MachineGhost wrote:
ochotona wrote:
Maybe the 21st Century PP is 50% US stocks, 50% non-US, and a big slice of those Emerging markets.20% REIT, 20% Gold, 20% US Treasuries... ooops, that's Meb Faber's Ivy-5 portfolio. The backtesting shows Faber's has almost 3% more CAGR for similar Sharpe ratio. MAXDD is large but isn't terrible at 21.64%.
I don't like unbalanced risk like that. They don't consider that equal weight diversification into a similar asset class is not real diversification. You ultimately need to decide on your top level strategic allocation and then fit everything equally into those three quadrants as the PP does. The Volatility PP Sr is a good start, but the equity exposure is rather low. I think the only guideline we really have is the safe withdrawal rates chart otherwise it seems like a crapshoot to decide what to use for strategic.
the chert is a guideline but the ultimate guideline will still be monitoring your own results for that proverbial 2% real return the first 15 years of retirement .
don't forget how the 1960's had the worst possible sequences the first 15 years and the best market run up in history the next 15 but it was to little to late . they already over spent down their assets the first 15 years .
with results from all asset classes pointing to below average performance this is really going to make things tough to go by what was in the past .
it figures i would retire smack in to it . but luckily our plan has a lot of discretionary spending in it so cutting withdrawals a bit may not be much fun but it can be done .
the good news is the safe withdrawal rates are called safe because they are already so conservative just because they are based around the worst conditions we have had and they were already pretty nasty .
the other good thing is that we will be not only dynamic with the portfolio but dynamic with the budget as each year will be based not on some fixed percentage of an opening balance but on the actual balance yearly .
the issue i have with the "4% rule " is 90% of the time you died with more than you started . not enjoying more things in life that cost money that you could have is not a good thing either .
so even if you go the standard 4% withdrawals inflation adjusted you still need a means of increasing withdrawals or risk leaving to much unspent on the table .
to conservative is no good either ,.
bob clyatt's dynamic spending method automatically gives you more when markets are up .
it can be hard as heck trying to come up with a spending plan using the 4% rule as any increases in a good market can't easily be spent since you are going to need them as a cushion in a down market since the income stream has to remain constant .
the dynamic method does not have a constant income stream . it can vary on the upside unlimited and is limited to just 5% cuts each year on the down side .
but spending methods in retirement are a whole other topic and could be their own discussion and this topic is about the pp in the accumulation stage not the decumulation stage ..