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technically market timing can take in anything done whether buying , selling or swapping assets .
but market timing for most purposes involves trying to beat the markets at their own game .
either with timing in and out based on what you think is next or charts or the seat of your pants .
rebalancing or changing a portfolio for other reasons like cutting risk before retirement or rebalancing to get your allocation percentages back to where you want them , REGARDLESS OF WHETHER MARKETS ARE HEADED UP OR DOWN or trying to beat the markets is not market timing for our purposes here .
me rebalancing every year to raise the following years spending cash is not timing the markets .sorry but you are stretching things a bit here for our purposes.
in fact i am making major changes to my portfolio for the new year .
my asset allocation will be the same as far as equities goes , but what i hold will be different as far as beta and supporting assets .
it has nothing to do with market timing …it simply has to do with being so far ahead 8 years in to retirement now that i have a lot of flexibility and i can safely increase equity levels to my 40- 50% goal from 35-40%
i don’t care if i lag markets if the portfolio and glide path meet my goals of income and growth so while its based on years in to retirement it is not based on timing and beating markets
the target date glide path was based on old school thinking that we are supposed to reduce equities by age for everyone and that has been proven to be poor logic .
further work by dr pfau and kitces show that glide path is wrong .
portfolio vulnerability is a big factor as well as devastating drops when portfolios are highest can alter a retiremt big time as income hits can change everything early on.
first factor is who you are investing for .
if a pension covers your needs and your draw rate is going to be small then what you basically have is legacy money .
you are investing for legacy money and heirs , not a safe with drawls rate for yourself , big difference even though you are the same age or retirement date .
if you are investing for you and your income to live on that is a different story
personal risk factor plays a roll as well . not everyone regardless of age has the same pucker factor .
that glide path also is terrible for dollar cost averting in as well , exactly the way it is used .
at the same time stocks go up over time and prices are rising , the glide path is cutting the allocation back .
the end result is a portfolio much to conservative and likely to miss goal .
there is no industry agreement on what a proper glide path should be so each firm does their own .
some are to aggressive for many and some to conservative.
better to go with 100% equities and as one gets closer go with a balanced portfolio if they want to reduce risk ,rather then a target date fund
but the concept of reducing equities forever as we age is a poor one. we are all not cookie cutter but wall street covers it’s ass so it can’t be said you were offered a non age appropriate choice
Why are you arguing with me? Is there something specific I wrote with which you disagree?
Why are you arguing with me? Is there something specific I wrote with which you disagree?
yes ' i disagree that cutting equities pre retirement is timing markets .
changing a strategy for other purposes other then beating markets for pretty much all of us isn’t timing markets..
it can be a wise move for all the reasons pfau and kitces mention . and that isn’t based on anyone’s prediction of what can be .
it’s the same logic most retirees living off a portfolio are not 100% equities .
for purposes here in these discussions,market timing has a very specific meaning and yearly rebalancing the same time each year isn’t timing for our purposes.
trying to time a rebalance because one thinks markets will fall is timing , but a balance back to the desired allocation by yearly date or month is not timing .
neither would a goal driven change in portfolio like retirement coming be considered timing when you start to shift from accumulation to decumulation
For those with constant relative-risk-aversion, one can calculate an easy and exact measurement of their riskcorrected total return per period by use of an appropriate "power mean": the Geometric Mean when U = log Wealth; the Harmonic Mean when U = -W⁻¹; and the general ${({\Sigma _{{P_j}}}W_j^\gamma )^{1/\gamma }}$ mean when $U = {W^\gamma }/\gamma ,1 > \gamma \ne 0.$ This subjective risk-corrected return compounds over multiple periods formally the way money returns compound: 1 + r₁ (1 + r₁) (1 + r₂), ..., $\Pi _1^T(1 + {r_t})$. For them, this approach can dramatize the inefficiency of being (say) half the time in each of two independent and identically distributed securities; 100% is then lost of the benefit from being all the time 50-50 in each; actually, being half the time in each is as bad as being all the time in either one, which is equivalent to being completely undiversified. More generally, there is proved here that, for any risk-averse U(W) and time-independent probabilities, optimal diversification within each time period outperforms generically any and all patterns of across-time diversification. The variety of proposed risk-corrected returns can give useful approximations for different classes of investors—widows and orphans, pension fiduciaries, high-flying plungers, and so forth—to replace or extend Markowitz, Sharpe, Treynor, or Modigliani-Modigliani measures of corrected performance.
