full term reserve is in place. Then, after the market returns to its historical average, start refilling Buckets 1 & 2. This way, you are taking from Bucket 3 only when your returns are positive.

RockMiner · 10-10-2006, 10:50 AM

Quote:

Originally Posted by 73ss454

This 3 bucket thing just seems to make things 3 times harder. If you have X amount of $ and take out X amount to live off what's the difference how many buckets one has? One would still take out X $ and end up at the same #.

I agree, the bucket concept is at best a device to make it easier to think about ones spending needs...that, and sell a lot of books.

There is really only one pile of $$, and chosing to think in terms of buckets needlessly complicates things IMO. The only bucket I need is one to contain the barf caused by the endless debate on this subject

Nords · 10-10-2006, 11:52 AM

Quote:

Originally Posted by Rock

The only bucket I need is one to contain the barf caused by the endless debate on this subject

I'm sure that Ray Lucia is looking for a "Bucket Brigade" to help him sell books & facilitate seminars!

astromeria · 10-10-2006, 12:01 PM

Splitting up my portfolio into super-safe, moderate, and go-for-it buckets helps me relax about it and do the right thing. I'm not a proselytizer--OK, I am about saving the planet and breastfeeding(!)--but I do like touching base with other bucketeers.

AHEM...

Who's the leader of the club that's made for you and me
R-A-Y
L-U-C
I-A-ai-yi-yi!

On that note, it's time to start making dinner for mclesters and Rich-in-Tampa

modhatter · 10-10-2006, 12:44 PM

In my ever so humble opinion. I think the core of his approach is to spend down the "cheapest" money (CD's) while giving bucket #2 (slightly higher gain potential (6-7%) time to grow, and buket #3 (hopefully your highest gain-over long hall) time to grow. There by gaining the most from your portfolio.

I think it's more about spending cheap money and tring to compound more expensive money.

Just a thought.

hogwild · 10-10-2006, 12:50 PM

Quote:

Originally Posted by mathjak107

On rays show today he talked about the refinements and the nuts and bolts of managing the buckets that will be discussed in his new book.

Thanks for the tip. I like to go to the archive site and listen to him so that I can skip thru the commercials.

I'm looking forward to his new book. I bought his first one last year.

sgeeeee · 10-10-2006, 12:54 PM

Quote:

Originally Posted by mathjak107

you move it when your behind what you should be. if your looking for a 7% average and you have 100,000 in bucket 3 then what ray is saying is after 3 years you should have about 121,000 not figuring compounding so i can do this in my head.

If the market is down and your only at 119,000 then move 2,000 into bucket taking advantage of the drop. you can do this once a year

by the same token if your up to 125,000 move 4,000 at years end into bucket 2

If this is all you do, then there is no difference between the 3 bucket method and any asset allocation and rebalance method. . . None. You can keep your money in one bucket, three buckets or 10 buckets. You still only have one portfolio. If you rebalance every year, then it is all the same.

The only potential advantage to a three bucket method (or to a bond ladder approach) is if you reserve the right to rebalance differently. If you choose not to rebalance when the market is down or to only partially rebalance under certain circumstances, then you could theoretically get a different result than traditional asset allocation and rebalancing. This is sometimes called dynamic asset allocation.

So . . . if you want to know if the 3 bucket method offers any advantage, you have to establish formal rebalance rules. Once you've done this, you could concievably back-test those rules using a historical data base.

73ss454 · 10-10-2006, 12:57 PM

Amen!

REWahoo · 10-10-2006, 12:57 PM

Ray has three buckets but being a LBYM type I have need of only one…and I’m hoping it still has something in it when I kick it.

JohnEyles · 10-10-2006, 12:58 PM

Quote:

Originally Posted by sgeeeee

The only potential advantage to a three bucket method (or to a bond ladder approach) is if you reserve the right to rebalance differently.

Yep !

Quote:

So . . . if you want to know if the 3 bucket method offers any advantage, you have to establish formal rebalance rules. Once you've done this, you could concievably back-test those rules using a historical data base.

Exactly what we've been talking about in a "bucket" thread in the FIRECalc support
group. Not sure what's happening - I made a half-assed proposition of some rules,
and I guess it's in Dory's court now.

youbet · 10-10-2006, 01:04 PM

Quote:

Originally Posted by sgeeeee

So . . . if you want to know if the 3 bucket method offers any advantage, you have to establish formal rebalance rules. Once you've done this, you could concievably back-test those rules using a historical data base.

And, couldn't you apply the same formal rebalancing rules to an asset allocation within a "one portfolio" model?

