Price-Only Historical Database Rates
Moderator: hocus2004
Price-Only Historical Database Rates
I have given some thought to JanSz's approach and the dangers associated with high stock allocations when valuations are high. I have made a series of runs with my latest version of my calculator, which I have named JanSz-Chips Special Versions. You can read about my latest changes in Living off the Dividends dated Friday, Dec 26, 2003 at 6:36 pm CST.
http://nofeeboards.com/boards/viewtopic.php?t=1911
I wrote these words.
JanSz has come up with an approach that has one withdraw 2% of a portfolio's current balance plus one-half of the capital gains that have taken place over the previous six years. If there ar no gains, the withdrawal remains at 2%.
Reflecting upon JanSz's approach, his algorithm sounds very much like living off one's dividends plus a percentage of long-term capital gains. The S&P 500 index yields less than 2% these days. Our own research points strongly to the dangers of withdrawing much more than the initial dividend yield when valuations are high.
The traditional time-tested approach to retirement finances is to live off of one's dividends, leaving the principal untouched. therealchips advocates this approach. It has served him well.
I have attached series of tables of Price-Only Historical Database Rates. That is, dividends are stripped away from the calculation. I used a calculator version that included all of my modifications. But you can reproduce this entire data set using no more than the basic Retire Early Safe Withdrawal [Rate] Calculator, Version 1.61, dated 7 November 2002, and the Living off the Dividends modifications.
You do not have to use anything more sophisticated than the data analysis summaries that come with the basic calculators (in columns S and Z and rows 10 through 144). If the balance after thirty years (as seen in column Z) is positive, the portfolio survived. If not, it failed. You vary the Initial Withdrawal Rate (i.e., you withdraw a constant percentage of the portfolio's initial balance plus adjustments to match inflation) to determine when a portfolio would have survived.
Interpreting the Results
All of the rates are determined only by price changes. All of the withdrawals are based upon the portfolio's initial balance. An actual investor would receive money from dividends in addition to these amounts. Dividend amounts would decrease as his balance decreases.
Keep in mind that a 100% ibond portfolio at a zero percent real interest rate would throw off 3.33% for 30 years (or more if there is deflation). Any interest that an actual 100% ibond portfolio would generate would produce an income stream similar to stock dividends.
There were 13 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). In all of the years in which P/E10 was higher than 20, the Historical Database Rates were less than 3.2%. There were ten such years.
All of this points us toward conserving our portfolios along the lines suggested in our investigations of switching.
Have fun.
John R.
http://nofeeboards.com/boards/viewtopic.php?t=1911
I wrote these words.
JanSz has come up with an approach that has one withdraw 2% of a portfolio's current balance plus one-half of the capital gains that have taken place over the previous six years. If there ar no gains, the withdrawal remains at 2%.
Reflecting upon JanSz's approach, his algorithm sounds very much like living off one's dividends plus a percentage of long-term capital gains. The S&P 500 index yields less than 2% these days. Our own research points strongly to the dangers of withdrawing much more than the initial dividend yield when valuations are high.
The traditional time-tested approach to retirement finances is to live off of one's dividends, leaving the principal untouched. therealchips advocates this approach. It has served him well.
I have attached series of tables of Price-Only Historical Database Rates. That is, dividends are stripped away from the calculation. I used a calculator version that included all of my modifications. But you can reproduce this entire data set using no more than the basic Retire Early Safe Withdrawal [Rate] Calculator, Version 1.61, dated 7 November 2002, and the Living off the Dividends modifications.
You do not have to use anything more sophisticated than the data analysis summaries that come with the basic calculators (in columns S and Z and rows 10 through 144). If the balance after thirty years (as seen in column Z) is positive, the portfolio survived. If not, it failed. You vary the Initial Withdrawal Rate (i.e., you withdraw a constant percentage of the portfolio's initial balance plus adjustments to match inflation) to determine when a portfolio would have survived.
Interpreting the Results
All of the rates are determined only by price changes. All of the withdrawals are based upon the portfolio's initial balance. An actual investor would receive money from dividends in addition to these amounts. Dividend amounts would decrease as his balance decreases.
Keep in mind that a 100% ibond portfolio at a zero percent real interest rate would throw off 3.33% for 30 years (or more if there is deflation). Any interest that an actual 100% ibond portfolio would generate would produce an income stream similar to stock dividends.
