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Post by Mustang on Dec 1, 2023 14:26:52 GMT
I was comparing how various balanced funds had preformed over the long run in Portfolio Visualizer looking at the lead changes back and forth during a 23 year retirement. It reminded me of a horse race.
I picked five horses, Index (VBIAX) because everyone says you need to be in an index fund. Other strong contenders Fidelity (FBALX) and Wellington (VWELX) both have long been on recommended lists to own. A fund I like, American (ABALX) and lastly there is the long shot, Wellesley (VWINX), heavily weighted with bonds, it really is running outside of its category. Wellesley runs great in the mud (bear market) but lacks speed on a dry track (bull market). Each horse starts with $10k. Withdrawal is 3.33% adjusted for inflation. The numbers are fund’s value as of December 31. The race starts December 31, 2000. Positions are reported annually. The numbers in brackets are in $1,000.
2000: Horses are in the gate having 10.0 each and they’re off. Wellesley takes an early lead. 2002: Wellesley (10.5) still holding the lead, American (9.5), Wellington (9.0), Fidelity (8.7) and Index last (8.1) 2004: American takes the lead (11.9) Wellesley & Fidelity nose to nose (11.6), Wellington (11.4) and Index (9.9) 2006: Its Fidelity (13.6), Wellington (13.2), American (12.9), Wellesley (12.6) and Index last (10.8). 2007: Fidelity (14.4), Wellington (13.8), American (13.4), Wellesley (13.0), and Index last (11.1) 2008: Wellesley makes a strong run to first (11.3) as the others fall back, Wellington (10.4) American (9.6), Fidelity (9.5), and Index (8.2). 2012: Wellesley pulls ahead (15.5), Wellington (14.5), Fidelity (13.9), American (13.5) and Index (11.1) 2014: Horses spaced out Wellington leading (18.1), Fidelity (17.4), Wellesley (17.4), American (17.0) and Index (13.4). 2016: Wellington extends lead (19.1), Wellesley (18.0), Fidelity (17.9) American (17.8) and Index (13.7). 2018: It’s still Wellington (20.3), Fidelity to second (19.1), American (19.0), Wellesley falling back (18.4) and Index (14.3). 2019: Wellington (24.2), Fidelity (23.2), American (22.2), Wellesley (21.0) and Index running last (16.9) 2020: Fidelity takes the lead (27.9), Wellington (26.4), American (24.1), Wellesley (22.2) and Index (19.1)
2023: Fidelity (30.4), Wellington (28.5), American (25.6), Wellesley (21.4) and Index
Index (VBIAX) performed poorly even against Wellesley Only when conditions put Wellesley. It ran last at every milepost.
Wellesley (VWIAX) pretty much performed as expected. It a solid performer in mud without speed on dry track. Early on it ran head to head with the others until 2012.
Fidelity (FBALX) definitely a favorite on dry tracks (bull markets) but really falls back when conditions are not precisely to his liking (e.g., 2008).
American (ABALX) is a solid third place performer having many of the advantages and disadvantage of Fidelity, just not as fast on a dry track.
Wellington (VWENX) not a top performer on either wet our dry but runs well under both conditions. Took the lead in 2012 and held it until 2020.
The race continues. In 2024 will the track be wet or dry? A dry track favors Fidelity. He doesn’t like mud. I think it’s looking like rain and the underdog, Wellesley, took and held the lead until 2012. If the race were starting today he would be a contender but he has a lot to make up. My favorite is still Wellington who seems to run well on both wet and dry tracks and I cannot see the future.
Edit: Corrected initial withdrawal from 4% to 3.33%. Changed start date for VWIAX limitation. Added links and updated table.
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kent
Ensign
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Post by kent on Dec 1, 2023 15:08:21 GMT
I have a lot of funds that I need to clean up eventually. My goal is 50% VTI and 50% QQQ no bonds as I have 5 years of cash in hand (This is my comfort level). Waiting on SSN as I plan on doing few years of Roth Conversion.
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Post by yogibearbull on Dec 1, 2023 15:38:41 GMT
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Post by Chahta on Dec 1, 2023 16:23:04 GMT
I have a lot of funds that I need to clean up eventually. My goal is 50% VTI and 50% QQQ no bonds as I have 5 years of cash in hand (This is my comfort level). Waiting on SSN as I plan on doing few years of Roth Conversion. Interesting approach. Are you retired taking living expenses or accumulating?
