hocus2004 wrote:One difference is that VBINX is TOTAL US market and TOTAL bond market - no need that the 2000 retiree stick to SP500 and gov bonds only when a fund like that is available. Only reason we keep looking at SP500 and gov bonds further back is that we do not HAVE the total market data.
I am not impressed by a showing that the Ben approach has done OK for five years. Any approach can do OK for five years. I am impressed that the Ben approach seems to have done a good bit better than the REHP study approach during a five-year time-period in which the REHP study approach did not well. This suggests to me that the Ben approach is another reasonable alternative to the intercst recommendation that all aspiring early retirees go with 74 percent S&P stocks regardless of valuation levels.
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I see the Ben approach as a seventh alternative to the intercst approach. Ben is advocating an approach similar to one that I gave serious consideration to when I was putting together my plan....The 60/40 portfolio that Ben is examining in this thread is not a true Permanent Portfolio...I think he just went with the 60-40 thing here to simplify.
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I see the Ben approach (the Permanent Portfolio approach) as being an alternative worthy of further study. There are a good number who simply are not comfortable with the idea of timing. This...calls for significant investment in stocks but which may well provide for a SWR significantly higher than the SWR obtained from the REHP approach at times of high valuations for S&P stocks. We need to look at some data to confirm this, of course. But it makes sense to me that the 60-40 total stock/total bond fund examined by Ben in his posts above might have a higher SWR than a 74 percent S&P stock portfolio at today's valuation levels. The Ben fund is more diversified, so one would intuitively expect that the highs would not be as high and the lows would not be as low.
My bottom line here is that I think that Ben is onto something significant....
I understand that it may be difficult or even impossible to do numbers investigations to confirm the value of the Ben approach because of a lack of pertinent data. My hope is that we might be able to come up with some creative ways of exploring the concept and assessing its workability....
I am pretty sure that we can modify our calculators to include the equivalent of bond ladders. If I am correct, we will then be able to simulate balanced funds much more realistically than we have up until now.
I have started a new thread Bond Ladders? that shows what I have available to for creating a new set of inputs. Such ladders could be formed out of treasury notes (5-years), bonds (30-years), TIPS and I-bonds tied in with the CPI along with TIPS and I-bonds tied in with the PPI.
Our calculators need to have a single number, the effective interest rate or return, for each year. I doubt that we will be able to lock-in favorable interest rates. But I think that we can simulate bond ladders.
Have fun.
John R.