NoFeeBoards.com!

No Fees! No Ads! No Spam!

Log in Register FAQ Memberlist Search NoFeeBoards.com! Forum Index

Best Allocations versus Time
Goto page 1, 2  Next
 
Post new topic   Reply to topic    NoFeeBoards.com! Forum Index » SWR Research Group
View previous topic :: View next topic  
Author Message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:21 am    Post subject: Best Allocations versus Time Reply with quote

I made a survey to determine the best allocations for portfolios of stocks and commercial paper when withdrawing over periods of 10, 20 and 30 years.

The data generally favor stock allocations close to 50%. There are minor differences that vary with the time period and whether one rebalances his portfolio. In fact, the surviving withdrawal rates with 10 and 20-year time periods were the same with and without rebalancing.

The data shout at us that a portfolio of stocks and commercial paper is a horrible idea, especially as one grows older. The biggest culprit is commercial paper. In most cases, it drags surviving withdrawal rates below that of an inflation-matched cash equivalent (such as TIPS at a zero percent interest rate).

But stocks are guilty as well. If commercial paper were alone in dragging withdrawal rates down, the best allocations would always have a high percentage of stocks.

Only when the time remaining is very long (in this case, thirty years as opposed to twenty years) does a portfolio of stocks and commercial paper compete with inflation-matched cash equivalents.

I did not make any adjustments for valuations in this survey. We have learned from other studies that it is best to rebalance portfolios when valuations are very high, as they are today. A better alternative for today might be to move into inflation-matched cash equivalents until valuations improve and/or to adopt a dividend-based strategy.

The Survey

I used my Deluxe Calculator V1.1A08 to determine surviving withdrawal rates for portfolios beginning in 1921-1980. I varied the withdrawal rate in increments of 0.1%. I recorded the highest surviving withdrawal rate with zero failures. And I recorded the lowest withdrawal rates at which there were 1 or more, 6 or more and 12 or more failures.

I looked at stock allocations of 0%, 20%, 50%, 80% and 100% with and without rebalancing. I looked at time frames of 10, 20 and 30 years.

I set the initial balance to $100000. I set expenses at 0.20%. I varied withdrawals to match inflation according to the CPI. The portfolios all consisted of stocks (as represented by the S&P500) and commercial paper. Other conditions were left at their default settings.

Tables

I have included my data in tables that follow this post.

Data Analysis

With a 10-year period, the best stock allocation was always 50%. Rebalancing improved the surviving withdrawal rate of the worst case sequence by 0.1%. Rebalancing made no difference when comparing rates with 6 (or more) and 12 (or more) failures.

TIPS at a zero percent (real) interest rate allow you to withdraw 10% annually for ten years. You can match this rate only by allowing the number of failures to exceed 6 (out of 60 conditions).

With a 20-year period, the best stock allocation without rebalancing was 50%. With rebalancing, there were some conditions that require an 80% stock allocation instead of 50%. The best surviving withdrawal rates were identical with and without rebalancing.

TIPS at a zero percent (real) interest rate allow you to withdraw 5% annually for twenty years. You can match this rate only by allowing at least one failure, but less than 6 failures (out of 60 conditions).

With a 30-year period, the best stock allocation at the first failure always included 50%. Rebalancing reduced the surviving withdrawal rate of the worst case sequence by 0.1% with stock allocations of 50% and 80%. Rebalancing improved the surviving withdrawal rate at 6 (or more) failures by 0.1%. The best stock allocation with 6 (or more) failures was 80% with rebalancing. Both 50% and 80% were best without rebalancing. If you are willing to accept the risk of 12 (or more) failures (out of 60 conditions), it is usually best to allocate everything into stocks. [This is not true today. We know this because we can now discern the effects of valuations.]

TIPS at a zero percent (real) interest rate allow you to withdraw 3.33% annually for thirty years. The historical surviving withdrawal rate of a 50% stock and 50% commercial paper allocation was 3.9% with rebalancing. It was 4.0% without rebalancing. TIPS must have a real interest rate of 1.3% to allow you to withdraw more than 4.0% safely each year for 30 years.

Conclusions

The traditional advice for investors is to reduce their stock allocations as they grow older. The data do not say this.