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Post by Mustang on Dec 1, 2023 18:23:02 GMT
I made a mistake in my withdrawal amount. I thought you had to enter the data monthly so I used 333 instead of 400. That was still wrong because I had previously been using a portfolio of $100,000 not $10,000. I can fix that in my original post. The benchmark was entered by ticker, VBAIX. I ran three portfolios first, VWENX, VWIAX and ABALX. The analysis is constrained by VBAIX which has a shorter lifespan than the others. The program may say Jan 2002 to Nov 2023 but the chart starts December 31, 2000 so the numbers for 2002 are as of December 31, 2002. Except for maybe a rounding error everything matched when I recreated the simulation.
I then went back and ran FBALX separately leaving VBAIX as the benchmark. Except for maybe a rounding error the numbers for FBALX matched what I posted. This is where it gets screwy. The results for the benchmark changed significantly. 2002 changed to 8.1, 2008 changed to 8.2, 2014 changed to 13.3 and finally 2023 changed to 19.1. None of those were the numbers when I ran the other funds. I did nothing to the inputs. The only thing I changed was to take the other three funds out and put FBALX in. Why did that change the benchmark's results?
With the change in the withdrawal the results were as I posted. Let me know if anything else is wrong. I'm still learning how to use the program. It was fun tracing the movement of the funds in the chart. I think it would be more informative if I every figure out how to post a link to it so others can see the chart.
Edit: The link doesn't work. It leads to a blank sheet.
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Post by yogibearbull on Dec 1, 2023 18:36:26 GMT
Mustang , PV withdrawals can be set monthly or annually. For linking, use the Link tool just when the PV run analysis begins. There are so many PV settings, that its a good idea to include at least one PV run link. Here is my PV run for 01/2000-now, original balance $100K, withdrawals initial $333/mo (rounded down from 333.333333) w/COLA, www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4dsRFKh1KJpMzhYJXfOeQp
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Post by Mustang on Dec 1, 2023 19:21:10 GMT
Thanks for the help. I added the links.
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Post by Mustang on Dec 1, 2023 21:14:09 GMT
I thought it would be interesting to pit two stock funds against FBALX and VWENX. The program made the start date December 31, 2000. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7OqBAl9pkGbbCJpqFirYm6 FBALX VTSMX VTSMX/QQQ VWELX 2003 10.6 8.0 6.6 10.3 2005 12.5 8.9 6.9 11.8 2007 14.4 10.0 7.7 13.8 2008 9.5 5.9 4.3 10.4 2012 17.5 11.7 6.6 14.5 2014 18.0 15.8 9.3 18.1 2016 17.9 12.2 9.8 19.1 2017 19.1 13.1 11.1 20.2 2019 23.2 16.6 14.5 24.3 2020 27.9 19.6 19.1 26.4 2023 30.4 22.4 22.4 28.5
This is a surprise. The two balanced funds take an early lead and the stock funds never catch up. Sequence of returns. The numbers are cumulative. It is hard to make up early losses.
Edit: Table results were invalid. To make it work correctly I had to substitute VTSMF for VTI and VWELX for VWENX. The balanced funds didn't change much but making the correction changed the results for the stock funds. Updated the table for the correct results. Portfolio's having those stock funds retiring December 31, 2000 would have seen a significant sequence of return problem 23 years of results favoring stocks, especially the last few years, we not enough to correct for the early losses.
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Deleted
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Post by Deleted on Dec 1, 2023 21:19:35 GMT
So basically by investing in a fund like fbalx and vwenx, one is getting less volatility and less gain.
So only reason to invest in balanced fund then could be if one needs that money in next 5 years or if it helps one sleep better.
