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Old 01-08-2022, 12:44 PM   #61
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And it is possible for TIPS returns to still beat inflation in some cases, per the link above "Although past performance is no guarantee of future results, note that in the 12 months ending November 30, 2021, the Bloomberg U.S. TIPS Index delivered a total return of 6.8%, even though the starting yield was negative." The same can't be said for 1% or less CDs, and the last time I bought some of those I didn't see any warning screens.
Yea I think if that "warning" message starts telling you that real returns are -2.6% instead of -1.3% then you can have some profit in real returns.

It does not look that rates will be going down but one never knows. I agree TIPS are still better than CDs.
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Old 01-08-2022, 01:30 PM   #62
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Edit;I think that worrying about real returns when evaluating an investment is a waste of time. What matters is the return on the investment relative to alternative investments. Given all the tradeoffs and uncertainties, which of the them is the best choice?

Looking at portfolio real return is a spectator sport. Not uninteresting, but not too useful for portfolio design. (Edit: well, maybe not too useful as the sole criterion for portfolio design.) I am often amused by posts here where the poster is planning to put a single-digit percentage of a portfolio into I-Bonds or TIPS and then starts obsessing about real rate of return. There is nothing that can provide meaningful inflation protection at 5% of a portfolio.
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Old 01-08-2022, 03:38 PM   #63
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Edit;I think that worrying about real returns when evaluating an investment is a waste of time. What matters is the return on the investment relative to alternative investments. Given all the tradeoffs and uncertainties, which of the them is the best choice?

Looking at portfolio real return is a spectator sport. Not uninteresting, but not too useful for portfolio design. (Edit: well, maybe not too useful as the sole criterion for portfolio design.) I am often amused by posts here where the poster is planning to put a single-digit percentage of a portfolio into I-Bonds or TIPS and then starts obsessing about real rate of return. There is nothing that can provide meaningful inflation protection at 5% of a portfolio.
I'm so glad we amuse you from time to time. Check back often. I think it's about to get amusing but YMMV.
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Old 01-08-2022, 05:17 PM   #64
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....I am often amused by posts here where the poster is planning to put a single-digit percentage of a portfolio into I-Bonds or TIPS and then starts obsessing about real rate of return. There is nothing that can provide meaningful inflation protection at 5% of a portfolio.
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I'm so glad we amuse you from time to time. Check back often. I think it's about to get amusing but YMMV.
I actually agree with Old Shooter on this one... a 5% difference in AA isn't going to make enough of a difference to bother wasting bits on... like 55/45 vs 60/40... it doesn't matter... flip a coin.
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Old 01-10-2022, 04:10 AM   #65
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I actually agree with Old Shooter on this one... a 5% difference in AA isn't going to make enough of a difference to bother wasting bits on... like 55/45 vs 60/40... it doesn't matter... flip a coin.
Heh, heh, I actually agree with Old Shooter too! 5% in AA ain't much difference. YMMV
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Old 01-14-2022, 05:58 PM   #66
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Seems the OP left this thread 2 pages ago. However, if you work hard for your money why not keep it working for you? If you have "won the game", then seems you have ability to ride out bumps in the road. I guess it depends on estate goals. I need to figure out how not to corrupt my kids, but I'm certainly not backing off AA when I get to the point where I don't know how to spend it all.
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Old 01-14-2022, 06:09 PM   #67
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Actually nothing really matters after establishing a basic plan. Series I bonds - Insignificant due to minimums. Another thread on resort fees - miniscule. I guess once you have it figured out the rest is irrelevant. Time for a hiatus. See ya later.
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Old 01-15-2022, 10:54 AM   #68
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Seems the OP left this thread 2 pages ago. However, if you work hard for your money why not keep it working for you? If you have "won the game", then seems you have ability to ride out bumps in the road. I guess it depends on estate goals. I need to figure out how not to corrupt my kids, but I'm certainly not backing off AA when I get to the point where I don't know how to spend it all.
"Winning the game" means you don't HAVE to take risk. So why risk a good chunk of your life savings if you don't have to? Unless you want to leave "more" to your heirs or "more" to charities.

Just like Vegas - some people do actually walk away from the tables after a big win. Others want to "let it ride" and keep betting until they lose part or all of what they've won.

Personally, I'm seeing enough HUGE warning signs in this market to consider getting out entirely, or dialing our already small (~25%) equity position back significantly. We're not investing for heirs or legacy, and I suspect 2022 is not going to be a very good year for US markets. This may actually be the year International finally outperforms US. And Value outperforms Growth, which I think is going to continue to get hammered. Time will tell, but 2022 looks like it will be very bumpy at best, and we could easily see a 30+% "repricing" - if not more.
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Old 01-15-2022, 11:14 AM   #69
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"Winning the game" means you don't HAVE to take risk. So why risk a good chunk of your life savings if you don't have to? Unless you want to leave "more" to your heirs or "more" to charities.
Because for some people "Winning the game" means they can afford to be 90%+ in equities and withstand even 50% lengthy decline without any problems.
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Old 01-15-2022, 01:13 PM   #70
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Because for some people "Winning the game" means they can afford to be 90%+ in equities and withstand even 50% lengthy decline without any problems.
I don't believe there are TRULY many people who would be psychologically comfortable watching their net worth drop 45% (50% of 90%) or more, regardless of whether they can pay the bills during that time or not. I know I sure wouldn't be.