There were 13 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). In all of the years in which P/E10 was higher than 20, the Historical Database Rates were less than 3.2%. There were ten such years.
All of this points us toward conserving our portfolios along the lines suggested in our investigations of switching.
Have fun.
John R.
Last edited by JWR1945 on Tue Dec 30, 2003 6:15 am, edited 1 time in total.
Price Only HDBR Tables
Price Only HDBR Tables
These are Historical Database Rates when dividends are removed from the total return. These were run on my JanSz-Chips Special Version 1.0 of the Retire Early Safe Withdrawal [Rate] Calculator.
Here are the conditions. The stock allocation is 80%. The commercial paper allocation is 20%. The investment expenses are 0.20%. The inflation adjustment is based on the CPI. The payout period is 30 years. The Initial Withdrawal Rate varies. The initial balance is $100000. Otherwise, I have used default settings.
Here are the special settings. The Capital Gains Percentage in cell B17 was set to zero. The Dividend Reinvestments in cell B22 were set to zero.
These are the Historical Database Rates with a precision of 0.1%. Portfolios survived at these rates. They failed when the withdrawal rate was increased by 0.1%.
The years that are listed are the same as FIRECalc produces. The P/E10 values are in row 186 (the S&P 500 "Real"Â P/E Ratio). They are taken from Professor Shiller's database. (I do not know how the 1871-1880 values in row 186 were calculated.)
Have fun.
John R.
These are Historical Database Rates when dividends are removed from the total return. These were run on my JanSz-Chips Special Version 1.0 of the Retire Early Safe Withdrawal [Rate] Calculator.
Here are the conditions. The stock allocation is 80%. The commercial paper allocation is 20%. The investment expenses are 0.20%. The inflation adjustment is based on the CPI. The payout period is 30 years. The Initial Withdrawal Rate varies. The initial balance is $100000. Otherwise, I have used default settings.
Here are the special settings. The Capital Gains Percentage in cell B17 was set to zero. The Dividend Reinvestments in cell B22 were set to zero.
These are the Historical Database Rates with a precision of 0.1%. Portfolios survived at these rates. They failed when the withdrawal rate was increased by 0.1%.
The years that are listed are the same as FIRECalc produces. The P/E10 values are in row 186 (the S&P 500 "Real"Â P/E Ratio). They are taken from Professor Shiller's database. (I do not know how the 1871-1880 values in row 186 were calculated.)
Code: Select all
Year P/E10 HDBR80-Prices Alone
1871 13.3 5.8%
1872 14.5 5.7%
1873 15.3 5.3%
1874 13.9 5.4%
1875 13.6 5.4%
1876 13.3 5.7%
1877 10.6 5.9%
1878 9.7 5.9%
1879 10.7 6.8%
1880 15.3 4.9%
1881 18.5 4.6%
1882 15.7 4.7%
1883 15.3 4.5%
1884 14.4 4.5%
1885 13.1 5.1%
1886 16.7 4.4%
1887 17.5 4.4%
1888 15.4 4.3%
1889 15.8 4.1%
1890 17.2 4.0%
Code: Select all
Year P/E10 HDBR80-Prices Alone
1891 15.4 4.0%
1892 19.0 3.8%
1893 17.7 3.3%
1894 15.7 3.7%
1895 16.5 3.8%
1896 16.6 3.6%
1897 17.0 3.8%
1898 19.2 3.4%
1899 22.9 3.4%