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Post by yogibearbull on Dec 1, 2023 21:21:15 GMT
Mustang : "This is where it gets screwy. The results for the benchmark changed significantly. 2002 changed to 8.1, 2008 changed to 8.2, 2014 changed to 13.3 and finally 2023 changed to 19.1. None of those were the numbers when I ran the other funds. I did nothing to the inputs. The only thing I changed was to take the other three funds out and put FBALX in. Why did that change the benchmark's results?" Well, what happened is this. You used Vanguard Admiral classes that don't have full history, so your runs are NOT starting from 01/1999 (but 01/2021 or 01/2022) - ALWAYS double-check if the PV results start from the date that you inputted (there is a message if it's different). You may have to review your summary AGAIN to see if anything changes. I have FIXED this by changing to longer existing Vanguard Investor classes, and now BOTH runs start from 01/1999 as you intended, and the benchmark results are identical. Run1 www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=73MKhVhLoCpYGQPN3qYkkHRun2 www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5dqyUNyD5mpjgN3gEJjRjU
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Post by Mustang on Dec 2, 2023 13:11:33 GMT
I just wanted to see how the funds would run against each other. Obviously those constraints affect the outcome. Even YBB's simulation shows a constraint but its outside the range of the simulation. I can't use those simulations for comparison to the original post. They would start the race December 31, 1998. The general rule of thought is that index funds beat managed funds. But that isn't true for balanced index funds. YBB's corrected charts show the index fund lagging far behind even Wellesley which is a conservative-allocation fund. Balanced Index funds are out and no longer considered contenders. That leave four: Fidelity (FBALX), Wellington (VWENX), American (ABALX) and Wellesley (VWINX). Symbols changed to get rid of constraints. Just for fun I'm making the underdog the benchmark so all four are on the same chart. $10,000 initial investment. Initial withdrawal 3.3% adjusted for inflation. Start date on chart December 31, 2000. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=1Rrl4PlHOZ9lzw6M6SbzqZ2002: Wellesley still takes an early lead with Fidelity trailing. 2005: Fidelity charges forward taking the lead. 2007: Fidelity holds lead. Then its Wellington, American and Wellesley. 2008. After hitting a ruff patch Wellesley takes the lead. Wellington second. Then American & Fidelity. 2013: Wellesley maintaining lead. Wellington second. Then its Fidelity & American. 2014: Wellington (18.0) takes the lead in a close race with Fidelity (17.5) second. Then American and Wellsley. 2017: Still a close race. Its Wellington, Fidelity, American and Wellesley 2020: Its Fidelity (27.9), Wellington (26.4), American (24.1) and Wellesley (22.2) 2023: Fidelity (30.4), Wellington (28.5), American (23.8) and Wellesley (20.7) Results are pretty much the same as before.
Wellesley is a solid runner best in during downturns. Fidelity excels in bull markets especially those favoring growth. Wellington does well in bull markets and hold its own during downturns. Remember: Any differences in the numbers from the original post are cumulative from December 31, 2000. This affected some funds more than others. For Fidelity and Wellington the numbers are often the same.
Its fun playing with Portfolio Visualizer but watch those constrains and thanks for the help.
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Post by archer on Dec 2, 2023 18:05:45 GMT
Mustang, How were you able to compare 5 funds? I've only seen PV be able to compare 3 plus a benchmark.
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Post by Mustang on Dec 2, 2023 20:11:37 GMT
You can do four fund by changing the benchmark. I then took out two funds and added the fifth to see what it looked like.
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Post by Mustang on Dec 2, 2023 22:32:37 GMT
So basically by investing in a fund like fbalx and vwenx, one is getting less volatility and less gain. So only reason to invest in balanced fund then could be if one needs that money in next 5 years or if it helps one sleep better. There is a difference between the accumulation phase of investing and the withdrawal phase. During the accumulation phase investors can take advantage of or ride out market downturns and crashes. Volatility can be good. Retirees cannot do that. They need to take money to live on. So, if there is a significant downturn they have to sell anyway, even at a loss, in order to buy food and pay the bills. Investment styles need to be different between the two phases. Volatility might cause the retiree to run out of money.
Higher average returns, yes. But withdrawals during downturns can result in in an equity portfolio having a lower ending balance than a balanced portfolio.
I have corrected an earlier post. People were talking about VTI and QQQ. I had to change VTI to VTSMX in order to run the simulation correctly. I used the same start date as the other corrected simulations. The retirement start date was December 31, 2000 with each fund having $10,000. The 2023 ending portfolio balance for VWELX and FBALX were the same at $28,500 and $30,500. Because the last 20 years has favored equity I was sure VTSMX or VTSMX would have a much higher ending balance but they didn't VTSMX and VTSMX/QQQ both ended with $22,400.