The traditional advice for investors is to maintain their stock allocations through rebalancing. The data do not say this.

The traditional advice by Benjamin Graham was for investors is to start with a 50% stock allocation and then to make adjustments depending upon the attractiveness of their investment choices. These data are consistent with such advice. They are not sufficient in themselves to prove this.

A portfolio of stocks and commercial paper is a horrible idea, mainly because commercial paper is a bad choice. Inflation-matched cash equivalents are far superior to commercial paper.

We know from other research that rebalancing stocks and commercial paper is a bad idea except when stock valuations are exceedingly high. Today's stock valuations are exceedingly high. They are well above the pre-bubble historical range.

In the absence of my other findings, I would have recommended starting with a 50% stock allocation, but without rebalancing. In light of those other findings, I recommend preserving capital and focusing on income streams.

Have fun.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:28 am    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and commercial paper. Expenses equal to 0.20%.

WITH REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None    7.5    8.1     8.7    8.0    7.4
1       7.6    8.2     8.8    8.1    7.5
6       8.2    9.1     9.7    9.5    8.6
12      9.4    9.9    10.3    9.8    9.9



WITHOUT REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   7.5     8.2     8.6    8.0    7.4
1      7.6     8.3     8.7    8.1    7.5
6      8.2     9.3     9.7    9.5    8.6
12     9.4    10.0    10.3    9.8    9.9

More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:32 am    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and commercial paper. Expenses equal to 0.20%.

WITH REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.4    4.1    4.7    4.8    4.5
1      3.5    4.2    4.8    4.9    4.6
6      3.8    4.8    5.5    5.3    5.0
12     4.0    5.3    5.7    5.7    5.5


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.4    4.3    4.8    4.7    4.5
1      3.5    4.4    4.9    4.8    4.6
6      3.8    5.0    5.5    5.2    5.0
12     4.0    5.6    5.7    5.6    5.5


The table for 30 years comes next.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:37 am    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and commercial paper. Expenses equal to 0.20%.

WITH REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   2.3    3.0    3.9    3.9    3.7
1      2.4    3.1    4.0    4.0    3.8
6      2.5    3.4    4.4    4.5    4.3
12     2.8    3.9    4.6    4.7    4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   2.3    3.4    4.0    3.9    3.7
1      2.4    3.5    4.1    4.0    3.8
6      2.5    3.9    4.4    4.4    4.3
12     2.8    4.3    4.7    4.7    4.8


More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:43 am    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS

TIPS BASELINE for 10 YEARS:
TIPS at zero percent real interest permits you to withdraw 10% safely for 10 years.

WITH REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   50    8.7
1      50    8.8
6      50    9.7
12     50   10.3



WITHOUT REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   50    8.6
1      50    8.7
6      50    9.7
12     50   10.3

More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:46 am    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS

TIPS BASELINE for 20 YEARS:
TIPS at zero percent real interest permits you to withdraw 5% safely for 20 years.

WITH REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None     80   4.8
1        80   4.9
6        50   5.5
12    50,80   5.7


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   50   4.8
1      50   4.9
6      50   5.5
12     50   5.7

Still more to come.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Sun Feb 20, 2005 11:55 am    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS

TIPS BASELINE for 30 YEARS:
TIPS at zero percent real interest permits you to withdraw 3.33% safely for 30 years.
TIPS at 1.0% real interest permits you to withdraw 3.87% safely for 30 years.
TIPS at 1.1% real interest permits you to withdraw 3.93% safely for 30 years.
TIPS at 1.2% real interest permits you to withdraw 3.99% safely for 30 years.
TIPS at 1.3% real interest permits you to withdraw 4.05% safely for 30 years.
TIPS at 1.4% real interest permits you to withdraw 4.11% safely for 30 years.
TIPS at 1.5% real interest permits you to withdraw 4.16% safely for 30 years.

WITH REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None    50,80   3.9
1       50,80   4.0
6          80   4.5
12        100   4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None       50   4.0
1          50   4.1
6       50,80   4.4
12        100   4.8


Have fun.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 3:21 pm    Post subject: Reply with quote

WR1945 wrote:
Best Allocations versus Time

I made a survey to determine the best allocations for portfolios of stocks and commercial paper when withdrawing over periods of 10, 20 and 30 years.
...
Conclusions

The traditional advice for investors is to reduce their stock allocations as they grow older. The data do not say this.