10-09-2006, 05:32 PM	#1
mathjak107 Thinks s/he gets paid by the post Join Date: Jul 2005 Posts: 2,388	ray lucia refined strategy On rays show today he talked about the refinements and the nuts and bolts of managing the buckets that will be discussed in his new book. The problem with the 1st book was it didnt cover the manipulation between buckets in much detail and you were kind of left to your own design. So heres a little bit of what will be in the book: Value Averaging: Lets say you need an average of 7% a year long term to make the numbers work. well at the end of year 1 your up 7%, year 2 up 9% and year 3 up 25%. You sell off everything over that yearly 7% average and move it to bucket 2. Okay you say what if your down in a year and below 7%. Well now his plan is to have you take some money from bucket 2 and buy back in to the stock bucket again. Havent really followed this thru yet as ill wait for the book and the details..

10-09-2006, 09:39 PM	#6
Brat Thinks s/he gets paid by the post Join Date: Feb 2004 Posts: 2,711	Re: ray lucia refined strategy When bucket 1 is nearing empty. The object is to let buckets 2 and 3 grow. __________________ Duck bjorn.

10-10-2006, 02:34 AM	#7
mathjak107 Thinks s/he gets paid by the post Join Date: Jul 2005 Posts: 2,388	Re: ray lucia refined strategy you move it when your behind what you should be. if your looking for a 7% average and you have 100,000 in bucket 3 then what ray is saying is after 3 years you should have about 121,000 not figuring compounding so i can do this in my head. If the market is down and your only at 119,000 then move 2,000 into bucket taking advantage of the drop. you can do this once a year by the same token if your up to 125,000 move 4,000 at years end into bucket 2

10-10-2006, 07:28 AM	#9
73ss454 Thinks s/he gets paid by the post Join Date: Oct 2004 Posts: 1,609	Re: ray lucia refined strategy This 3 bucket thing just seems to make things 3 times harder. If you have X amount of $ and take out X amount to live off what's the difference how many buckets one has? One would still take out X $ and end up at the same #.

10-10-2006, 09:09 AM	#10
RASAP Dryer sheet aficionado Join Date: May 2006 Posts: 43	Re: ray lucia refined strategy It seems (maybe too) obvious to me but... Bucket 1, and to some extent, Bucket 2 is there to tide you over during an extended market downturn which could happen at any time. So, while the market is up, one should keep Buckets 1 and 2 full so that when the day comes that the market is down for an extended period, your full term reserve is in place. Then, after the market returns to its historical average, start refilling Buckets 1 & 2. This way, you are taking from Bucket 3 only when your returns are positive.

10-09-2006, 05:41 PM	#2
astromeria Moderator Emeritus Join Date: Aug 2005 Posts: 1,380	Re: ray lucia refined strategy The real kicker is robbing bucket 2 to pay bucket 3 when the market's getting hammered. That will take...courage! I hope I'm up for it. __________________ You can't always get what you want, but if you try sometimes, you might find you get what you need.

10-09-2006, 05:44 PM	#3
mathjak107 Thinks s/he gets paid by the post Join Date: Jul 2005 Posts: 2,388	Re: ray lucia refined strategy Lets call it a loan. ha haha

10-10-2006, 12:01 PM	#13
astromeria Moderator Emeritus Join Date: Aug 2005 Posts: 1,380	Re: ray lucia refined strategy Splitting up my portfolio into super-safe, moderate, and go-for-it buckets helps me relax about it and do the right thing. I'm not a proselytizer--OK, I am about saving the planet and breastfeeding(!)--but I do like touching base with other bucketeers. AHEM... Who's the leader of the club that's made for you and me R-A-Y L-U-C I-A-ai-yi-yi! On that note, it's time to start making dinner for mclesters and Rich-in-Tampa __________________ You can't always get what you want, but if you try sometimes, you might find you get what you need.

10-10-2006, 12:44 PM	#14
modhatter Recycles dryer sheets Join Date: Aug 2005 Posts: 345	Re: ray lucia refined strategy In my ever so humble opinion. I think the core of his approach is to spend down the "cheapest" money (CD's) while giving bucket #2 (slightly higher gain potential (6-7%) time to grow, and buket #3 (hopefully your highest gain-over long hall) time to grow. There by gaining the most from your portfolio. I think it's more about spending cheap money and tring to compound more expensive money. Just a thought.

10-10-2006, 12:57 PM	#17
73ss454 Thinks s/he gets paid by the post Join Date: Oct 2004 Posts: 1,609	Re: ray lucia refined strategy Amen!

10-10-2006, 12:57 PM	#18
REWahoo Moderator Emeritus Join Date: Jun 2002 Location: Texas Hill Country Posts: 10,194	Re: ray lucia refined strategy Ray has three buckets but being a LBYM type I have need of only one…and I’m hoping it still has something in it when I kick it. __________________ Some claim to have a crystal ball when it comes to investing in stocks and real estate. Me, I've got a disco ball... Retired in 2005 at age 58 - better FIREd late than never.

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