This is precisely why many financial advisors recommend a lower proportion of equity as the investor approaches retirement. Most of the studies I've read say that a portfolio of 50-75% stocks have the highest success rate (historical data) and probabilities of success (computer simulations on predicted data).
P.S. I posted links to the charts. If anyone sees an mistake let me know I will correct it.
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Post by Mustang on Dec 3, 2023 8:29:51 GMT
I thought I test the difference between taking withdrawals and not taking them. There is a huge difference in VTSMX/QQQ. This definitely reinforces the idea that a balanced portfolio holds up better during the withdrawal phase.
Ending Balances FBALX VTSMX VTSMX/QQQ VWELX Without Withdrawals $56,600 $55,300 $68,700 $52,500
With Withdrawals 30,400 22,400 22,400 28,500 Increase Without 26,200 32,900 46,300 24,000
Links:
Edit: Fixed Link. Numbers checked. Typo on VTSMX fixed. Should have been $55,300 accidentally typed $55,600. This made no difference in the results.
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Post by fishingrod on Dec 3, 2023 11:34:37 GMT
Mustang , Check the order of your numbers. I see VTMSX/QQQ ahead with/without withdrawals when I look at the numbers.
What surprised me was that FBALX beat VTMSX both with/without withdrawals.
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Post by yogibearbull on Dec 3, 2023 12:04:04 GMT
Mustang , with withdrawals, there was a cash flow of $9,526 that was probably withdrawn and spent. So, for FBALX, Without withdrawals $56,600 With withdrawals $30,400 (residual) + $9,526* (total cash flow) = $39,926 Increase without $26,200 (not accounting for cash flows), $16,674 (accounting for cash flows) So, still some investment gains foregone by spending (assumed 0% return on cash flows). BTW, the links are just repeated (so, both w/o withdrawals). But "With withdrawal" link is in an earlier post. fishingrod , withdrawals put a heavier penalty on higher volatility, so all-stock portfolios tend to suffer. *I just added the cash flows manually. Free PV doesn't allow Excel download of results to further manipulate the data.
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Post by fishingrod on Dec 3, 2023 12:19:45 GMT
yogibearbull , Mustang , Really makes one think about withdrawals. What has made FBALX stand out? Stock selection? Asset allocation? Bond selection?
From first glance FBALX looks like it has tilted toward growth and has a go almost anywhere/ diversified bond sleeve.
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Post by Chahta on Dec 3, 2023 12:43:04 GMT
Mustang: “They need to take money to live on. So, if there is a significant downturn they have to sell anyway, even at a loss, in order to buy food and pay the bills.” Why? Should 2years of cash be part of a healthy portfolio before retirement starts? To make the cash last longer how about using distributions only? Nothing is perfect and consuming principal may need to be done in the worst of times. But that is why it was saved.
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Post by yogibearbull on Dec 3, 2023 13:29:57 GMT
Chahta, reality is that people doing these withdrawal analyses/studies are least likely to use them. There are people who don't know the differences between savings accounts, T-Bills, mutual funds, etc. They have received a lump-sum from their workplace (layoff or retirement) or inherited some money. They just want something buy-hold-forget, something that they can do now and leave it along for years. Regrettably, in my circle, there are several of relatives and friends like that - they are beyond learning new tricks and have other real life problems to deal with. That is where the value of these analyses lie. A BIG takeaway is to use hybrids, use initial 4-5% w/COLA, and most likely, there won't be a disaster.
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Deleted
Deleted Member
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Post by Deleted on Dec 3, 2023 14:17:09 GMT
So, why would people who received lump sums or inheritances and are too stupid to know the difference between savings accounts, T-Bills etc.. want to spend time doing these withdrawal analyses?
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Post by anovice on Dec 3, 2023 15:39:31 GMT
Chahta , reality is that people doing these withdrawal analyses/studies are least likely to use them. There are people who don't know the differences between savings accounts, T-Bills, mutual funds, etc. They have received a lump-sum from their workplace (layoff or retirement) or inherited some money. They just want something buy-hold-forget, something that they can do now and leave it along for years. Regrettably, in my circle, there are several of relatives and friends like that - they are beyond learning new tricks and have other real life problems to deal with. That is where the value of these analyses lie. A BIG takeaway is to use hybrids, use initial 4-5% w/COLA, and most likely, there won't be a disaster. "Regrettably, in my circle, there are several of relatives and friends like that - they are beyond learning new tricks and have other real life problems to deal with." Very regrettably and seemingly not so bright, when they have a talent like you as a resource.
