Intercst Article on 2% SWR

Research on Safe Withdrawal Rates

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hocus2004
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Post by hocus2004 »

"Unclemick; I really like the idea of living off the dividends and interest of the portfolio. I believe JWR does too."

I see merit in this approach too. I don't see it as the only way to go. But it is one sensible way to go.

A lot of the old rules of thumb make sense. That's how they became rules of thumb. What has happened in recent years is that our ability to analyze data has become much greater with the development of computer software that helps with this process. Our expectation should be that the new tools will refine the old rules of thumb and thereby add new insights. We should NOT expect the new data-analysis tools to REJECT the old time-tested rules of thumb.

In the early days of its development, SWR analysis appeared to do just this. Some of the early SWR analysts were coming up with shocking conclusions, that you can just put all of your money in one asset class and do fine, that there is no need to even examine any of the others because the one asset class is obviously so superior in every possible way and at all possible times. We see now that this was all just Bull Market enthusiasm getting carried away with itself. There was no "data" showing that stocks are always the super, super, super investment choice. It wasn't data that the early SWR researchers were reporting on, it was their own emotional desire to strike it rich quick as they saw so many others doing during the course of one of the greatest bull markets that the world has even known.

It's now time for the Retire Early community to become a little more sober in its judgments re investing choices. A good number of people have already been hurt financially by the excess enthusiasms evident in the "research" of the REHP study. More will be hurt more seriously in days to come unless we begin to open up some space on the various boards for honest and informed posting on investment questions.

Going back to the old time-tested rules of thumb is a big improvement over sticking with the silly "All Stocks All the Time!" mantra of the REHP study enthusiasts. In time, though, I think that it makes sense to make use of the new statistical-analysis tools that have become available to us in recent years. These tools really do provide value when put to reasoned uses. It is not SWR analysis that has failed us. It is one particular approach to SWR analysis that has failed us. The draft versions of new tools are often not perfect. The way it works is that one person puts forward a tool, then someone else improves it, and then someone else, and it gets better and better over the course of time.

The mission of this board is to make the SWR tool better than what it has been in the past. That's what we are all about. Those who see us as trying to tear down the REHP study are misreading our intentions in a serious way. Our goal is not to tear something down, but to build something up. It is the DCMs who have made this a life-and-death struggle with intercst. If intercst were asked to follow the same rules that all other community members follow, the intercst posting tactics would simply never have become such a problem.

If raddr discovered that he got a number wrong in a study, he would correct the error, would he not? If JWR1945 learned that he got a number wrong, he would fix it. It's the same with BenSolar or any other numbers guy. All understand that errors in mathematical calculations need to be corrected. Why should it be any different with intercst? Because he started the first board? I don't buy it. If you get a number wrong in a study, you have to fix it. No exceptions.

I am not a numbers guy, but I see the value of tapping into the guidance that the analysis of numbers can often provide. SWR analysis is a powerful tool for helping aspiring early retirees achieve their life goals. Intercst and the other DCMs have given SWR analysis a bad name. Down the road, no one is going to remember the nonsense gibberish that these people spout on our boards on a daily basis. The work that JWR1945 has done will be helping aspiring early retirees to achieve their goals for a long time to come.

JWR1945 got the number right. It's wrong that he had been smeared every which way to next week for doing so. All he ever did was get the number right, and share his findings with the community of aspiring early retirees. That is what a number guy is supposed to do, get the number right. JWR1945 has nothing to be ashamed of, it's those who smear him who have something to be ashamed of. Presuming that I am right in believing that there are a good number of people in the outside world with a sincere interest in learning what it takes to win financial freedom early in life, JWR1945 won't go down in the history of our movement as a "meatball," or a "dimwit" or a "mental case." He will go down as a hero.

And it was my May 13, 2002, post that drew him into our community.That makes me a little bit of a hero too, doesn't it?
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Post by JWR1945 »

unclemick wrote:JWR

Let's push timing mismatch a little more. Take a balanced fund - presumably rebalancing fairly continuously..
..
Hmmm - can I surmise that someone like Vanguard is smart enough to recognize some of these effects versus a 'fixed retirement calculator'.

The Target Retirement Series comes to mind - where the end of the sliding asset mix has 25% Inflation Protected securities.
The underlying problem cannot be solved. The culprit is rebalancing. If it were no more than a timing mismatch, it would be solvable.