The traditional advice for investors is to maintain their stock allocations through rebalancing. The data do not say this.
...
We know from other research that rebalancing stocks and commercial paper is a bad idea except when stock valuations are exceedingly high. Today's stock valuations are exceedingly high. They are well above the pre-bubble historical range.
...

I have just completed collecting data with TIPS with interest rates of 0%, 1% and 2%.

TIPS data differ significantly from data using commercial paper.

TIPS data favor reducing stock allocations as one ages. Kind of.

TIPS data favor rebalancing always. More precisely, it is always best to rebalance when you select the best allocation at a given number of years and at a given number of failures. If you simply specify an allocation instead of selecting the best, you may be better off not rebalancing.

Commercial paper is similar to TIPS at a 1% interest rate. Kind of. But there is an important qualitative difference that changes the story regarding rebalancing.

Have fun.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 3:32 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 0% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
8.8    9.4     9.0     8.0    7.4
8.9    9.5     9.1     8.1    7.5
9.6    9.9     9.6     9.0    8.6
9.8   10.0    10.1    10.2    9.9


WITHOUT REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
8.8    9.2     8.9     8.0    7.4
8.9    9.3     9.0     8.1    7.5
9.6    9.8     9.4     8.9    8.6
9.8   10.0    10.0    10.0    9.9

More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 3:33 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 0% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
4.3   4.8    4.8    4.7    4.5
4.4   4.9    4.9    4.8    4.6
4.8   5.1    5.2    5.2    5.0
4.8   5.2    5.5    5.5    5.5


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
4.3   4.7    4.7    4.6    4.5
4.4   4.8    4.8    4.7    4.6
4.8   5.0    5.0    5.1    5.0
4.8   5.2    5.4    5.4    5.5

More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 3:36 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 0% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
2.8    3.4    3.7    3.7    3.7
2.9    3.5    3.8    3.8    3.8
3.2    3.6    4.0    4.3    4.3
3.2    3.7    4.3    4.7    4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
2.8    3.4    3.6    3.7    3.7
2.9    3.5    3.7    3.8    3.8
3.2    3.7    4.0    4.2    4.3
3.2    3.7    4.4    4.7    4.8


The 0% TIPS SUMMARY follows.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 3:56 pm    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS

TIPS Ideal BASELINE for 10 YEARS:
TIPS at zero percent real interest ideally permits you to withdraw 10% safely for 10 years.

WITH REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None    20      9.4
1       20      9.5
6       20      9.9
12      80     10.2


WITHOUT REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   20        9.2
1      20        9.3
6      20        9.8
12   20,50,80   10.0


OPTIMAL STOCK ALLOCATIONS

TIPS Ideal BASELINE for 20 YEARS:
TIPS at zero percent real interest ideally permits you to withdraw 5% safely for 20 years.

WITH REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None       20,50   4.8
1          20,50   4.9
6          50,80   5.2
12     50,80,100   5.5


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None      20,50   4.7
1         20,50   4.8
6            80   5.1
12          100   5.5


OPTIMAL STOCK ALLOCATIONS

TIPS Ideal BASELINE for 30 YEARS:
TIPS at zero percent real interest permits you to withdraw 3.33% safely for 30 years.
TIPS at 1.0% real interest ideally permits you to withdraw 3.87% safely for 30 years.
TIPS at 1.1% real interest ideally permits you to withdraw 3.93% safely for 30 years.
TIPS at 1.2% real interest ideally permits you to withdraw 3.99% safely for 30 years.
TIPS at 1.3% real interest ideally permits you to withdraw 4.05% safely for 30 years.
TIPS at 1.4% real interest ideally permits you to withdraw 4.11% safely for 30 years.
TIPS at 1.5% real interest ideally permits you to withdraw 4.16% safely for 30 years.