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Post by retiredat48 on Dec 3, 2023 17:05:47 GMT
I thought I test the difference between taking withdrawals and not taking them. There is a huge difference in VTSMX/QQQ. This definitely reinforces the idea that a balanced portfolio holds up better during the withdrawal phase.
Just a general comment. Backtesting distributions has to build in rigidity. If one SEPARATES their fixed income bond allocation from their stock allocation,(ie not using balanced finds) they benefit by getting to CHOSE which allocation side each year to take distys from. So if stocks down, take from bonds etc. And typically stocks and bonds are uncorrelated. Stocks down, bonds up etc. I manage my distributions and planned allocation withdrawals each December for the upcoming years plan. Like if stocks have zoomed way up, I may sell some and plan to withdraw that money from IRAs in coming year. Like year 2020 just before COVID. Stocks had a huge Dec/Jan runup, so I solely took rmds from stock side sales then. I thus "immunize" my portfolio for up to two years wait time so not met with unwanted stock declines and rmds. For example, this year we are having a good Nov/Dec stock market. Markets near highs. So in Dec or Jan I will be selling some stock side funds to plan for next year rmds. A candidate so far is health care funds. They are a big performance laggard in this current upswing, and I will likely be exiting some decades-long healthcare funds, to cover next year rmds. Note also we are recently seeing a good shift from growth to value stocks in performance. Maybe time to cash in on some growthy funds as well. Bottom line: If investors put in the time to follow markets/websites etc, they can benefit more by separating the stock and bond allocation side versus lumping it into a balanced fund. I don't expect current retirees to change preferences in this regard. (Most retirees too rigid!). But for those investors ten or more years away from retirement, consider this aspect. R48
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Deleted
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Post by Deleted on Dec 3, 2023 17:16:54 GMT
I, regrettably, started learning about investing and interest rates after age of 40. Even then I started by investing in value style and in M* favored funds. M* also favors value shops. And that turned out to be a total disaster. So I am not surprised many people are not financially literate as I was in that category most of my life.
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Post by anovice on Dec 3, 2023 18:46:42 GMT
I thought I test the difference between taking withdrawals and not taking them. There is a huge difference in VTSMX/QQQ. This definitely reinforces the idea that a balanced portfolio holds up better during the withdrawal phase.
Just a general comment. Backtesting distributions has to build in rigidity. If one SEPARATES their fixed income bond allocation from their stock allocation,(ie not using balanced finds) they benefit by getting to CHOSE which allocation side each year to take distys from. So if stocks down, take from bonds etc. And typically stocks and bonds are uncorrelated. Stocks down, bonds up etc. I manage my distributions and planned allocation withdrawals each December for the upcoming years plan. Like if stocks have zoomed way up, I may sell some and plan to withdraw that money from IRAs in coming year. Like year 2020 just before COVID. Stocks had a huge Dec/Jan runup, so I solely took rmds from stock side sales then. I thus "immunize" my portfolio for up to two years wait time so not met with unwanted stock declines and rmds. For example, this year we are having a good Nov/Dec stock market. Markets near highs. So in Dec or Jan I will be selling some stock side funds to plan for next year rmds. A candidate so far is health care funds. They are a big performance laggard in this current upswing, and I will likely be exiting some decades-long healthcare funds, to cover next year rmds. Note also we are recently seeing a good shift from growth to value stocks in performance. Maybe time to cash in on some growthy funds as well. Bottom line: If investors put in the time to follow markets/websites etc, they can benefit more by separating the stock and bond allocation side versus lumping it into a balanced fund. I don't expect current retirees to change preferences in this regard. (Most retirees too rigid!). But for those investors ten or more years away from retirement, consider this aspect. R48 R48, I think that I get your thought of cashing in on some growthy funds. They have done very well. However, for the same reason for selling growthy funds, I do not get your thought of exiting some decades long healthcare funds. I do understand that they have been big performance laggards but isn't that a reason to hold on (reversion to the mean)?