1900 18.7 3.3%
1901 21.0 3.0%
1902 22.3 2.9%
1903 20.3 2.7%
1904 15.9 3.3%
1905 18.5 2.7%
1906 20.1 2.4%
1907 17.2 2.4%
1908 11.9 3.3%
1909 14.8 2.9%
1910 14.5 2.4%
1911 14.0 2.7%
1912 13.8 2.8%
1913 13.1 2.7%
1914 11.6 3.0%
1915 10.4 3.3%
1916 12.5 3.1%
1917 11.0 3.7%
1918 6.6 5.4%
1919 6.1 5.9%
1920 6.0 5.4%
Code: Select all
Year P/E10 HDBR80-Prices Alone
1921 5.1 5.7%
1922 6.3 5.7%
1923 8.2 5.1%
1924 8.1 5.2%
1925 9.7 4.7%
1926 11.3 4.2%
1927 13.2 3.9%
1928 18.8 3.1%
1929 27.1 2.3%
1930 22.3 2.4%
1931 16.7 2.8%
1932 9.3 4.1%
1933 8.7 4.9%
1934 13.0 3.7%
1935 11.5 4.3%
1936 17.1 3.3%
1937 21.6 2.7%
1938 13.5 3.8%
1939 15.6 3.6%
1940 16.4 3.8%
1941 13.9 4.9%
1942 10.1 6.2%
1943 10.2 6.0%
1944 11.1 5.6%
1945 12.0 5.3%
1946 15.6 5.0%
1947 11.5 6.5%
1948 10.4 7.0%
1949 10.2 6.9%
1950 10.7 7.1%
Code: Select all
Year P/E10 HDBR80-Prices Alone
1951 11.9 6.3%
1952 12.5 5.8%
1953 13.0 5.6%
1954 12.0 5.8%
1955 16.0 4.5%
1956 18.3 3.9%
1957 16.7 4.0%
1958 13.8 4.4%
1959 18.0 3.5%
1960 18.3 3.4%
1961 18.5 3.4%
1962 21.2 3.1%
1963 19.3 3.3%
1964 21.6 2.9%
1965 23.3 2.7%
1966 24.1 2.6%
1967 20.4 3.0%
1968 21.5 2.8%
1969 21.2 2.8%
1970 17.1 3.3%
1971 16.5 3.4%
1972 17.3 3.3%
1973 18.7 3.2%
1974 13.5 4.2%
1975 8.9 5.6%
1976 11.2 4.7%
1977 11.4 4.8%
1978 9.2 5.8%
1979 9.3 6.0%
1980 8.9 6.0%
Have fun.
John R.
Price Only HDBR Tables
Price Only HDBR Tables 1921-1980
These tables list the Price-Only Historical Database Rates from 1921-1980 of an 80% stocks / 20% commercial paper portfolio as ordered by P/E10. All dividends were stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations.
Have fun.
John R.
These tables list the Price-Only Historical Database Rates from 1921-1980 of an 80% stocks / 20% commercial paper portfolio as ordered by P/E10. All dividends were stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations.
Code: Select all
Year P/E10 HDBR80-Prices Alone
1921 5.1 5.7%
1922 6.3 5.7%
1924 8.1 5.2%
1923 8.2 5.1%
1933 8.7 4.9%
1975 8.9 5.6%
1980 8.9 6.0%
1978 9.2 5.8%
1932 9.3 4.1%
1979 9.3 6.0%
1925 9.7 4.7%
1942 10.1 6.2%
1943 10.2 6.0%
1949 10.2 6.9%
1948 10.4 7.0%
1950 10.7 7.1%
1944 11.1 5.6%
1976 11.2 4.7%
1926 11.3 4.2%
1977 11.4 4.8%
1935 11.5 4.3%
1947 11.5 6.5%
1951 11.9 6.3%
1945 12.0 5.3%
1954 12.0 5.8%
1952 12.5 5.8%
1934 13.0 3.7%
1953 13.0 5.6%
1927 13.2 3.9%
1938 13.5 3.8%
Code: Select all
Year P/E10 HDBR80-Prices Alone
1974 13.5 4.2%
1958 13.8 4.4%
1941 13.9 4.9%
1939 15.6 3.6%
1946 15.6 5.0%
1955 16.0 4.5%
1940 16.4 3.8%
1971 16.5 3.4%
1931 16.7 2.8%
1957 16.7 4.0%
1936 17.1 3.3%
1970 17.1 3.3%
1972 17.3 3.3%
1959 18.0 3.5%
1956 18.3 3.9%
1960 18.3 3.4%
1961 18.5 3.4%
1973 18.7 3.2%
1928 18.8 3.1%
1963 19.3 3.3%
1967 20.4 3.0%
1962 21.2 3.1%
1969 21.2 2.8%
1968 21.5 2.8%
1937 21.6 2.7%
1964 21.6 2.9%
1930 22.3 2.4%
1965 23.3 2.7%
1966 24.1 2.6%
1929 27.1 2.3%
Have fun.
John R.
Price-Only HDBR Tables 1921-1980
These tables list the Price-Only Historical Database Rates from 1921-1980 of an 80% stocks / 20% commercial paper portfolio in their decreasing order. All dividends have been stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations.
Have fun.
John R.