WITH REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   50,80,100   3.7
1      50,80,100   3.8
6         80,100   4.3
12           100   4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   80,100   3.7
1      80,100   3.8
6         100   4.3
12        100   4.8

Notice that withdrawal rates at the best stock allocations with rebalancing are always as good as or better as without rebalancing.

The message is this: always rebalance portfolios of stocks and TIPS.

[Strictly speaking, this applies only when your portfolio survival requirements are 80% and better.]

Have fun.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:01 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 1% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None    9.3     9.8     9.2     8.1    7.4
1       9.4     9.9     9.3     8.2    7.5
6      10.1    10.3     9.8     9.1    8.6
12     10.3    10.4    10.3    10.3    9.9


WITHOUT REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None    9.3     9.6     9.1     8.1    7.4
1       9.4     9.7     9.2     8.2    7.5
6      10.1    10.2     9.7     9.0    8.6
12     10.3    10.3    10.2    10.2    9.9

More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:03 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 1% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   4.7    5.2    5.1    4.7    4.5
1      4.8    5.3    5.2    4.8    4.6
6      5.3    5.5    5.5    5.3    5.0
12     5.4    5.6    5.7    5.6    5.5


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   4.7    5.0    5.0    4.7    4.5
1      4.8    5.1    5.1    4.8    4.6
6      5.3    5.4    5.3    5.1    5.0
12     5.4    5.5    5.6    5.5    5.5

More 1% TIPS data follow.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:06 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 1% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.3    3.8    3.9    3.8    3.7
1      3.4    3.9    4.0    3.9    3.8
6      3.7    4.0    4.3    4.4    4.3
12     3.7    4.1    4.6    4.8    4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.3    3.8    3.8    3.8    3.7
1      3.4    3.9    3.9    3.9    3.8
6      3.7    4.0    4.2    4.3    4.3
12     3.7    4.1    4.6    4.8    4.8

The 1% TIPS SUMMARY follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:19 pm    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS
1% TIPS data

TIPS Ideal BASELINE for 10 YEARS:
TIPS at 1% real interest ideally permit you to withdraw 10% safely for 10 years.

WITH REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   20    9.8
1      20    9.9
6      20   10.3
12     20   10.4


WITHOUT REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   20    9.6
1      20    9.7
6      20   10.2
12   0,20   10.3


OPTIMAL STOCK ALLOCATIONS
1% TIPS data

TIPS Ideal BASELINE for 20 YEARS:
TIPS at 1% real interest ideally permit you to withdraw 5% safely for 20 years.

WITH REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None    20   5.2
1       20   5.3
6    20,50   5.5
12      50   5.7


WITHOUT REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   20,50   5.0
1      20,50   5.1
6         20   5.4
12        50   5.6


OPTIMAL STOCK ALLOCATIONS
1% TIPS data

TIPS Ideal BASELINE for 30 YEARS:
TIPS at 0% real interest permit you to withdraw 3.33% safely for 30 years.
TIPS at 1.0% real interest ideally permits you to withdraw 3.87% safely for 30 years.
TIPS at 1.1% real interest ideally permits you to withdraw 3.93% safely for 30 years.
TIPS at 1.2% real interest ideally permits you to withdraw 3.99% safely for 30 years.
TIPS at 1.3% real interest ideally permits you to withdraw 4.05% safely for 30 years.
TIPS at 1.4% real interest ideally permits you to withdraw 4.11% safely for 30 years.
TIPS at 1.5% real interest ideally permits you to withdraw 4.16% safely for 30 years.

WITH REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None       50   3.9
1          50   4.0
6          80   4.4
12     80,100   4.8


WITHOUT REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None    20,50,80   3.8
1       20,50,80   3.9
6         80,100   4.3
12        80,100   4.8

This is the summary for a portfolio of stocks and TIPS at a real interest rate of 1%.

