The bucket stress test thread thats active right now got me thinking. I wonder what a back test of my current portfolio would look like if I include withdrawals and include rebalancing every year. I started with a hypothetical $1,000,000 portfolio. I withdrew 4% the first year and then increased my withdrawals 2.5% every year after that. I plan to give myself a 2.5% raise every year once I retire (which is in Jan).
I used 2004-present as the time frame since that's the data available at Morningstar. Here are the results:
SP500...7.3%
Wellington...8.3%
My 60/40 portfolio...9.0%
My 60/40 portfolio incl rebalancing yearly....9.5%
Worst year (2008)
SP500...-37.1%
Wellington...-22.2%
My 60/40 Port...-27.7%
My 60/40 port rebalanced...-20.5%
Lowest end of year balance
Sp500...$733,290
Wellington...$956,111
My 60/40 port...$955.964
My 60/40 port rebalanced...$984,591
I was surprised that rebalancing made that big a difference and I was especially happy to see that it also drastically reduced draw down in 2008.
My portfolio is a 60/40 mix of low expense index and actively managed funds.
I used 2004-present as the time frame since that's the data available at Morningstar. Here are the results:
SP500...7.3%
Wellington...8.3%
My 60/40 portfolio...9.0%
My 60/40 portfolio incl rebalancing yearly....9.5%
Worst year (2008)
SP500...-37.1%
Wellington...-22.2%
My 60/40 Port...-27.7%
My 60/40 port rebalanced...-20.5%
Lowest end of year balance
Sp500...$733,290
Wellington...$956,111
My 60/40 port...$955.964
My 60/40 port rebalanced...$984,591
I was surprised that rebalancing made that big a difference and I was especially happy to see that it also drastically reduced draw down in 2008.
My portfolio is a 60/40 mix of low expense index and actively managed funds.
