haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
a temporary drop in NAV or share price, no matter how dramatic, doesn't mean squat for ROI until you redeem. if you have to redeem, all bets are off. buy and hold is negated by buy and redeem in the short term.
if doing a partial reedemption, more shares means more time til your number of shares goes to zero.
if you are in a position to have to redeem now and at a fast clip, vs wait for a recovery, then an agressive stock AA is the wrong place to be.
nobody is happy about the ferocious bear, but it does not seem to me to be a valid reason to dump "buy and hold" as a LONG TERM investment strategy.
go ahead...fire away...
I think you are right on. Trying to build a retirement fund is really different from living from that fund once you retire. It is pschologically different, and mathematically different. With more experience, we may find that trying to fund retirement with a high stock allocation is very risky, unless the retiree can completely get by on annuity type income such as pension and SS if necessary. The Dow is a pretty staid collection of stocks, and a few days ago it had lost over 50% in just a tad over a year.
Even if it comes back pretty well, assuming a 100% stock allocation(not that many would try this, but as an illustration) and assuming a starting WR of 4%, we now are withdrawing at 8% pa, or 8/12 =.67% per month. So if the market essentially goes nowhere for a year after the 50% break, our retiree will be down to $100,000,000-500,000-40,000, leaving her with only $460,000., assuming she can cut back and not take the inflation adjustment. If this market level is maintained, with unpredictible ups and downs, or just steady, she will be down another $40,000 after the second year, to $420,000. Needing $40,000 per year, and sooner or later running up against inflation adjustments that will have to be made if her lifestyle is not to be seriously damaged. Would she retire with $420,000?
I doubt that she would.
Ha