Have fun.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:22 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 2% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None    9.7    10.2     9.4     8.2    7.4
1       9.8    10.3     9.5     8.3    7.5
6      10.6    10.7    10.1     9.2    8.6
12     10.9    10.8    10.5    10.4    9.9



WITHOUT REBALANCING AT 10 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None    9.7    10.0     9.4     8.2    7.4
1       9.8    10.1     9.5     8.3    7.5
6      10.6    10.6     9.9     9.1    8.6
12     10.9    10.7    10.4    10.3    9.9


More 2% TIPS data follow.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:24 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 2% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   5.2    5.6    5.3    4.8    4.5
1      5.3    5.7    5.4    4.9    4.6
6      5.8    5.9    5.8    5.4    5.0
12     5.9    6.0    6.0    5.7    5.5



WITHOUT REBALANCING AT 20 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   5.2    5.4    5.2    4.8    4.5
1      5.3    5.5    5.3    4.9    4.6
6      5.8    5.8    5.5    5.2    5.0
12     5.9    5.9    5.8    5.6    5.5


More follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:26 pm    Post subject: Reply with quote

NUMBER OF FAILURES and WITHDRAWAL RATES for 1921-1980
Stocks and TIPS at a 2% interest rate. Expenses equal to 0.20%.

WITH REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.8    4.3    4.2    3.9    3.7
1      3.9    4.4    4.3    4.0    3.8
6      4.2    4.5    4.6    4.5    4.3
12     4.3    4.6    4.9    4.9    4.8



WITHOUT REBALANCING AT 30 YEARS
Number of failures, Withdrawal Rates for 0% stocks, 20% stocks, 50% stocks, 80% stocks, 100% stocks

Code:
None   3.8    4.2    4.1    3.9    3.7
1      3.9    4.3    4.2    4.0    3.8
6      4.2    4.4    4.4    4.4    4.3
12     4.3    4.5    4.8    4.8    4.8


The 2% TIPS SUMMARY follows.

John R.


Back to top
View user's profile Send private message
JWR1945
***** Legend


Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Wed Feb 23, 2005 4:37 pm    Post subject: Reply with quote

OPTIMAL STOCK ALLOCATIONS
2% TIPS data

TIPS Ideal BASELINE for 10 YEARS:
TIPS at zero percent real interest ideally permit you to withdraw 10% safely for 10 years.

WITH REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None   20   10.2
1      20   10.3
6      20   10.7
12      0   10.9



WITHOUT REBALANCING AT 10 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None     20   10.0
1        20   10.1
6      0,20   10.6
12        0   10.9



OPTIMAL STOCK ALLOCATIONS
2% TIPS data

TIPS Ideal BASELINE for 20 YEARS:
TIPS at zero percent real interest ideally permit you to withdraw 5% safely for 20 years.

WITH REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None      20   5.6
1         20   5.7
6         20   5.9
12     20,50   6.0



WITHOUT REBALANCING AT 20 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None      20   5.4
1         20   5.5
6       0,20   5.8
12      0,20   5.9


OPTIMAL STOCK ALLOCATIONS
2% TIPS data

TIPS Ideal BASELINE for 30 YEARS:
TIPS at zero percent real interest permit you to withdraw 3.33% safely for 30 years.
TIPS at 1.0% real interest ideally permit you to withdraw 3.87% safely for 30 years.
TIPS at 1.1% real interest ideally permit you to withdraw 3.93% safely for 30 years.
TIPS at 1.2% real interest ideally permit you to withdraw 3.99% safely for 30 years.
TIPS at 1.3% real interest ideally permit you to withdraw 4.05% safely for 30 years.
TIPS at 1.4% real interest ideally permit you to withdraw 4.11% safely for 30 years.
TIPS at 1.5% real interest ideally permit you to withdraw 4.16% safely for 30 years.

WITH REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None      20   4.3
1         20   4.4
6         50   4.6
12     50,80   4.9



WITHOUT REBALANCING AT 30 YEARS
Number of failures, Best stock allocation(s), Withdrawal Rates

Code:
None         20   4.2
1            20   4.3
6      20,50,80   4.4
12    50,80,100   4.8


This is the summary when using stocks and 2% TIPS.

Notice that withdrawal rates at the best allocations with rebalancing are as good as or better than without rebalancing.

Have fun.

John R.


Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    NoFeeBoards.com! Forum Index » SWR Research Group All times are GMT - 9 Hours
Goto page 1, 2  Next
Page 1 of 2

 
Jump to:  
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Powered by phpBB © 2001- 2004 phpBB Group
Designed for Trushkin.net | Styles Database