These tables list the Price-Only Historical Database Rates from 1921-1980 of an 80% stocks / 20% commercial paper portfolio in their decreasing order. All dividends have been stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations.
Code: Select all
Year P/E10 HDBR80-Prices Alone
1950 10.7 7.1%
1948 10.4 7.0%
1949 10.2 6.9%
1947 11.5 6.5%
1951 11.9 6.3%
1942 10.1 6.2%
1980 8.9 6.0%
1979 9.3 6.0%
1943 10.2 6.0%
1978 9.2 5.8%
1954 12.0 5.8%
1952 12.5 5.8%
1921 5.1 5.7%
1922 6.3 5.7%
1975 8.9 5.6%
1944 11.1 5.6%
1953 13.0 5.6%
1945 12.0 5.3%
1924 8.1 5.2%
1923 8.2 5.1%
1946 15.6 5.0%
1933 8.7 4.9%
1941 13.9 4.9%
1977 11.4 4.8%
1925 9.7 4.7%
1976 11.2 4.7%
1955 16.0 4.5%
1958 13.8 4.4%
1935 11.5 4.3%
1926 11.3 4.2%
Code: Select all
Year P/E10 HDBR80-Prices Alone
1974 13.5 4.2%
1932 9.3 4.1%
1957 16.7 4.0%
1927 13.2 3.9%
1956 18.3 3.9%
1938 13.5 3.8%
1940 16.4 3.8%
1934 13.0 3.7%
1939 15.6 3.6%
1959 18.0 3.5%
1971 16.5 3.4%
1960 18.3 3.4%
1961 18.5 3.4%
1936 17.1 3.3%
1970 17.1 3.3%
1972 17.3 3.3%
1963 19.3 3.3%
1973 18.7 3.2%
1928 18.8 3.1%
1962 21.2 3.1%
1967 20.4 3.0%
1964 21.6 2.9%
1931 16.7 2.8%
1969 21.2 2.8%
1968 21.5 2.8%
1937 21.6 2.7%
1965 23.3 2.7%
1966 24.1 2.6%
1930 22.3 2.4%
1929 27.1 2.3%
Have fun.
John R.
Price-Only Historical Database Rates (for 1921-1980) and P/E10 are not nearly so tightly related as normal Historical Database Rates (which include dividend reinvestments) and P/E10.
If you separate the Price-Only Historical Database Rates into thirds, the rates with the highest valuations (as measured by P/E10) range from 2.3% to 3.9%. The rates with intermediate valuations range from 2.8% to 6.5%. The rates with the lowest valuations range from 4.1% to 7.1%. The highest and lowest ranges almost overlap.
This is consistent with the notion that long-term earnings, as seen in their ten-year average E10, form the basis of both prices and dividends. The remaining component of the total return, known as the speculative return, is caused by multiple expansion and contraction. It is seen in P/E10.
Have fun.
John R.
If you separate the Price-Only Historical Database Rates into thirds, the rates with the highest valuations (as measured by P/E10) range from 2.3% to 3.9%. The rates with intermediate valuations range from 2.8% to 6.5%. The rates with the lowest valuations range from 4.1% to 7.1%. The highest and lowest ranges almost overlap.
This is consistent with the notion that long-term earnings, as seen in their ten-year average E10, form the basis of both prices and dividends. The remaining component of the total return, known as the speculative return, is caused by multiple expansion and contraction. It is seen in P/E10.
Have fun.
John R.
I have added Price Only Historical Database Rates with a 50% stock / 50% commercial paper allocation to these tables. HDBR80-P is for the 80% stock allocation and HDBR50-P is for the 50% stock allocation.
These are Historical Database Rates when dividends are removed from the total return. These were run on my JanSz-Chips Special Version 1.0 of the Retire Early Safe Withdrawal [Rate] Calculator.
Here are the conditions. The stock allocation is 80%. The commercial paper allocation is 20%. The investment expenses are 0.20%. The inflation adjustment is based on the CPI. The payout period is 30 years. The Initial Withdrawal Rate varies. The initial balance is $100000. Otherwise, I have used default settings. [That is for HDBR80-P data. For HDBR50-P data, the stock allocation is 50% and the commercial paper allocation is 50%.]
Here are the special settings. The Capital Gains Percentage in cell B17 was set to zero. The Dividend Reinvestments in cell B22 were set to zero.
These are the Historical Database Rates with a precision of 0.1%. Portfolios survived at these rates. They failed when the withdrawal rate was increased by 0.1%.