Think about what happens with a 50% / 50% portfolio of stocks and TIPS (and/or ibonds). Unless stock returns and those of the TIPS match exactly, it will be necessary to buy or sell some TIPS.

You are already aware of the necessary assumption that TIPS produce neither capital gains nor losses. This covers the circumstance when TIPS need to be sold. This happens whenever stocks have lost ground.

How about purchases? This happens when stocks do well, better than the TIPS. It is necessary to assume that you can purchase new TIPS at exactly the same interest rate as those purchased initially. In fact, you must assume that you can do no better. There is no reasonable alternative. You cannot appeal to the historical record. TIPS are new creations. [However, you would be able to conduct sensitivity studies with other assumptions.]

In the real world, one has to appeal to human judgment at some point.

Have fun.

John R.
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Post by JWR1945 »

unclemick wrote:JWR

Let's push timing mismatch a little more..What can we surmise if the take out is the SEC yield or lower versus a higher take out where I'm presumably eating some principle periodically..
..
ben wrote:Unclemick; I really like the idea of living of the dividends and interest of the portfolio. I believe JWR does too. Not only will the income be better protected but one also avoids selling in bad times. Finally it has a feel-good factor that makes it easier to actually pull the string and go for FIRE in the first place! :D Cheers!
Limiting your withdrawals to the SEC yield does not guarantee success. It is still possible for a fund to lose money. OTOH, I am sure that both of you are aware of this and you would protect your principal. [The alternative would be to do nothing while your dividend amounts head toward zero.]

I am a strong advocate of smart selling (and smart buying as well). If you are patient, you can (expect to) get a reasonable price. I define this as being within the top third of the 52-week range of highs and lows when selling and in the bottom third when buying.

My preference has been to own individual stocks. If I were younger or if I had to depend upon my investments for income, my preferences might have turned out differently. With individual stocks, you can almost always buy and sell smartly. If you cannot buy smartly, it is not a big deal. Let the stock get away from you. There will always be another. If you cannot sell smartly, you need to consider whether the company is going out of business. If so, take your lumps and sell. If not, decide whether you want to sell or whether you want to hold on to the shares, mentally placing their value at zero.

Various models use mechanical rebalance rules instead. That is probably a good idea with many funds. I am much less comfortable in trying to time purchases and sales of funds.

Have fun.

John R.
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Post by ben »

My current well diversified portfolio (40% global equity, 30% global FI, 20% commodities/PM, 10% REITs) pays about 3% (after 15% foreign withholding tax) in interest and dividends - I feel VERY confident that a 3% w/r from such a diversified portfolio and never selling (say of dividends drop to 2.5%) is as safe as it gets.

Studies including commodities/REITs/international/small caps Etc. have shown an increase in the HSWR. The studies however cover only 30 years or so due to data availibility - still makes me very confident in the above technique. Will see in 30 years whether I was right! :lol:

Cheers!
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Post by JWR1945 »

ben wrote:My current well diversified portfolio..pays about 3% (after 15% foreign withholding tax) in interest and dividends - I feel VERY confident that a 3% w/r from such a diversified portfolio and never selling (say of dividends drop to 2.5%) is as safe as it gets.
This is what is so attractive about dividends. Your companies and other investments absorb the short-term fluctuations that a price-oriented strategy demands. They do the smoothing for you.

Earnings, when averaged over several years, are predictable enough to support favorable dividend policies.

Prices are different. Selling when prices are low kills retirement portfolios. It is one thing to talk about prices two to three decades in the future. It is another to depend up this year's prices.

Have fun.

John R.
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Post by ben »

Fully agree JWR! :D
My only addition is the feel-good factor of knowing can live of the income flow alone, it makes the FI so much more "real" to see my RE budget being paid into my broker account from that as we speak! :D

Trust you are also happy with MRK come-back these days! :D

Cheers! Ben
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Post by JWR1945 »

ben wrote:Trust you are also happy with MRK come-back these days!
Actually, no! I have a limit order to buy more shares at a very low price. I will leave it in place for now. [I already own a ton of Merck shares. I want to buy another.]

Make no mistake about it, letting a good opportunity get away is hard to take. It sounds so easy. It is not.

I am likely to make a limit order for PFE (Pfizer, sp?). I haven't settled on a price (or prices) yet. It has a great drug pipeline and its latest fall in price makes it attractive. Newsletter writers love it.

