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Old 01-03-2023, 11:57 AM
 
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You can only do it in real time ……if 5 years in you are not seeing 2-3% real returns a red flag should go up .. by 8 years in a cut in draw would be in order.

Even portfolios like the golden butterfly or the permanent portfolio, or even ray dalios all weather can’t be back tested as these assets did not exist or if they did the data isn’t accurate .


All back testing is good for is determining what math caused the failures….then the assets don’t matter since it can be any assets you own that need that 2-3% real returns to average out the first 15 years for 4% to hold.

That is why I say the past only gives us the math for the time frames that failed to hold .

Now it’s up to us to monitor it going forward.

This stuff is just to over thought …

Retirement investing should be simple .

If I ever re did things I would just go with 80% Wellesley and 20% gold

Last edited by mathjak107; 01-03-2023 at 12:33 PM..
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Old 01-03-2023, 12:05 PM
 
Location: Sputnik Planitia
7,826 posts, read 11,715,734 times
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Quote:
Originally Posted by mathjak107 View Post
You can only do it in real time ……if 5 years in you are not seeing 2-3% real returns a red flag should go up .. by 8 years in a cut in draw would be in order.
thanks, yeah, this is a good strategy. I bought into all the hype put out by the brokerages and all over bogleheads that International diversification is required. I diversified into these funds over 5 years ago and they have performed horribly up until now.

The so called International outperformance due to them being cheap - well, I am still waiting for it, supposed to be anyday now...

Europe is in crisis - political and in terms of the economy - ravaged by inflation and crazy regulations, the Emerging markets have too much debt, Japan - well, it's been dead for 40 years, I think Canada looked promising but they have a huge debt bubble (housing) that is showing cracks etc. etc. The US still seems like the most solid boat in a turbulent ocean.
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Old 01-03-2023, 12:32 PM
 
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Originally Posted by k374 View Post
thanks, yeah, this is a good strategy. I bought into all the hype put out by the brokerages and all over bogleheads that International diversification is required. I diversified into these funds over 5 years ago and they have performed horribly up until now.

The so called International outperformance due to them being cheap - well, I am still waiting for it, supposed to be anyday now...

Europe is in crisis - political and in terms of the economy - ravaged by inflation and crazy regulations, the Emerging markets have too much debt, Japan - well, it's been dead for 40 years, I think Canada looked promising but they have a huge debt bubble (housing) that is showing cracks etc. etc. The US still seems like the most solid boat in a turbulent ocean.
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Old 01-03-2023, 12:39 PM
 
Location: Victory Mansions, Airstrip One
6,648 posts, read 4,940,679 times
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Originally Posted by k374 View Post
I bought into all the hype put out by the brokerages and all over bogleheads that International diversification is required.
John Bogle always said he felt it's not necessary for U.S. investors to own international equities.

The Bogleheads differ from the man Bogle on a few different fronts.
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Old 01-03-2023, 04:44 PM
 
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If I wanted to play a weak dollar I would use gold ..

Using international stocks has too many variables , their markets and then the dollar …it is very undependable as far as counting on what it will do
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Old 01-05-2023, 09:33 AM
 
Location: Sputnik Planitia
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One thing of concern I noticed is that the 1966-1995 cycle, the first 10 years had an average dividend yield of 3.53%

Today it is 1.5%, wouldn't that affect the 4%?
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Old 01-05-2023, 09:44 AM
 
105,740 posts, read 107,717,837 times
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Originally Posted by k374 View Post
One thing of concern I noticed is that the 1966-1995 cycle, the first 10 years had an average dividend yield of 3.53%

Today it is 1.5%, wouldn't that affect the 4%?
No , because it is the combination of market returns , rates , inflation and most importantly the sequence of those coming in.

The 1966 group failed because the first 15 years they saw

Minus .13 on stocks ,

1.08% on bonds

Inflation 5.38%

So that is what caused them to fail and what 4% swr is based on

Rebalanced 60/40 returned .84% over 15 years.

The 30 year period was closed to normal

Last edited by mathjak107; 01-05-2023 at 10:19 AM..
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Old 01-05-2023, 12:45 PM
 
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What’s interesting is even from 1907 the 30 year periods had a reversion to the mean and all even in the worst of times were pretty normal looking .

But when spending down it’s the first 15 years that determines your failing .

30 year outcomes , are fairly decent

1907 stocks returned 7.77% -- bonds 4.250-- rebalanced portfolio 7.02- - inflation 1.64--

1929 stocks 8.19% - - bonds 1.74%-- rebalanced portfolio 6.28-- inflation 1.69--

1937 stocks 10.12 - - bonds 2.13 - rebalanced portfolio -- 7.24 inflation-- 2.82

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were: stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%
..

Here are the first 15 years that caused the failures


1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%
.

1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%
.

1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%
.

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%


This is why we can never use average returns ….the averages over 30 years show you would have done well , yet these were the worst time frames on record.

For 4% to fail you would need less then a 1% real return for 15 years
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Old 01-05-2023, 05:02 PM
 
Location: moved
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Originally Posted by k374 View Post
... I bought into all the hype put out by the brokerages and all over bogleheads that International diversification is required. I diversified into these funds over 5 years ago and they have performed horribly up until now.

The so called International outperformance due to them being cheap - well, I am still waiting for it, supposed to be anyday now...
Foreign equities have broadly been in a bear-market since 2007. Back then, the US dollar was weak - at what turns out to have been its nadir. The dollar rallied as consequence of the Great Recession, and has been strong ever since. This works against foreign holdings for US-based investors.

Currencies aside, most of the rest of the world simply didn't recover as sprightly as did the US, from the 2007-2009 bear market. Europe has been stumbling from one crisis to another. First it was sovereign debt and austerity. Then Greece threatening to crash out of the Euro (remember that?). Then Brexit. Now the energy crisis.

Every year, knowledgeable and sincere professionals keep articulating the need for international diversification. And every year they've been wrong! Vanguard publishes a quarterly newsletter with their forecasts for cumulative annual growth rate over the coming decade. Quarter after quarter, now for at least the past 4-5 years that I've been watching their newsletters, they have predicted foreign equities outstripping domestic ones. And every year, they've been wrong.

This is why I keep reiterating, that these 4% rules or other "rules" about retirement planning, need to consider not just the allocation between stocks-bonds-gold-cash-etc., but the composition within each category. For example, real estate might be a category to consider, via REITs or otherwise. Well, I can say from personal experience that the performance of real estate was (and probably will be) very different between Ohio and California. The same holds for US vs. foreign. And for that matter, S&P 500 vs. small-cap.

The TLDR lesson is forehead-slappingly basic: for the equity portion of one's portfolio, 100% S&P 500, 100% of the time. Everything else, every attempt at "diversification", is only extra volatility AND reduced returns! The most efficient portfolio also happens to be the simplest.
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Old 01-05-2023, 10:14 PM
 
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Yet you were able to beat the S&P 500 by 25% in last year's stock picking game. Was that just a one time fluke?
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