I’ve posted Entry #63 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Valuation-Informed Indexers Can Retire Five Years Sooner.
Juicy Excerpt: Both portfolios survived until Year 60/Age 85 in each of the hundreds of return sequences tested. The most likely end-point portfolio value for the Buy-and-Holder was $754,000. For the Valuation-Informed Indexer, the most likely end-point portfolio value was $1,095,000.
The VII portfolio also had a higher best result — 2,872,000. This compared to a best result for the Buy-and-Holder of $1,516,000. However, the Buy-and-Hold portfolio registered a much better worst result. This number was $249,000. The VII number was $28,000, showing that there were a small number of return sequences in which the VII portfolio came close to failing.
Valuation-Informed Indexers generally obtain higher returns despite taking on less risk. But Valuation-Informed Indexers who elect to retire at age 60 are taking on slightly more risk in their retirements than their Buy-and-Hold counterparts as the cost of being able to do so. The added risk they are taking on has both its positive and negative aspects. The Valuation-Informed Indexer who retires at age 60 is a bit more likely to experience a close call retirement than the Buy-and-Holder who leaves the workforce at age 65. However, he also enjoys the potential of being able to leave a much bigger estate to his children or to charities. In the typical case, he will end up with the larger portfolio.