Some people think that the pharmaceutical sector's attractiveness is in the past. What they are missing is that prices are already down. The sector looks good today when compared to stocks in general, not merely when priced for growth.

IMHO, Merck is still a great buy. Pfizer is a good buy. Both will do OK even if stock valuations fall in half overnight. They are that attractive!

Have fun.

John R.
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Post by ben »

I have been looking at PFE too - could be interesting. Cheers!
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Post by hocus2004 »

Intercst: "You'll find few reputable analysts suggesting that a retiree limit his or her withdrawals to 2% from an adequately diversified retirement portfolio."

JWR1945: " It is one thing to assert that it is possible for an investor to obtain a Safe Withdrawal Rate greater than 2%. It is quite different for intercst to claim that a specific allocation of the S&P500 index and commercial paper will do the job."

The fact that intercst engages in such word games shows that he lacks confidence in his SWR claims. If he believed that a reasoned case for his claims could be put forward, he would permit reasoned discusssion of the realities of SWRs at the Motley Fool board.
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Post by hocus2004 »

"I feel VERY confident that a 3% w/r from such a diversified portfolio and never selling (say of dividends drop to 2.5%) is as safe as it gets."

I think it is safe to say that the approach you describe is a good bit safer than the approach characterized in the REHP study as "100 percent safe."
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Post by hocus2004 »

"My only addition is the feel-good factor of knowing I can live off the income flow alone, it makes the FI so much more "real" to see my RE budget being paid into my broker account from that as we speak! "

This "It Makes It Real!" Factor is a big deal, in my view.

Leaving the valuations question aside for the time being, one of the things that I very much dislike about the REHP study is the artificiality of the analytical approach employed. Everything depends on the assumption that the investor will not sell a single share of stock even if he experiences a drop in portfolio value of 50 percent or more. I cannot recall ANYONE other than intercst ever defending this assumption. It is an obvious absurdity. Yet it is absolutely critical to the findings of the study. If that assumption ends up being even a little bit false, if the investor ends up selling even just a share or two, the entire building topples to the ground. The silly claim that "you can safely take out 4 percent from a high-stock portfolio regardless of how high valuations go!" is premised on the idea that there will be at least one dollar remaining in your portfolio at the end of 30 years if you never sell a single share. Sell a single share, and the study no longer "works."

Why should people devote years of effort to accumulating enough assets to retire early and then throw it all away by using such a silly assumption on which to base their investment decisions? Shouldn't we aim to be as realistic in our investing strategies as we are in our saving strategies? I sure think so. All investors who use studies like the REHP study to inform their investing decisions are done serious harm by doing so. But aspiring early retirees are generally hurt far more than most others. As a general rule, we have saved more, so we have more assets at risk. I would think that if there were any group of people who would be interested in the accuracy of SWR research, it would be aspiring early retirees.

"Make It Real" is a motto that has served me well on a number of occasions. One case was when I was trying to persuade my wife of the merits of my Retire Early saving strategies. She was not ever hostile, but I think it is fair to say that at one time she was skeptical. The thing that brought her around was when we paid off the mortage (I did this before putting any money into TIPS or ibonds or CDs). When the first month came in which she did not need to write a big check to the company that held our mortage, she became a believer that this stuff works.

You can argue that this should not be required. There's a sense in which it should be enough to write some numbers on a piece of paper and show it to her. I showed her lots of pieces of paper in the early days, and all I can tell you is that the human mind often perceives a difference between something working on paper and something working in the real world. When we didn't have to send a mortage check in any more, the Retire Early idea was transformed in my wife's mind from something that works on paper to something that works in the real world. That made a big difference for me because her efforts were critical to our efforts to reach our goals. There are things that I am good at and there are things that she is good at. When our efforts are combined, we are a pretty darn powerful team. We were not really a team re the financial freedom question until that month when she no longer had to send in a mortgage check.

