A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Academic Researcher Wade Pfau: “Now That I Am Accounting for Risk, I Am Even More Amazed by How Well Valuation-Informed Indexing Works… Why Haven’t Academics Already Published Research About This?”

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Yesterday’s blog entry reported on an e-mail that I sent to academic researcher Wade Pfau on February 21, 2011. He responded on February 24, 2011.

He said: “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works. I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests.  VII is much less risky by pretty much any standard I consider.  I must wonder… did I make a mistake somewhere?  Why haven’t academics already published research about this?”

Wade provided a link to a Bogleheads Forum thread he started:

http://www.bogleheads.org/forum/viewtopic.php?p=970705#970705

He also set forth a link to an exchange he had with Drip Guy, one of the lead Goons:

http://www.bogleheads.org/forum/viewtopic.php?t=68683

He said: “He never responded to me.  But have you ever heard him express before that he essentially has a backup plan for the 4% rule, and that is to start cutting withdrawals should the need arise?”

Comments

  1. Since you are talking directly about me in your piece, and since Wade (not you!) seems to have been confused in his PRIVATE email to you (“he never replied”) that you have now made public, I will break my own rule about not posting here, just this once for other’s (not your!) benefit:

    I believe Wade was mistaken in that I certainly DID reply to him (see the thread yourself for the pleasant back and forth dialog among all parties!), and I think I was fully responsive to any questions he had regarding my own position or planning — he even went the extra step of reiterating what he thought I meant, to ensure he was not misstating it! A very nice gesture, one I don’t belive I have ever seen from you, BTW.

    So, perhaps my failure to then say something positive like “You’ve got it!” was considered unresponsive?

    In any event, from my standpoint these two snippets from the thread nicely encapsulate our dialog and it’s outcome:

    Wade: “I guess this is actually consistent with what you’ve believed all along: go ahead and start your retirement with a 4% withdrawal rate, but always stand ready to lower your withdrawals should things take a turn for the worse. That sounds fine to me. It’s the Guyton/Klinger view, and I have no objection to that. The reason why I was more worried than you about whether 4% is too high for the initial withdrawal rate, is because I was implicitly assuming that it would be very bad if the retiree ever had to lower his withdrawals after retiring. But both of these models are competitive and will serve the different needs of different people. I feel like we might be on the same wavelength about this now…”

    DripGuy: “There’s hope for you to become a Boglehead, yet Wade!”

  2. Drip Guy is one of the Goon posters who threatened to get Wade fired from his job by making defamatory calls to his employer if Wade continued to publish research showing that Buy-and-Hold investing strategies can never work for long-term investors.

    Given your history, I don’t find you a trustworthy source on this matter, Drip Guy.

    I DO find Wade a trustworthy source on this matter. At the time he was engaged in research that I believe will go down in history as one of the most important studies ever published in the history of stock analysis.

    I of course wish you the best in all your future endeavors in any event, my long-time abusive posting friend.

    Rob

  3. You are a liar.

    I dare you to post ANY link, or especially any claim from Wade himself stating that I have ever threatened him in any way, including making any call to any one in any capacity.

    Your failure to do so will serve to illustrate what a complete LIAR you are.

  9. Rob,

    You understand that ‘statements you write yourself’ do not count as evidence that ‘other people wrote things’…right?

    You aren’t that demented yet I hope?

  10. Everybody “knows” what the story is, What.

    You understand yourself on some level of consciousness that Get Rich Quick strategies do not work in the long term. If you didn’t, you wouldn’t be so upset.

    There’s never been a single study that supported Buy-and-Hold. There never can be one. It’s a logical impossibility. When the pain of the economic crisis gets great enough, we all will move away from trying to “defend” Buy-and-Hold and on to discussion of what works.

    The words are here for your benefit and for the benefit of all others when you and they decide to make use of them. I can do no more than provide those words and I can do no less than provide those words.

    I of course wish you the best of luck in all your future endeavors.

    Rob

  11. The story that I ‘know’ is that you are mentally unstable and make things up.

    If you could produce any evidence to the contrary then what I ‘know’ might change.

  12. The story that I ‘know’ is that you are mentally unstable and make things up.

    Yeah, yeah.

    I bet you say that to all the boys who post honestly on safe withdrawal rates, What.

    Rob