Sounds like We Need This Guy On Here............:)

[FinanceDude]

From Fundalarm:

David Snowball, new-fund guru and proprietor of the FundAlarm Annex, has agreed to bare his portfolio this month, as well .....The document file that David originally sent me was named "David's stupid portfolio strategy," and I have to say that took me by surprise, since I don't always (indeed, never) associate "David Snowball" with "stupid"......But what David really means by "stupid portfolio" -- well, here's what David means, in his own words:


By David Snowball:

My portfolio is designed to allow me to be stupid. It’s not that I try to be stupid but, being human, the temptation is almost irresistible at times. If you’re really smart, you can achieve your goals by taking a modest amount and investing it brilliantly. My wife suggested that I ought not be banking on that route, so I took the road less traveled. Years ago, I used free software available from Fidelity, Price and Vanguard to determine how much I needed to invest in order to fund my retirement. I used conservative assumptions (long-term inflation near 4% and expected portfolio returns below 8%), averaged the three recommendations and ended up socking away a lot each month.

Downside (?): we needed to be careful with our money – our cars tend to be fuel-efficient Hondas or Toyotas that we drive for a quarter million miles or so, I tend to spend less on new clothes each year than on good coffee (if you’re from Pittsburgh, you know Mr. Prestogeorge’s coffee; if you’re not, the Steeler Nation is sad on your behalf), our home is well-built but modest and our vacations often involve driving to see our families or other natural wonders.

Upside: well, we’ve never become obsessed about the importance of owning stuff. And the more sophisticated software now available suggests that, given our current rate of investment, we only need to earn portfolio returns of about 6% in order to reach our long-term goals.

And I’m fairly confident that I’ll be able to maintain that pace, even if I am repeatedly stupid along the way.

It’s a nice feeling.

 

[cute fuzzy bunny]

I wonder what he means by "returns of about 6%"? Given his expected rate of inflation of 4% and tax considerations...isnt something less than 2% indicative of either a very deep LBYM or a very large portfolio size?

If he means 6% after taking off the 4% inflation figure...good luck sustaining 10% over the long haul.

 

[Nords]

I wonder what he means by "returns of about 6%"? Given his expected rate of inflation of 4% and tax considerations...isnt something less than 2% indicative of either a very deep LBYM or a very large portfolio size?
If he means 6% after taking off the 4% inflation figure...good luck sustaining 10% over the long haul.

I think he means 6% total - 4% inflation = 2%. David's a good LBYM guy who'd be a real asset to this board.

He's been posting on FundAlarm for several years but he singlehandedly kept Brill's alive long after the spam zombies overwhelmed it. As a communications professor, he's the guy who came up with the phrase "reciprocated diatribes" to refer to our testosterone-soaked shouting matches spirited debates.

 

[JohnEyles]

I think he means 6% total - 4% inflation = 2%.

That's assuming infinite timeframe, no ? Spreadsheet sez 6% ROR with 4% inflation
will support 4% WR *IF* timeframe can be limited to 30 years (WR = 3.5% for 40yrs).
(This assumes of course, that real-return is constant from year to year, which of course
it ain't. It is interesting though, that inflation CAN vary wildly, as long as real-return
remains 2% or above, also wildly optimistic).

 

[jdw_fire]

That's assuming infinite timeframe, no ? Spreadsheet sez 6% ROR with 4% inflation
will support 4% WR *IF* timeframe can be limited to 30 years (WR = 3.5% for 40yrs).

Mr Snowball is in the accumulation phase and just makes the observation

And the more sophisticated software now available suggests that, given our current rate of investment, we only need to earn portfolio returns of about 6% in order to reach our long-term goals.

He didn't say that was the return he was getting

 

[d]

My portfolio is designed to allow me to be stupid

.... a wise man.

 

[bssc]

One of the smart guys who retired from my wife's office is back a work. A couple of years after retirement, he invested in a sure thing from a guy he met at church. Now, he is back at work. I follow the stupid plan and don't invest in things that I don't understand.

 

[haha]

That's assuming infinite timeframe, no ? Spreadsheet sez 6% ROR with 4% inflation
will support 4% WR *IF* timeframe can be limited to 30 years (WR = 3.5% for 40yrs).
(This assumes of course, that real-return is constant from year to year, which of course
it ain't. It is interesting though, that inflation CAN vary wildly, as long as real-return
remains 2% or above, also wildly optimistic).

I don't see what is so wildly optimistic about a real 2% return. You can even have it steady as a gentle breeze. There could be some price volatility, though not much. If you could live on 2.5% you can even ignore the volatility, 'cause you won't have to sell anything. Just buy TIPs. Right now in maturities from very short to above 10 years they offer about 2.5% real. Also you might consider oil and gas (pipeline) MLPs or GPs to the MLPs. These are not fool proof, but some are close and the yields are higher than TIPs. (As they should be. )

Also see the thread on ISM for a step or two down from TIPs in safety, and a step or two up in yield.

Lately we have been strongly rewarded for assuming risk. It is tempting but probably not warranted to extrapolate that forward.

Ha

 

[d]

I follow the stupid plan and don't invest in things that I don't understand.

as do i ... though it severely limits my alternatives ... though sometimes i don't understand that i don't understand ...

 

[JohnEyles]

That's assuming infinite timeframe, no ? Spreadsheet sez 6% ROR with 4% inflation
will support 4% WR *IF* timeframe can be limited to 30 years (WR = 3.5% for 40yrs).
... inflation CAN vary wildly, as long as real-return remains 2% or above, also wildly optimistic).

I don't see what is so wildly optimistic about a real 2% return. You can even have it steady as a gentle breeze. There could be some price volatility, though not much. If you could live on 2.5% you can even ignore the volatility, 'cause you won't have to sell anything. Just buy TIPs.

Good point. It's been discussed here before, I think. If you're willing to live on 3.5% WR,
(or feel comfortable with 30 years, and 4% WR) and give up any chance of doing better
or leaving an inheritance, an all-TIPS portfolio would do the trick, at least according to my
calculations. ( Or as you say, if you can live on 2.5% WR you can live forever, and leave
a nice inheritance when you die !).

 

[Ed_The_Gypsy]

...he invested in a sure thing from a guy he met at church.

Trivia question:
Does anyone remember what Bob Heinlein had to say about churchy people?

 

[larry]

Trivia question:
Does anyone remember what Bob Heinlein had to say about churchy people?

"to cash through dianetics?" or is that "to infinity and beyond?"

 

[cute fuzzy bunny]

Churchy la femme...