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I know you've been saying this often, so I backtested a portfolio of 50% large cap ( SPY) and 50% small cap ( IWM)
a $1,000,000 portfolio in 2000 would be worth inflation adjusted $1,800,000 in 2015
What say you?
I say that given the tumult and gyration of those 15 years, to have one's holdings less-than-double over 15 years, is a rather paltry showing. And keep in mind, that 2013 and 2014 were years of handsome gains in the markets, much augmenting the cumulative amount over those 15 years. exclude them, and suddenly the comparison is much worse.
And even that factor of 1.8 over 15 years looks a bit suspect to me (see below).
Quote:
Originally Posted by DaveinMtAiry
For me I will maintain a year's worth of living expenses in cash to draw from in a down market. If it is a prolonged down market I'll then tap my bond holdings. This should buy 4-5 years easily, plenty of time to see a recovery in the stock market.
That's good point. What if one holds 10 years' worth of expenses in a stable basket of funds? 100 years' worth of expenses? Ought one then to cease hand-wringing over stock market gyrations?
Quote:
Originally Posted by FREE866
good Lord..you are wrong mathjak--can you just admit that??
a 50% large cap and 50% small cap portfolio went from $1,000,000 in 2000 to $1,800,000 INFLATION ADJUSTED
what aren't you getting?
I can't purport to speak for Mathjak, nor am I aiming to berate you, Free866... but are you sure that your numbers are inflation-adjusted? Over 15 years, inflation resulted in about 40% loss of purchasing-power. So, you're saying that your 50/50 mix went from $1M to $2.6M, in raw numerical dollars? Sorry, but I just don't see that.
Ultimately, I revert to something like Dave's point. To rephrase, we dearly wish to avoid spending-down from an account that's highly fluctuating, let alone declining. Bonds and CDs naturally ought to comprise the "spending account", but they themselves lag over long periods of time. A better scheme is warranted. Could that be the "Permanent Portfolio"? Maybe. Let's suppose so. But then, this Permanent Portfolio fits with the portion of one's investments, that one conceivably ever intends to spend. For money held in with infinite-duration intent, a higher weighting towards equities is more attractive - even if it does take 13 years to recover.
in the end it is only all about our personal choices and outcomes .
but in forums when we discuss outcomes and strategies there needs to be a uniform measure of comparisons .
nothing in the financial world would ever be true for everyone , so once we start trying to base statistics on individual outcomes there is no stat that ever would serve as a reference point nor guide .
if we went by personal outcomes we wouldn't need stocks based on 2000-2015 since long term treasuries beat the broad index's .
if you look at all those popular portfolio's on that website i posted they all use broad based index funds and generally either total market or s&p 500 as the core.
by the way the butterfly is 20% s&p 500 and 20% small cap so there are popular models that do that , and it had much smaller swings and less losing years than most similar conventional models.
so retirees do have an assortment of diversified all weather portfolio's that don't bet the ranch on just prosperity and low inflation /low rates
That's good point. What if one holds 10 years' worth of expenses in a stable basket of funds? 100 years' worth of expenses? Ought one then to cease hand-wringing over stock market gyrations?
I can't purport to speak for Mathjak, nor am I aiming to berate you, Free866... but are you sure that your numbers are inflation-adjusted? Over 15 years, inflation resulted in about 40% loss of purchasing-power. So, you're saying that your 50/50 mix went from $1M to $2.6M? Sorry, but I just don't see that.
but we were discussing portfolio's for retirees and the fact they need a 2% real return over the first 15 years to not take a pay cut .
i don't know any retirees 100% equities with 50% in small cap , do you ?
that is a good model for the accumulation stage .
we all like to think the equities side of our portfolio can easily do that 2% real return , but the fact is it already failed to do it using the typical total market fund or s&p 500 funds that most models of the popular portfolio's use and that was my point . not that it can't be done but that as a rule you can't count on it all the time .
especially when paying your bills and lifestyle are betting the ranch on it . i can't stress enough that the decumulation stage is very different , all the up years mean little as your balance going forward will always be what is left after the cycle completes and the number of years it takes to rebuild back .
the success of your withdrawal rate hinges on that balance and that recovery time being better than the worst case scenarios we have had to date . no one wants to take a pay cut , not when working and not in retirement
I say that given the tumult and gyration of those 15 years, to have one's holdings less-than-double over 15 years, is a rather paltry showing. And keep in mind, that 2013 and 2014 were years of handsome gains in the markets, much augmenting the cumulative amount over those 15 years. exclude them, and suddenly the comparison is much worse.
And even that factor of 1.8 over 15 years looks a bit suspect to me (see below).
That's good point. What if one holds 10 years' worth of expenses in a stable basket of funds? 100 years' worth of expenses? Ought one then to cease hand-wringing over stock market gyrations?
I can't purport to speak for Mathjak, nor am I aiming to berate you, Free866... but are you sure that your numbers are inflation-adjusted? Over 15 years, inflation resulted in about 40% loss of purchasing-power. So, you're saying that your 50/50 mix went from $1M to $2.6M, in raw numerical dollars? Sorry, but I just don't see that.
Ultimately, I revert to something like Dave's point. To rephrase, we dearly wish to avoid spending-down from an account that's highly fluctuating, let alone declining. Bonds and CDs naturally ought to comprise the "spending account", but they themselves lag over long periods of time. A better scheme is warranted. Could that be the "Permanent Portfolio"? Maybe. Let's suppose so. But then, this Permanent Portfolio fits with the portion of one's investments, that one conceivably ever intends to spend. For money held in with infinite-duration intent, a higher weighting towards equities is more attractive - even if it does take 13 years to recover.
1. It's a fictional portfolio. 2. No one recommends having half your assets in small caps. 3. It's cherrypicking scenarios with hindsight seeing that certain indices fared better through the period than others. 4. The higher implied volatility isn't factored into the results since withdrawal percentage rates will have to rise sharply in the downturns.
i have 22% large cap and 20% mid cap and small cap for a total equity side of 42%
I'm 45 % large cap 40% small cap 15% international and ~ 2 years cash on side
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