The years that are listed are the same as FIRECalc produces. The P/E10 values are in row 186 (the S&P 500 "Real"Â P/E Ratio). They are taken from Professor Shiller's database.
Have fun.
John R.
These are Historical Database Rates when dividends are removed from the total return. These were run on my JanSz-Chips Special Version 1.0 of the Retire Early Safe Withdrawal [Rate] Calculator.
Here are the conditions. The stock allocation is 80%. The commercial paper allocation is 20%. The investment expenses are 0.20%. The inflation adjustment is based on the CPI. The payout period is 30 years. The Initial Withdrawal Rate varies. The initial balance is $100000. Otherwise, I have used default settings. [That is for HDBR80-P data. For HDBR50-P data, the stock allocation is 50% and the commercial paper allocation is 50%.]
Here are the special settings. The Capital Gains Percentage in cell B17 was set to zero. The Dividend Reinvestments in cell B22 were set to zero.
These are the Historical Database Rates with a precision of 0.1%. Portfolios survived at these rates. They failed when the withdrawal rate was increased by 0.1%.
The years that are listed are the same as FIRECalc produces. The P/E10 values are in row 186 (the S&P 500 "Real"Â P/E Ratio). They are taken from Professor Shiller's database.
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1871 13.3 5.8% 7.0%
1872 14.5 5.7% 6.9%
1873 15.3 5.3% 6.5%
1874 13.9 5.4% 6.5%
1875 13.6 5.4% 6.3%
1876 13.3 5.7% 6.5%
1877 10.6 5.9% 6.4%
1878 9.7 5.9% 6.1%
1879 10.7 6.8% 7.2%
1880 15.3 4.9% 5.7%
1881 18.5 4.6% 5.7%
1882 15.7 4.7% 5.8%
1883 15.3 4.5% 5.5%
1884 14.4 4.5% 5.2%
1885 13.1 5.1% 5.6%
1886 16.7 4.4% 5.1%
1887 17.5 4.4% 5.1%
1888 15.4 4.3% 5.0%
1889 15.8 4.1% 4.7%
1890 17.2 4.0% 4.6%
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1891 15.4 4.0% 4.5%
1892 19.0 3.8% 4.4%
1893 17.7 3.3% 3.7%
1894 15.7 3.7% 3.9%
1895 16.5 3.8% 4.0%
1896 16.6 3.6% 3.8%
1897 17.0 3.8% 3.9%
1898 19.2 3.4% 3.7%
1899 22.9 3.4% 3.8%
1900 18.7 3.3% 3.7%
1901 21.0 3.0% 3.5%
1902 22.3 2.9% 3.6%
1903 20.3 2.7% 3.3%
1904 15.9 3.3% 3.7%
1905 18.5 2.7% 3.3%
1906 20.1 2.4% 3.1%
1907 17.2 2.4% 3.1%
1908 11.9 3.3% 3.6%
1909 14.8 2.9% 3.5%
1910 14.5 2.4% 3.0%
1911 14.0 2.7% 3.1%
1912 13.8 2.8% 3.3%
1913 13.1 2.7% 3.3%
1914 11.6 3.0% 3.4%
1915 10.4 3.3% 3.7%
1916 12.5 3.1% 3.7%
1917 11.0 3.7% 4.3%
1918 6.6 5.4% 5.7%
1919 6.1 5.9% 6.4%
1920 6.0 5.4% 5.9%
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1921 5.1 5.7% 5.8%
1922 6.3 5.7% 5.7%
1923 8.2 5.1% 5.3%
1924 8.1 5.2% 5.3%
1925 9.7 4.7% 5.0%
1926 11.3 4.2% 4.5%
1927 13.2 3.9% 4.3%
1928 18.8 3.1% 3.7%
1929 27.1 2.3% 3.0%
1930 22.3 2.4% 2.9%
1931 16.7 2.8% 3.0%
1932 9.3 4.1% 3.6%
1933 8.7 4.9% 4.0%
1934 13.0 3.7% 3.4%
1935 11.5 4.3% 3.7%
1936 17.1 3.3% 3.1%
1937 21.6 2.7% 2.7%
1938 13.5 3.8% 3.3%
1939 15.6 3.6% 3.2%
1940 16.4 3.8% 3.3%
1941 13.9 4.9% 4.0%
1942 10.1 6.2% 4.7%
1943 10.2 6.0% 4.7%
1944 11.1 5.6% 4.5%
1945 12.0 5.3% 4.4%
1946 15.6 5.0% 4.5%
1947 11.5 6.5% 5.5%
1948 10.4 7.0% 5.7%
1949 10.2 6.9% 5.6%
1950 10.7 7.1% 5.9%
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1951 11.9 6.3% 5.6%
1952 12.5 5.8% 5.3%
1953 13.0 5.6% 5.2%
1954 12.0 5.8% 5.3%
1955 16.0 4.5% 4.5%
1956 18.3 3.9% 4.1%
1957 16.7 4.0% 4.2%
1958 13.8 4.4% 4.5%
1959 18.0 3.5% 3.9%
1960 18.3 3.4% 3.8%
1961 18.5 3.4% 3.8%
1962 21.2 3.1% 3.6%
1963 19.3 3.3% 3.8%
1964 21.6 2.9% 3.5%
1965 23.3 2.7% 3.3%
1966 24.1 2.6% 3.3%
1967 20.4 3.0% 3.5%
1968 21.5 2.8% 3.4%
1969 21.2 2.8% 3.4%
1970 17.1 3.3% 3.8%
1971 16.5 3.4% 3.8%
1972 17.3 3.3% 3.8%
1973 18.7 3.2% 3.8%
1974 13.5 4.2% 4.5%
1975 8.9 5.6% 5.4%
1976 11.2 4.7% 4.9%
1977 11.4 4.8% 5.0%
1978 9.2 5.8% 5.7%
1979 9.3 6.0% 6.0%
1980 8.9 6.0% 6.1%
Have fun.
John R.
I have added Price Only Historical Database Rates for a 50% stock / 50% commercial paper allocation. HDBR80-P is for the 80% stock allocation. HDBR50-P is for the 50% stock allocation. These tables are ordered according to HDBR50-P
These tables list the Price-Only Historical Database Rates from 1921-1980 of a 50% stocks / 50% commercial paper portfolio in their decreasing order. All dividends have been stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations. HDBR80 is for 80% stocks / 20% commercial paper. HDBR50-P is for 50% stocks / 50% commercial paper.
Have fun.
John R.
These tables list the Price-Only Historical Database Rates from 1921-1980 of a 50% stocks / 50% commercial paper portfolio in their decreasing order. All dividends have been stripped away. Withdrawals at the rates shown resulted in 30 years of portfolio survival. Withdrawals at rates 0.1% higher than those shown failed. Withdrawals were adjusted to match inflation. Investment expenses were set at 0.20%. All withdrawals are based upon the portfolio's initial balance. There was no switching of portfolio allocations. HDBR80 is for 80% stocks / 20% commercial paper. HDBR50-P is for 50% stocks / 50% commercial paper.
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1980 8.9 6.0% 6.1%
1979 9.3 6.0% 6.0%
1950 10.7 7.1% 5.9%
1921 5.1 5.7% 5.8%
1978 9.2 5.8% 5.7%
1948 10.4 7.0% 5.7%
1922 6.3 5.7% 5.7%
1951 11.9 6.3% 5.6%
1949 10.2 6.9% 5.6%
1947 11.5 6.5% 5.5%
1975 8.9 5.6% 5.4%
1954 12.0 5.8% 5.3%
1952 12.5 5.8% 5.3%
1924 8.1 5.2% 5.3%
1923 8.2 5.1% 5.3%
1953 13.0 5.6% 5.2%
1977 11.4 4.8% 5.0%
1925 9.7 4.7% 5.0%
1976 11.2 4.7% 4.9%
1943 10.2 6.0% 4.7%
1942 10.1 6.2% 4.7%
1974 13.5 4.2% 4.5%
1958 13.8 4.4% 4.5%
1955 16.0 4.5% 4.5%
1946 15.6 5.0% 4.5%
1944 11.1 5.6% 4.5%
1926 11.3 4.2% 4.5%
1945 12.0 5.3% 4.4%
1927 13.2 3.9% 4.3%
1957 16.7 4.0% 4.2%
Code: Select all
Year P/E10 HDBR80-P HDBR50-P
1956 18.3 3.9% 4.1%
1941 13.9 4.9% 4.0%
1933 8.7 4.9% 4.0%
1959 18.0 3.5% 3.9%
1973 18.7 3.2% 3.8%
1972 17.3 3.3% 3.8%
1971 16.5 3.4% 3.8%
1970 17.1 3.3% 3.8%
1963 19.3 3.3% 3.8%
1961 18.5 3.4% 3.8%
1960 18.3 3.4% 3.8%
1935 11.5 4.3% 3.7%
1928 18.8 3.1% 3.7%
1962 21.2 3.1% 3.6%
1932 9.3 4.1% 3.6%
1967 20.4 3.0% 3.5%
1964 21.6 2.9% 3.5%
1969 21.2 2.8% 3.4%
1968 21.5 2.8% 3.4%
1934 13.0 3.7% 3.4%
1966 24.1 2.6% 3.3%
1965 23.3 2.7% 3.3%
1940 16.4 3.8% 3.3%
1938 13.5 3.8% 3.3%
1939 15.6 3.6% 3.2%
1936 17.1 3.3% 3.1%
1931 16.7 2.8% 3.0%
1929 27.1 2.3% 3.0%
1930 22.3 2.4% 2.9%
1937 21.6 2.7% 2.7%
Have fun.