A second example of the "Make It Real" phenomenon was when we used to take two-hour walks each weekend to go through all the details of our plan. She has lots of practical questions and I was able to recite lots of the numbers from memory in those days (I'm actually LESS intense about this stuff today than I was then, believe it or not). One time I was reciting the number for how much we had in our Section 401(k) plans, and she stopped me. "Don't you have to pay taxes on that amount when you take it out?" She is of course correct. It is wrong to count the full amount of your Section 401(k) plan as your "savings" since you only get to make use of the after-tax portion to finance your costs of living. This was a complication that I had simply never thought about until then. I was counting the entire Section 401(k) amount as if it were savings that belonged to us alone. Why had I missed it? Because I hadn't taken the important step of MAKING IT REAL. I was just plugging in numbers and needed to focus on how the real things being represented by those numbers was actually going to be put to use down the line.

This is the sort of thing that Ben is talking about in his comment above. There are lots of people who have fears about submitting the resignation letter, even when they have spent years thinking through the theory of early retirement. Ben is saying that he is already seeing income being produced by his investments on a monthly basis, so this income stream has become "real" to him. All that he will be doing when he hands in the resignation is changing the direction in which this income stream is channeled. This is a very important point, in my assessment. His approach is not a mumbo-juimbo, hide-the-assumptions approach, like the REHP approach. His approach may not possess 100 percent theoretical purity (please note that he does not make absurd claims of "100 percent safety", a sign that he is not working a con). But his approach is sensible. His approach is rooted in real-world things. His approach has been tested (he has been watching the income stream for some time) and it appears to be able to hold up under a number of different scenarios.

Ben's approach is not perfect for everyone, in my view. I see it as being better for people in some varieties of circumstances than for those in others. But his claims for his approach are not extravagent ones. They are reasonable. This gives me confidence that he knows what he is doing, When I hear intercst say that anyone who follows any approach other than his suffers from "mental illness," I LOSE confidence in the intercst approach. I wonder, why so defensive? Why so unwilling to respond to questions? Why so unable to engage in reasoned discourse? It's hard for me to believe that there are not a whole bunch of others with similar thoughts, and that means that our unwillingness to permit reasoned discussions on investing questions has caused us to lose a lot of good posters who otherwise might be participating in our discussions.

A third illustration of the importance of Making It Real comes from some comments on my book that I received from one of JWR1945's daughters. I sent JWR1945 a late-version draft last New Year's Eve. He read it quickly, sent me his feedback, and indicated that he would like to have his daughters read the book. I sent them copies, and one of the daugthers sent me a good number of helpful comments.

In one comment, she referred to some numbers I put forward in Chapter Eight ("Middle-Class Millionaries") in which I was arguing that the increase in middle-class incomes that we have seen since the mid-20th Century has made it possible for those who manage their money effectively to free themselves from dependence on a paycheck remarkably early in life. She told me that she found some of the claims that I put forward to be hard to believe. So she took out a calculator to see for herself how much a difference it makes to save more than the standard 10-percent-of-income saving target. She said that she was amazed to see what the calculator told here. Her reaction was to get serious enough about this stuff to have a conversation with her husband in which she put forward the idea of cutting back on spending in some areas. Was it my words that made a difference? Only as a prompting. The real difference was made by the calculator, which took the abstract concepts I had put forward and Made Them Real for her. (One of her suggestions was that I publish a workbook to go along with the "Passion Saving" book, and I think that that is an outstanding idea that may ultimately help a lot of people win financial freedom early in life. So thanks, JWR1945's daughter!)

I love theory. But there is a point at which theory has to be translated into action, and for that to happen successfully, there needs to be some reality to the theory. Theory divorced from reality is bad theory. The theory that drives the REHP study is theory divorced from reality, bad theory.

You know what REHP study enthusiasts are saying today when people point out to them that the extremely high valuations that apply today make stocks a less attractive investment choice than they are at most other times? They are holding "the Study" against their chests like a protective cloak and saying "Oh no, a 4 percent withdrawal works REGARDLESS of valuations, this study PROVES it so!" And you know what they will say when valuations go down hard? They will say "the study failed! I have to sell!"

