it is evolving and provides insight to be able to consider a variety of strategies.
I very much agree with what you are saying here, UncleMick.
At the beginning, The Data-Based SWR Tool was the combination of two analytical approaches: (1) the idea of identifying the SWR, which at the time I developed the new tool was being done primarily through use of the conventional SWR methodology; and (2) the value investing concept, the idea that all assets provide differing long-term value propositions when purchased a low prices or moderate prices rather than at high prices.
What I did in the mid-1990s, when I was putting together my Retire Early plan, was to say "Assuming that this value investing stuff is all true (and the historical data does indeed back up the claim that value investing works), what sort of SWR would you come up with then?" The answer is, you would come up with very different answers that what you come up with when you ignore valuation, as is the case with the conventional SWR methodology.
It is the combination of the two approaches that provides the Data-Based SWR tool its great power. Value investing by itself provides many insights, but they are often not actionable insights because they are often not quantified insights. What I like about SWR analysis is that things are reduced to a number. It helps to reduce things to numbers when you are trying to compare Option A to Option B; when one number is significantly higher than another, that tells you something. The flaw with the conventional methodlogy, of course, is that it gets the number wrong. There's some value in knowing the conventional methodology number (properly referred to as the Historical Surviving Withdrawal Rate) but there is obviously far more value in knowing the correct number. To get the correct number, you have to factor in the effect of changes in valuation, which is the single biggest factor in any analytically valid SWR analysis.
The first number that we wanted to calculate when we started exploring this stuff was the SWR as traditionally defined--the highest take-out number that is guaranteed to work in the event that the future is no worse than the past. There had been a lot of discussion in our community of the number generated by REHP study and we wanted to know the number that compares to that one when the calculations are done properly. We determined that the number you get from taking an informed look what the historical data says is nowhere even remotely in the same ballpark as the REHP number for the years since our various boards have been in existence.
We have gone far beyond that at this point. JWR1945 has examined lots of questions far removed from the question of what is the highest take-out number that is guaranteed to work presuming that the future is no worse than the past. I think it is fair to refer to this other stuff as "SWR Research" because the analyses being done are making use of the same general analytical techniques as was earlier use to determine the actual SWR number. In most cases, JWR1945 is using the calculator that he developed for purposes of asking the initial question.
We now use the term "SWR Research" loosely, and my guess is that our use of it will become more loose over time. What makes it "SWR Research" as we now use the term is that we are making use of historical data to generate insights about how to best invest to win sustainable financial freedom in the present. That is a statement of the ground rules. Anything that fits under those ground rules fits at this board, so far as I am concerned.
It may be that somewhere down the road we will want to come up with a different name than "SWR Research" for the businsess we conduct here. A name that I use in my head is "Passion Investing." That one will strike people as counter-intuitive because the usual thought is that numbers analysis is not too passionate an activity. I can make a case that it is when the numbers are being used for the purposes to which we are putting them here, but that would be another of those long posts, so I am inclined to skip it for the time-being.
Another option that has some appeal to me is "Probability Investing." I think that phrase sums up what we are doing pretty well. We are calculating the probabilities of various potential outcomes and using those probabilities to inform our investing decisions. I like that one because it sounds broader than "SWR Research" and it might for that reason pull in some people who think of a board limited to determining the SWR as being too narrow to be worth their time.
My sense, though, is that JWR1945 prefers "SWR Research." You put forward a post making a similar point to the one you put forward above at an earlier time, and my sense was that he expressed a preference for the current term. JWR1945 is the one that does the most important work here, so it is obviously his call as to what we call this stuff.
I am OK with any of those three terms and am open to consideration of others. I think that down the line we might want to consider options. I don't see that there is any harm with sticking with the term "SWR Research" indefinitely, though. It does describe what we do adequately. Determining the SWR was our starting-point and we have just sort of taken it from there, following the implications of our findings where they led us.