John R.
Interpreting these Results
All of the rates are determined only by price changes. All of the withdrawals are based upon the portfolio's initial balance. An actual investor would receive money from dividends in addition to these amounts. Dividend amounts would decrease as his balance decreases.
Keep in mind that a 100% ibond portfolio at a zero percent real interest rate would throw off 3.33% for 30 years (or more if there is deflation). Any interest that an actual 100% ibond portfolio would generate would produce an income stream similar to stock dividends.
With an 80% stock allocation, there were 13 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). In all of the years in which P/E10 was higher than 20, the Historical Database Rates were less than 3.2%. There were ten such years. The lowest Price-Only Historical Database Rate with 80% stocks was 2.3% The highest Price-Only Historical Database Rate with 80% stocks was 7.1%.
With a 50% stock allocation, there were 6 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). The lowest Price-Only Historical Database Rate with 50% stocks was 2.7%. The highest Price-Only Historical Database Rate with 50% stocks was 6.1%.
What this means is that an 80% stock allocation can cost you up to 1.0% from price volatility when compared to risk free investments. A 50% stock allocation can cost you up to 0.6% because of price volatility when compared to risk free investments.
That is, stock dividends should yield at least 1.0% more than TIPS and/or ibonds to justify holding a high stock allocation (80%). Stock dividends should yield at least 0.6% more than TIPS and/or ibonds to justify a medium stock allocation (50%). Otherwise, stock price volatility can reduce your safe withdrawal rate.
This is very important in today's stock market with its low dividend yields.
There really is such a thing as risk.
Have fun.
John R.
All of the rates are determined only by price changes. All of the withdrawals are based upon the portfolio's initial balance. An actual investor would receive money from dividends in addition to these amounts. Dividend amounts would decrease as his balance decreases.
Keep in mind that a 100% ibond portfolio at a zero percent real interest rate would throw off 3.33% for 30 years (or more if there is deflation). Any interest that an actual 100% ibond portfolio would generate would produce an income stream similar to stock dividends.
With an 80% stock allocation, there were 13 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). In all of the years in which P/E10 was higher than 20, the Historical Database Rates were less than 3.2%. There were ten such years. The lowest Price-Only Historical Database Rate with 80% stocks was 2.3% The highest Price-Only Historical Database Rate with 80% stocks was 7.1%.
With a 50% stock allocation, there were 6 years out of 60 in the 1921-1980 interval in which the Price-Only Historical Database Rates were less than 3.3% (and there were 4 years in which they were equal to 3.3%). The lowest Price-Only Historical Database Rate with 50% stocks was 2.7%. The highest Price-Only Historical Database Rate with 50% stocks was 6.1%.
What this means is that an 80% stock allocation can cost you up to 1.0% from price volatility when compared to risk free investments. A 50% stock allocation can cost you up to 0.6% because of price volatility when compared to risk free investments.
That is, stock dividends should yield at least 1.0% more than TIPS and/or ibonds to justify holding a high stock allocation (80%). Stock dividends should yield at least 0.6% more than TIPS and/or ibonds to justify a medium stock allocation (50%). Otherwise, stock price volatility can reduce your safe withdrawal rate.
This is very important in today's stock market with its low dividend yields.
There really is such a thing as risk.
Have fun.
John R.