Ask intercst about this and he will say that anyone who sells when prices go down is a "dimwit," a non-INTJ, someone who has not yet attained the "MasterMind Investor" status that he claims for himself. But are those who sell when prices go down really dimwits? Not if they really believe that how stocks have performed in the past is a reasonable guide to assessing how they may perform in the future. Remember, "the Study" makes no adjustment for valuations, and the historical data shows that the valuation level that applies on the start date of the retirement is the single biggest factor that determines whether the retirement succeeds or not. What is going to happen is that AFTER prices go down the REHP study enthusiasts are going to acknolwedge that valuation levels are a critical factor in determining an SWR. Say that valuations drop enough so that 4 percent really does become the SWR for a high-stock portfolio. The REHP study enthusiasts will then understand that the historical data finally supports their idea of employing a 4-percent take-out from a high-stock portfolio. But they will not have enough assets at that time for a 4 percent take-out to cover their costs of living (presuming that they need a 4 percent take-out to support their costs of living at the price levels that apply today, or at whatever time their retirements began). So they are going to have to restructure their plans. Not because they are "dimwits." Because they pinned their hopes on the unrealistic assumption that for the first time in history price levels will have zero effect on SWRs.

The REHP study advocates an investing approach that is not at all a "Make It Real" investing approach. It is a fanciful approach, a la-la land approach, a Get Rich Quick approach. It may well work for intercst. There are indeed some people who manage to get rich quick through pure luck, and it appears that intercst may end up being one of them. He went with an "All Stocks All the Time!" investing strategy at a time in history when doing so turned out to be an approach that generated lots of wealth quickly. Does that mean that others are "100 percent safe" in trying to follow in intercst's footsteps? It does not. Get Rich Quick schemes work for some and not for others. The intercst investing recommendations are dangerous investing recommendations. In all likelihood his study will end up being responsible for hundreds (if not thousands) of busted retirements.

I don't like the idea of our movement being perceived as being rooted in a Get Rich Quick scheme. That's not what most of us are about. There are all sorts of people who have posted to the various boards who are being entirely sensible in the investment approaches that they are following. Those are the people who I want to hear from. I want to hear what JWR1945 has to say, and what FoolMeOnce has to say, and what Wanderer has to say, and what Ben has to say, and what hundreds and hundreds of other aspiring early retirees have to say. Those are the people I learn from, and so those are the people I want to hear expressing their views on the various boards.

Intercst? I haven't learned anything from him in years now, not since late 2000, when the price levels of stocks went down a bit and he lost interest in the subject of early retirement (did he really think that this would never happen again because he had assumed the possibility out of existence with the publication of his study?) If he never put forward another post, I doubt that I would miss out on anything too important. And even if there were some small thing that I would miss out on by him never putting forward another post, that loss would be more than countered by what I would gain from hearing from the hundreds of others who would feel free to talk about investing in an honest and informed way if intercst would just kindly go away and leave the rest of us in peace.

We are not a Get Rich Quick Society, and it embarasses me that the DCMs populate the various boards with so many posts indicating that we are. We are at heart a people that cares about winning financial freedom in realistic ways. I think that over time people like Ben who see the importance of being realistic in the development of their own plans will also see the need for permitting reasoned discussion on the boards so that they can be put to use helping newcomers to put together realistic plans too. That when the real fireworks (the good kind!) begin.
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Post by hocus2004 »

Here's a link to a thread at the Early Retirement Forum that discusses the Intercst article on 2 percent SWR claims.

http://early-retirement.org/cgi-bin/yab ... 44;start=0

Intercst participated on this thread, giving me an opportunity to ask him for a response to the statements by William Bernstein that the methodology used in the REHP study is "highly misleading" at times of high valuation and that any aspiring retiree thinking of making use of the intercst SWR numbers to plan a retirement today would be well-advised to "Fuggedaboutit."

Intercst: "re: Bernstein This question has been answered for hocus so many times on the various retire early boards, that it only confirms "Hoco-mania".

"Hocus continues to be unable to differentiate between future stock market returns (which we don't know) and historical stock market returns (which we can calculate to three or more significant figures of precision.)

"Bernstein (or anyone else) doesn't know what future stock market returns will be. The "higher valuations" might lead to lower long term returns that provide a 30-year SWR of less than 4%, they might not.

"The historically high stock market valuations in 1929 required the additional factors of the Great Depression and a 25% unemployment rate to knock the SWR down to 4%. I see no evidence that those accompanying factors are present today nor were they present at the market peak in 2000.

