Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on December 2, 2011. Wade responded the next day.
He thanked me for my encouraging words and said: “The idea about PE10 going up being different than P/E10 going down does make sense.”
Wade told me about a book titled “How to Profit From Formula Plans in the Stock Market,” which was published in 1961. He said that he downloaded it at a time when a free download was available but that there was no longer such a download available. He said that it talks about a “halfway rule,” which takes advantage of this concept.
The e-mai stated: “I had a productive evening. Bengen’s discussion about changing asset allocation being the next step got me moving to combine my safe savings rates program with my valuation-based asset allocation program. (do you remember in February when DRiP Guy complained about using a fixed allocation in my safe savings rate paper? That is what I fixed now) Naturally, I am finding that VII can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation. The only exception occurs a little bit with the 1990s stock market boom, as you saw earlier with my blog entries about the rolling periods. I’m attaching 3 figures I made about this tonight. This here is probably enough to write an article for Journal of Financial Planning. I’m thinking about this now.
The three figures referred to by Pfau appear below: