40+% decline in equity and fixed income returns

[bigfoot]

I cannot compute this decline in any figures in the FIRECalc results, specifically the Excel spreadsheet and spreadsheet functions in the Investigate tab. Can anyone show me where this decline appears in actual figures?

 

[bigfoot]

How do I get a reply

My question has to do with the big bold box when one loads FIRECalc 3.0. It says that the 40+% decline for 2008 has been added to the calcs. However, I cannot compute this loss when the spreadsheets are output. How do I get someone to reply to my thread? I'm a little new to the site and don't know how to get a reply.

 

[W2R]

I don't know the answer to your question, but I just wanted to reply so that you know it is being read!

I am pretty sure those who know more about this than I, will reply. It may take a day or two.

 

[RonBoyd]

How do I get someone to reply to my thread? I'm a little new to the site and don't know how to get a reply.

Actually, if I read this correctly, it has been read 89 times. You seem to have hit the jackpot. Now everyone will be holding their breath waiting for the answer.

 

[REWahoo]

How do I get someone to reply to my thread? I'm a little new to the site and don't know how to get a reply.

You might try sending a PM to Dory36, the guy who built FIRECalc. Not sure you'll get a response but it's worth a try.

 

[ERD50]

I saw it, but didn't really understand the question. I figured maybe someone else would give it a try.

Maybe you could try to re-state the Q. If I am reading it right, there is nothing to "look for" or "compute", it is just that that newer data is reflected in what you get as an answer.

-ERD50

 

[bigfoot]

Here's what I'm trying to confirm: That the values in a FIRECalc run actually shows a 40+% decline for 2008. How I arrived at this question is that I ran FIRECalc for a 30-year period with 1979 beginning the last 30-year period. Then looking at the values between the next to last and last years - which should be for 2008 - the values usually show only about a 25+% decline. The values I'm referring to are those in the Excel spreadsheet which is an option in the Investigate tab before running FIRECalc. If the decline is actually input as 40+%, I cannot find it refected in actual values.

 

[ERD50]

Here's what I'm trying to confirm: That the values in a FIRECalc run actually shows a 40+% decline for 2008. How I arrived at this question is that I ran FIRECalc for a 30-year period with 1979 beginning the last 30-year period. Then looking at the values between the next to last and last years - which should be for 2008 - the values usually show only about a 25+% decline. The values I'm referring to are those in the Excel spreadsheet which is an option in the Investigate tab before running FIRECalc. If the decline is actually input as 40+%, I cannot find it refected in actual values.

OK, I'm *guessing* the wording at FireCalc is a little vague. I think the 40% refers to equities, and a lesser number to fixed - that seems more inline with reality.

So, assuming you had a blend of equities and fixed, a 25% decline would make sense. You could validate that by setting your portfolio to 100% equities, and re-running.

Does that makes sense?

-ERD50

 

[bigfoot]

The bold box on the FIRECalc first screen says "...40+% decline in equity and fixed income returns...2008," so I assumed that decline was input for both equity and fixed income. I did run it again with `00% equities and got about a 35% decline, which is closer to the stated 40+% decline. Is that close enough to confirm that the 40+% decline for 2008 is actually included? I care a lot about this cuz plan to retire next year - after taking a terrible beating on my portfolio over past year or so. I wonder how to get a FIRECacl run showing taking a terrible beating in first year or so, and then maybe a ~+35% gain in a later year, and then back to averages after that? Seems like that would be the most likely outcome going forward.

 

[bigfoot]

I meant to state "I did run it again with 100% equities..."

 

[REWahoo]

I wonder how to get a FIRECacl run showing taking a terrible beating in first year or so, and then maybe a ~+35% gain in a later year, and then back to averages after that? Seems like that would be the most likely outcome going forward.

FIRECalc uses actual history from 1871 through 2008. To my knowledge there is no way to plug in "what if" market return numbers to get it to do what you're asking.

Also, since it does go all the way back to 1871 it includes the Great Depression years of the early 30's which performed in a similar manner to what you are proposing. I'm thinking if you get a 100% success rate, you've actually run the test you're looking for.

 

[bigfoot]

Regarding the second part of my issue, ie, how to model going forward in current economic conditions, I ran FIRECalc and found that the 30-year series with the worst first year is beginning in 1931, and the worst last year is beginning 1903. So it appears the best to do going forward is to look at the 30-year period beginning in 1931. Overall, I guess the magic 100% success result overshadows all other little details.

 

[youbet]

Regarding the second part of my issue, ie, how to model going forward in current economic conditions, I ran FIRECalc and found that the 30-year series with the worst first year is beginning in 1931, and the worst last year is beginning 1903. So it appears the best to do going forward is to look at the 30-year period beginning in 1931. Overall, I guess the magic 100% success result overshadows all other little details.

FireCalc is not a tool for "modeling forward." If you want to assume that the 30 year run beginning in 1931 would be predictive of a 30 year run beginning in 2009, have at it. But I don't think there is any basis for making that assumption.

FireCalc is what it is..... a back-testing tool. Based on years of reading posts on this board, I think many (maybe me?) misunderstand what it's doing.

In regard to "The bold box on the FIRECalc first screen says "...40+% decline in equity and fixed income returns...2008," I think the importance of the inclusion of 2008 data is being overstated. It impacts only the last year of the last run.

Congrats on using the spreadsheet output! It's the most effective way to use FireCalc. Crank the numbers through the usual statistical analysis tools in Excel and you'll learn a lot. It took me a long time to come to grips with the fact that historical outcomes vary so widely based on the year you start. Many here like to assume "average" outcomes are typical when in fact getting an "average" outcome is quite rare. You're much more likely to wind up well above or below average, again depending on the year you start.

 

[F-One]

From Dory 36 ....

... in the thread http://www.early-retirement.org/forums/f36/firecalc-updated-for-q4-2008-a-41894.html Dory says

By the way... the only updated data I have is the "standard" market and interest data. So the "mixed portfolio" will not include the new data. That portfolio data was generously contributed by Bob Clyatt, the author of Work Less Live More, but that was a one time contribution, and I have no practical and accurate way to extend it to later years.

I believe only with the selection of Total Market under the Your Portfolio tab will the 40% decline in equities be calculated.