How Do You Withdraw?

[2177V]

These descriptions are qualitative. What quantitative criteria do you use?

If you are talking about some "quantitative criteria" to justify 5 years of my liquidity fund that will hold me over during a bear market plus recovery time, please click the following link:

https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

There were only 3 bear market's "duration time" plus "recovery time" from 30 total bear markets since 1946 that exceeded 60 months.

However, I am OK with this decision because having more than 5 years would lower the overall performance of my portfolio.

Statistically I "should" survive 27 bear markets out of 30. This translate to 90% safety net and only 10% risk of a financial loss. Everybody is different when it comes to risk.

 

[Huston55]

These descriptions are qualitative. What quantitative criteria do you use?

For example, we keep 4+/- yrs in ‘cash’ (CDs/short term bond ladder) for the same reason you keep VFSTX. If, at the end of the year, the S&P500 is flat or up for the year, I consume the current rung for the coming year’s expsenses & sell stock MF to buy/add an outyear rung. If, at the end of the year, the S&P500 is down for the year, I consume the current rung for the coming year’s expenses but, don’t buy/add an outyear rung.

I am retired and I have a diversified portfolio of stocks and bonds with a Vanguard IRA I have one bond fund VFSTX (4 star morningstar) which is low performance but low volatility that I use to withdraw "one entire year of living expense early in the year". I do not like to withdraw monthly because the value of VFSTX may go up and down slightly. I wait until the value of VFSTX is relatively high and then I withdraw one entire year so I do not second guess myself.

I have about 5 years of living expenses in VFSTX because rest of my portfolio is designed for performance. This means the value of my performance portion of my portfolio goes up and down significantly while VFSTX is fairly stable and goes up and down very slightly to ensure some liquidity. My experience: During a crash or bear market, an investor loses liquidity because you have to provide time for your portfolio to recover. This is why liquidity is important to me so I divided my portfolio is a performance portion (stock) and a liquidity portion (VFSTX).

When the market is high, I sell some of my stock shares in the performance portion to buy VFSTX to lock in my gains and to maintain the 5 years of living expenses in reserve. When the market is low, I live off VFSTX until the market recovers because I have 5 years of living expenses to hold me over.

I picked 5 years because "most" bear markets and crashes recovers within 5 years and having more than 5 years in VFSTX affects my overall performance. 5 years is my comfort level to maintain sufficient liquidity while other people may want more or less liquidity depending on how conservative or how aggressive you want to be.

If you are talking about some "quantitative criteria" to justify 5 years of my liquidity fund that will hold me over during a bear market plus recovery time, please click the following link:

https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

There were only 3 bear market's "duration time" plus "recovery time" from 30 total bear markets since 1946 that exceeded 60 months.

However, I am OK with this decision because having more than 5 years would lower the overall performance of my portfolio.

Statistically I "should" survive 27 bear markets out of 30. This translate to 90% safety and only 10% risk of a financial loss.

Sorry, I wasn’t clear enough. I meant what quantitative criteria do you use for when the market is HIGH and when it’s LOW. I included an example of the quantitative criteria we use (S&P500).

 

[2177V]

Sorry, I wasn’t clear enough. I meant what quantitative criteria do you use for when the marke is HIGH and when it’s LOW. I included an example of the quantitative criteria we use (S&P500).

For stocks....i like to use the 90 days EMA. This is because stocks fluctuates more and the EMA puts more weight on recent data.

For bonds I like to use the 180 days SMA. This is because bonds do not flucturates as much as stocks.

For more info on EMA and SMA.....See

https://www.investopedia.com/terms/e/ema.asp

However, lately I have been putting more weight using the interactive graphs at Morningstar.com. My opinion: I consider Morningstar the "Consumers Reports" for investors.

The interactive graphs gives me a better signal on when to sell or buy...or when the S&P500 is relatively high or low. I do admit that looking at the interactive graphs can be more qualitative than quantitative.

However, once you start using the interactive graphs on Morningstar and comparing the stock or bond prices to other indexes such as the S&P500, some of my buy and sell decisions become very obvious.

When I am confronted with a grey area decision, I attempt to think strategically and use my experience. My experience indicates more regrets not buying and less regrets after selling.