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

Valuation-Informed Indexing #606: It’s Not Just Getting the Safe Withdrawal Rate Studies Corrected, We Need to Come to Terms With Why It Took So Long to Do So

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I’ve posted Entry #606 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Not Just Getting the Safe Withdrawal Rate Studies Corrected, We Need to Come to Terms With Why It Took So Long to Do So.

Juicy Excerpt: The analytical failure that is at the root of the analysis that produced the rule is that, if a retirement using that withdrawal rate survived even though it began at a time when valuations were off the charts, that withdrawal rate is retroactively rendered “safe.” That makes no sense to me.

Comments

  1. Wrong, We look at the plan we put in place 10-20 years ago and then see if we did better or worse than expected. That tells us if we are right or wrong.

  2. Do you take the amount of irrational exuberance present in the stock price into consideration?

    If you fail to do that, then you will obviously get all the numbers wrong.

    There is now 41 years of peer-reviewed research showing that irrational exuberance is a real thing.

    Rob

  3. You have said many times that 10 years is long term. Let’s double it and say 20 years. Now, how much do you have in your account and what are your returns? 42 years of peer reviewed research says to look at your account balance and return rates.

  4. Are you saying to look at the account balancxe adjusted for the effect of irrational exuberance or not adjusted? If you don’t make an adjustment, you will be using wrong numbers. How is that a good idea?

    That’s the entire dispiute — whether people giving investment advice should make an effort to get the numbers right or not.

    Rob

  5. If you were right, you would be rich by now, while the rest of us would be broke. It never played out like you said it would. You have admitted as such.

  6. Things did not play out as I thought they would. This has been the worst bull market in U.S. history. Who could have possibly anticipated such a thing?

    If we don’t open the entire internet to honest posting re the last 41 years of peer-reviewed research, we are just going to have to live through another bull market in days to come. Does that sound even a tiny bit appealing to you?

    I think that I will become rich from this work in days to come. The shift from Buy-and-Hold to Valuation-Informed Indexing is (by far) the greatest advance in the history of personal finance. That’s why it has been hard to pull off. Changes like that do not happen overnight.

    My best and warmest wishes to you and yours.

    Rob

  7. “we are just going to have to live through another bull market in days to come. Does that sound even a tiny bit appealing to you?”

    Yep. I like making money. I am well diversified and now have a substantial portfolio that allows me to take advantage of the market. If I had depleted my assets, I would be terrified right now.

  9. I am happy keeping my $6 million result. When you go to the grocery store to buy found, tell them about your interpretation of market timing and see if that pays the bill.