"Over on the Motley Fool board, prometheuss recently offered this rebuttal to hocus's continuing misinterpretation of Bernstein.

http://boards.fool.com/Message.asp?mid=21783972

"<<arrete: Beyond that, you can fairly see the envy dripping out of his [hocus] post. All talk and no substance. All he can do (apparently) is slime other people.>>

prometheuss: "Good point. The question YKW [i.e., hocus] asked was answered several times, but no answer can satisfy him because his envy clouds his judgment.

http://boards.fool.com/Message.asp?mid=18201341

prometheuss:"The book "Four Pillars of Investing," by William Bernstein, discusses the efficient frontier in great detail. On page 234, Bernstein makes the following statement in regard to safe withdrawal rates for stocks:

"A particularly bad returns sequence can reduce your safe withdrawal rate amount by as much as 2 percent below the long-term return of stocks. Recall from Chapter 2 that it's likely that future real stock returns will be in the 3.5 percent range, which means that current retirees may not be entirely safe withdrawing more than 2 percent of the real starting values of their portfolios per year."

"YKW ignores everything Bernstein says and grasps at the 2% number to counter his nemesis. No one has ever disputed that a future with 3.5% real stock market returns would reduce the SWR. After all, such a future would be much worse than the historical record. Bernstein says that such a future might occur for someone who retires at the height of the 90's bull market. And it might--or it might not.

"</snip>

intercst:"I concur with prometheuss's remarks. "

Intercst was then asked by BobSmith why the 3.5 percent real return for stocks indicated by the Gordon Equation would translate into an SWR for stocks of only 2 percent,

Intercst: "Depends on the pattern of returns over the 30-year pay out period. It could happen when combined with a 3.5% real return (which is much less than the historical average.)

"On the other hand, we could be hit with an asteroid, nuclear war, or worldwide deadly plague before then.

"That's why Bernstein doesn't recommend that anyone actually limit their withdrawals to 2%."

The SWR is the withdrawal rate that works in a worst-case returns sequence. Intercst here acknowledges that it "depends on the pattern of returns" whether a withdrawal greater than 2 percent would work or not for retirements beginning at the top of the bubble. That's something.

However, he continues to practice deception in the suggestions that he puts forward that some sort of economic calamity is required for the Gordon Equation to accurately predict long-term stock returns. Bernstein makes clear in Chapter Two of his book "The Four Pillars of Investing" that no such econonic calamity is necessary for the Gordon Equation to provide reasonably accurate predictions of long-term returns. Bernstein says on Page 72 of his book: "The ability to estimate future stock and bond returns is perhaps the most critical of investment skills. In this chapter, we've reviewed a theoretical model that allows us to compute the 'expected returns' of the major asset classes on an objective, mathematical basis." I put up the "What Bernstein Says" post on August 27, 2002, so intercst has had more than two years to review Bernstein's SWR statements.

I stand by my recommendation that responsible community members take steps to see that intercst's posting privileges are revoked at the various FIRE/Retire Early/Passion Saving boards. We all have both a right and responsibility to protect fellow community members from posters who have put their personal agendas above the long-term health of the board communities by engaging in posting practices likely to result in large numbers of busted retirements in coming days.

For the benefit of those unsure whether gaining access to the material set forth at the Early Retirement Forum thread is worth taking the trouble of clicking the link provided, it might be worth noting here that the thread also features a nice picture of a big fish.
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Post by JWR1945 »

I continue to be amazed by the advocates of the conventional methodology.

It takes a special kind of mind to twist William Bernstein's 80% comment into saying that a 40% chance of success is essentially the same as a 76% chance of success. Yet, that is where intercst would lead us.

It takes a special kind of mind to reject the totality of probability theory regarding the future. Yet that is what Prometheus and others are doing when they say that the future is unknowable.

It is not as if the advocates of the conventional methodology were ignorant. They have been told the truth many times over. They have been told about the Gordon Equation in chapter 2 of William Bernstein's book. They have been told about his comments on page 234 cautioning that anything higher than 2% is potentially hazardous. They willfully, repeatedly and selectively forget what they find convenient to forget.

Have fun.

John R.
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Post by hocus2004 »

"They willfully, repeatedly and selectively forget what they find convenient to forget. "

At least they got it right about the fish thing. That really was an impressive-looking fish that Cut-Throat caught.
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Post by unclemick »

Yes the Soap Opera is great fun. If it keeps people fired up enough to keep running data sets/analysis - that's where the 'acres of diamonds lie'.

I repeat: as of 1/05/05 - SEC yield for Vanguard Balanced Index (a 60/40) = 2.39%.

Long strings of data may be boring for non numerical cats but therein lies illumination.

