Am I looking at this the right way?
I am trying to figure out an estimated fluctuation range of return on my investment portfolio. Assume that I have a 80% stock and 20% bond allocation. I used the annual return from the US stock market from 1928 to 2011 and the annual return on US bonds from 1928 to 2011. So my equation would look like this: (Annual Stock Return for Year A)(80%) + (Annual Bond Return for Year A)(20%)= X%. I then reviewed the combined annual returns between 1928 and 2011. The worst year resulted in a -36% return and the best year resulted in a 43% return.
Assume I have $500,000 in my investment portfolio. Assume that I do not want to take more than 4% of my investment portfolio to use as living expenses. Assume that I plan to FIRE within one year. Does this mean that I would need to be prepared to live on any amount between $12,800 and $28,600 based on an 80 percent stock and 20 percent bond investment portfolio allocation? So if I retired on a day when the stock and bond market took a major turn for the better or for the worse, would my investment income vary by this amount, somewhere between $12,800 and 28,600?
Thank you for your insight.
I am trying to figure out an estimated fluctuation range of return on my investment portfolio. Assume that I have a 80% stock and 20% bond allocation. I used the annual return from the US stock market from 1928 to 2011 and the annual return on US bonds from 1928 to 2011. So my equation would look like this: (Annual Stock Return for Year A)(80%) + (Annual Bond Return for Year A)(20%)= X%. I then reviewed the combined annual returns between 1928 and 2011. The worst year resulted in a -36% return and the best year resulted in a 43% return.
Assume I have $500,000 in my investment portfolio. Assume that I do not want to take more than 4% of my investment portfolio to use as living expenses. Assume that I plan to FIRE within one year. Does this mean that I would need to be prepared to live on any amount between $12,800 and $28,600 based on an 80 percent stock and 20 percent bond investment portfolio allocation? So if I retired on a day when the stock and bond market took a major turn for the better or for the worse, would my investment income vary by this amount, somewhere between $12,800 and 28,600?
Thank you for your insight.