I'll draw attention to the bold above:
"More generally, there is proved here that, for any risk-averse U(W) and time-independent probabilities, optimal diversification within each time period outperforms generically any and all patterns of across-time diversification" -- such as the glide path.
we are talking life style differences, sequence of risk differences and volatility differences which is not what the barely understandable article keeps saying.
yes ' i disagree that cutting equities pre retirement is timing markets .
By definition it is market timing.
Quote:
Originally Posted by mathjak107
changing a strategy for other purposes other then beating markets for pretty much all of us isn’t timing markets.
Intent is irrelevant to the mathematics. Mathematics doesn't care if your intent is attempting to beat the market or not; Mathematics only cares about the action, not the intent.
Quote:
Originally Posted by mathjak107
it can be a wise move for all the reasons pfau and kitces mention.
You should try reading a few other sources - for example, the following link lists the top 100 Economics & Financial Scientists. You'll note that neither Pfaul nor Kitces are mentioned.
it’s the same logic most retirees living off a portfolio are not 100% equities
That is a straw man; nowhere have I ever said anything about being 100% equities. You''re inventing something I never said and then arguing against it.
Quote:
Originally Posted by mathjak107
for purposes here in these discussions,market timing has a very specific meaning
Once again, there are two states of being:
time-constant asset allocation
time-varying asset allocation.
Target-date funds are an example of time-varying asset allocation which is timing the market. Ditto for glide-path which is timing.
Quote:
Originally Posted by mathjak107
and yearly rebalancing the same time each year isn’t timing for our purposes.
That is a straw man; nowhere have I ever said anything aboutrebalancing. You''re inventing something I never said and then arguing against it.
Quote:
Originally Posted by mathjak107
trying to time a rebalance because one thinks markets will fall is timing ,
Rebalancing is preservation of asset allocation percentages. It has nothing to do with market timing. Once again, you are inventing things I didn't say and then arguing against them.
No, you are inventing things I didn't say so you can argue against them.
Quote:
Originally Posted by mathjak107
we are not talking performance differences .
we are talking life style differences, sequence of risk differences and volatility differences which is not what the barely understandable article keeps saying.
the article keeps mentioning out performs .
this isn’t about out performing
You keep inventing things I didn't say and arguing against them.
You should try reading a few other sources - for example, the following link lists the top 100 Economics & Financial Scientists. You'll note that neither Pfaul nor Kitces are mentioned.
The above enforce academic rigor where the only things published have gone through extensive peer review, filtering out shoddy scholarship.
The articles are written for people who have actually gone to college, and hence the mathematics is over your head, but you could still benefit from reading them. They can broaden your perspective.
Last edited by moguldreamer; 11-23-2023 at 09:09 AM..
if you want to get technical any fund certainly is market timing.
those running the funds are buying and selling daily trying to beat their benchmarks .
buying a stock or selling a stock is timing so anything we do is timing .
even target date funds use market timing because their glide paths need to beat the competition.
which is why in 2008 we saw the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement.
in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.
now when it comes to retirement changes that is a life style and goal change .
here is what you are not considering.
in a 30 year retirement the entire outcome of that retirement is decided in the first 15 years .
there is no do over here and even the best of times coming have not been able to last the full time frame without pay cuts and no one wants pay cuts as to much was spent down to early when unexpected worst outcomes struck early on .
in fact the first 5 years in retirement are very influential on the first 15 years .
so any big hits when your asset base is the highest can be wicked .
the damage done with high equity levels early on can be hard to make up .
no one knows if we are facing an extended downturn or not .
so those who want to risk it can go right up to the gates and thru them with high equity levels .
the risk is they will have to see a pay cut if things are not at least average . pay cuts after you establish a lifestyle can be killer .
most retirees who are counting on that asset base to support them would be far better served following the glide path determined by pfau or kitces who have been disproving and improving on all the ideas and supposed math that the brains from the old school came up with
you get to caught . up in math and data that in the real world is either missing other factors or is just useless.
modern day retirement planning is now becoming effective and also logical as well as easy thanks to the work of those like kitces , pfau, milevski and blanchette ,
ALL OF WHO HAVE BEEN INFLUENTIAL IN THE FINANCIAL PLANNING INDUSTRY changing what was once believed to be the way
by the way you notice almost all those publications have the words economics in them ?
i don’t see anything relating to financial planning ..,those i mentioned have nothing to do with economics.
how many articles and papers by kitces are in the journal of financial of financial planning? i lost count
Last edited by mathjak107; 11-23-2023 at 09:31 AM..
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