Your library may have Ben Graham's The Intelligent Investor - 1949 or the 1973 4th ed. - page 41: The Basic Problem of Bond-Stock Allocation.

I understand Jason Zweig has edited a newer version of Ben Graham's classic.

Raddr's forays into international and commodities instruments and John R's dividend and TIP's investigations are the areas where 'perhaps' the acres of diamonds lie.

Number on dudes!
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ben
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Post by ben »

Uncle mick - what the heck IS SEC yield!? I have always presumed it means dividends/interest? The SEC part is obviously not the Securutues and Exchange commission...
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and http://www.investopedia.com/terms/s/secyield.asp says:
A standard yield calculation developed by the Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds. It is based on the most recent 30-day period covered by the fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the period, after the deduction of the fund's expenses. This is also referred to as the "standardized yield."


The SEC yield is a good yield to use when you compare bond funds because it captures the effective rate of interest that an investor can receive in the future.
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I.e. it refers to bond funds ONLY. Cheers, Ben
Normal; to put on clothes bought for work, go to work in car bought to get to work needed to pay for the clothes, the car and the home left empty all day in order to afford to live in it...
unclemick
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Post by unclemick »

Thanks Ben

Meant to answer on the other forum - but got distracted. It's the SEC method of calculating the annualized yield of mutual funds(all kinds) so the dividend and interest payout can be compared among all funds.

Does not include cap gains.
hocus2004
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Post by hocus2004 »

"The Soap Opera is great fun."

I strongly disagree. The soap opera aspects of the SWR discussions have been a huge time sink. We have lost scores of community members who got fed up with the nonsense. We have lost opportunities to do wonderful things with the insights that we have developed over the past 32 months. Had we taken a construcitve approach to these discussions, we would by today have had our findings written up in places like the Wall Street Journal and the Scott Burns column and those write-ups would have brought lots of new talent into the various FIRE/Passion Saving/Retire Early communities. We have also lost a lot of our self respect as we have seen ourselves spending not days, not weeks, not months, but YEARS wallowing in mud. The Soap Opera aspect of this thing have been an unmitiigated DISASTER from Day One. Good riddence to the nonsense (presuming that it is now on its way out, as is my sense of things).

"If it keeps people fired up enough to keep running data sets/analysis - that's where the 'acres of diamonds lie'. "

This is a wonderful comment, UncleMick, one of the most profound insights I have seen posted re this matter. Our community has engaged in its discussions of the realities of SWRs in the most twisted, screwed-up, back asswards, confused, mixed-up, inefficient, wasteful way imaginable. Despite all that, we have LEARNED big-time. We overcame the obstacles and we generated insights that are going to set the world of investing advice on its head in days to come.

That's what we do. We struggle with the material and we learn. We've been doing it since May 1999, when intercst founded the first board, and we are going to continue doing it for a long time to come. Why? Because the work we do at these boards is so darn important that we just can't stop ourselves no matter how screwed-up an approach to the process we elect to take.

We haven't proceeded in the most graceful manner possible. But we have advanced the world's knowledge of how to win financial freedom all the same. We did the job we came here to do. Good for us.

And we are going to just keep on doin' for a long time to come. That's an exciting reality to contemplate. I recall the Logic Chain on this aspect of things once put forward by one of my favorite personal finace advisors of all time.

Juicy Karen Carpenter Premise #1: "We find a place where there's room to grow."

Juicy Karen Carpenter Premise #2: : "We start out walking and learn to run."

Juicy Karen Carpenter Conclusion: "We've only just begun."
JWR1945
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Post by JWR1945 »

unclemick wrote:Yes the Soap Opera is great fun. If it keeps people fired up enough to keep running data sets/analysis..
Unfortunately, it works the other way. It has seriously hindered our progress.

Friendly competition is good. Harsh, destructive rhetoric is not. Toss in some out-and-out lies and intentional misrepresentation and you get to where we are today.

Have fun.

John R.
unclemick
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Post by unclemick »

Heh,heh - Bogle still has a copy of "Index Funds are Un-American" poster on his web site. Johnson and Fidelity have caved over time(offered index funds) but I doubt they are the best of buddies.

Post the numbers and let history decide.

Alas, the strong rants seem to draw more views than the the number runs. Perhaps I'll be seeing some of them at Walmart in the future.
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