Easy to hypothesize about people's willingness and ability to withstand a prolonged 30-50% or more drop. But as someone who's lived through a crash or two remember all too well how so many "go go" stock advocates (here and elsewhere) were ready to jump off the nearest tall building when stocks did crash hard.

You might want to go back and read some posts during the most recent big drops. Lots of wailing and gnashing of teeth, with lots of "how could I have been so foolish?" posts..just sayin.
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Old 01-15-2022, 02:36 PM   #71
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I find this an interesting discussion and something DH and I have given a lot of thought to. Our portfolio matches our risk tolerance, which is pretty low. We focused more on low overhead and a defensive portfolio against market crashes and high inflation than increasing our inflation adjusted net worth in our retirement plan. Our goal was a 0% real return, but our plan works for us living to over 100 at even -1% or less real return. For us it is all about diminishing marginal utility. If we had a much larger portfolio, we probably wouldn't change our lifestyle all that much as we try to have a low environmental footprint. But a much lower portfolio would impact my sense of financial security. I like knowing that even if we passed and one of our adult kids had an accident or disability, they wouldn't have to work or worry about money. At least if they lived below their means, like we do now. And they both have been good about that, one even more than us.

Right now our annual expenses subject to inflation are about the same as Social Security, which is inflation adjusted, plus we have a good chunk of our portfolio in TIPS ladders (bought when yields were positive) returning 7 - 10% total (rate + inflation factor). We decided recently to up our 401K allocations to TIPS funds because even at 5 - 6% returns those still work for our retirement plan, plus we both feel inflation is not likely to ease up anytime soon.
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Old 01-16-2022, 02:39 PM   #72
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Originally Posted by 24601NoMore View Post
"Winning the game" means you don't HAVE to take risk. So why risk a good chunk of your life savings if you don't have to? Unless you want to leave "more" to your heirs or "more" to charities.

Just like Vegas - some people do actually walk away from the tables after a big win. Others want to "let it ride" and keep betting until they lose part or all of what they've won.

Personally, I'm seeing enough HUGE warning signs in this market to consider getting out entirely, or dialing our already small (~25%) equity position back significantly. We're not investing for heirs or legacy, and I suspect 2022 is not going to be a very good year for US markets. This may actually be the year International finally outperforms US. And Value outperforms Growth, which I think is going to continue to get hammered. Time will tell, but 2022 looks like it will be very bumpy at best, and we could easily see a 30+% "repricing" - if not more.
Yes, why RISK when you don't need the next win to survive to the end? I don't spend the money I have now with low risk. What would I do if I won MORE? YMMV
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Old 01-16-2022, 02:56 PM   #73
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Yes, why RISK when you don't need the next win to survive to the end? I don't spend the money I have now with low risk. What would I do if I won MORE? YMMV
There is a sense of freedom when you can detach yourself from what the market does. It feels good to not have to depend on something unknowable, like stocks returning x pct the next 10 years.
I actually feel a sense of pride that I won the game with no help from the market.
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Old 01-16-2022, 02:57 PM   #74
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Yes, why RISK when you don't need the next win to survive to the end? I don't spend the money I have now with low risk. What would I do if I won MORE? YMMV
I do it because I don't think the risk is as high as people fear.

And it makes life interesting to stay engaged.

Of course, I do not go gunho like the youngsters who put it all on a few stocks. One has to choose the right level of risk/reward for himself.
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Old 01-16-2022, 03:34 PM   #75
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Feeling very pessimistic a few years ago, I changed my AA to 25% equities, 50% bonds and 25% cash. Sounds insanely conservative, right?

But when I input all my particulars into FI Calc, the success rate is 97.6%, even if I DOUBLE my spending and increase that with inflation. I don't have any heirs to think about, so what would be the logical argument for increasing my equity allocation and volatility?

Thanks for the help.


No bequests so $0 at death is success.

Real rate of return which must be exceeded to arrive at $0 at death:

= RATE((AgeDeath - AgeNow), WithdrawalRate, -CapitalNow, CapitalDeath)

Example, normalising CapitalNow to 1:

= RATE((97 - 67), 2%, -1, 0)
= -3.023%
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Old 01-16-2022, 03:57 PM   #76
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There is a sense of freedom when you can detach yourself from what the market does. It feels good to not have to depend on something unknowable, like stocks returning x pct the next 10 years.
I actually feel a sense of pride that I won the game with no help from the market.
Full disclosure: The market - or more precisely, my Megacorp stock was a big factor in taking me to Financial Independence at age 51. It had been in the doldrums for quite some time (all the while, I was socking it away due to Megacorp "giving" it to me as my 401(k) match) and then it "exploded" shortly before my pension/health insurance vested. I've often said - and actually kind of believe it - it's better to be lucky than good - especially when it comes to investments.

I do still participate in the market but at much lower levels than most here (30 to 35% most of the time.) YMMV
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Old 01-16-2022, 04:00 PM   #77
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I do it because I don't think the risk is as high as people fear.

And it makes life interesting to stay engaged.

Of course, I do not go gunho like the youngsters who put it all on a few stocks. One has to choose the right level of risk/reward for himself.
Heh, heh, if I want "interesting" I could go skydiving. Think I'll stay inside the perfectly good airplane and keep my AA at 35% for a while. No criticism of anyone else's AA, but mine seems to work well for me though YMMV.
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