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Post by archer on Dec 3, 2023 19:10:50 GMT
I don't believe in anything other than flexible strategies. There is no one size fits all AA that will not have trade offs. Any one AA will have its good starting years and bad starting years. Picking 2001 or more conservative 2000 as starting years while safe, is also quite extreme. I guess its a matter of how safe one wants to be with a set it and forget it PF, and how much wealth they want to sacrifice for that safety by assuming a very disadvantageous starting year for backtesting.
Interestingly, even with the unfortunate starting years, the rolling returns are all very close with the PFs we are discussing including withdrawals.
Holding a couple years of cash can help with a prolonged downturn, but, it needs to be replenished at a sacrifice of compounding growth during the rebound years.
On the positive side, if one has enough to live on with a 4% withdrawal, even starting in the year 2K, all PFs grew after said withdrawals. So, it appears to me that given that all the above examples proved to grow, the more aggressive PFs have better odds of increasing wealth without the risk of running out of money.
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Post by Mustang on Dec 3, 2023 21:03:14 GMT
Mustang : “They need to take money to live on. So, if there is a significant downturn they have to sell anyway, even at a loss, in order to buy food and pay the bills.” Why? Should 2years of cash be part of a healthy portfolio before retirement starts? To make the cash last longer how about using distributions only? Nothing is perfect and consuming principal may need to be done in the worst of times. But that is why it was saved. That is part of the Bucket method. I have incorporated it in my succession plan but have never tested it. The funds selected for this simulation are VWELX, VWINX, and CASHX. Portfolio 1 has a cash account. It is 49.5%, 49.5%, 1%. Portfolio 2 does not so its asset allocation is 50/50. Starting balance $10,000. Withdrawals are $333 per year With a cash account the ending balance was $24,700. Without its $25,100. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4MjaBr9LTznpK1U0jeRELOPortfolio Visualizer rebalances annually. I imagine it would be different if withdrawals could be selective but I don't know how much. At some time or another cash has to be replenished. In my succession plan the withdrawal is from the fund with the highest previous EOY balance and the withdrawal from cash only happens if both funds lose money in the same year. The only time that has happened was 1973-1974 which is why I picked two years cash. Here are the years with losses for this specific withdrawal period. 2002 2008 2018 2022 VWELX - 6.9% -22.3% -3.4% -14.3% VWINX +4.6% -9.8% -2,6% - 9.1%
I picked 2008 as an example of replenishing cash. I would think it would have to be replenished fairly quickly because we don't know when the next down turn will occur. The charts shows the portfolio with cash at $13,400 December 31, 2007. I chose $10,000 to simplify calculations.
2008: VWELX $4,500 x 0.777 = $3,497 VWINX $4,500 x 0.902 = $4,059 Both lost money so the withdraw is from cash leaving $667.
2009: VWELX $3,497 x 1.222 = $4,273 VWINX $4,059 x 1.160 = $4,708 - $333 = $4,375. Total of $8,648 is still underwater so cash stays at $667. 2010: VWELX $4,273 x 1.109 = $4,739 VWINX $4,375 x 1.107 = $4,843 - $333 = $4,510. Total of $9,249. VWELX $4,739 - $333 = $4,406.
Two years to replenish cash back to $1,000. Total portfolio VWELX = $4,406 VWINX = $4,510 and Cash $1,000. Total = $9,916. I'm not sure this makes a big difference but I'm keeping the cash buffer.
Distributions may or may not work. During a downturn capital gain distributions are unlikely and dividends could be reduced. A fixed dollar withdrawal adjusted for inflation is for a retiree that needs a stable income.
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Post by yogibearbull on Dec 3, 2023 22:21:50 GMT
Mustang, as PV doesn't allow selective withdrawals from components, incorporating small amounts of cash via CASHX (T-Bill returns) isn't meaningful. If cash/CASHX is used for asset allocation, that is a different thing. The best way is to use a small buffer account for cash outside of the PV parameters. This buffer account can be used to (i) fund initial year's monthly withdrawals, as the PV assumes annual withdrawals at the end of the year only, (ii) to move the annual withdrawals into this buffer account to fund monthly withdrawals for the following year. Lately, I prefer PV Year-to-Year runs vs Month-to-Month runs for reasons mentioned elsewhere. So, in your examples of $10K original principal, and initial 3.33% withdrawals w/COLA, one would setup a buffer account of $333+ if the withdrawals of $27.75/mo are to start right away. I don't think that this quite fits bucket methodology (Evensky/Benz). BTW, one PV limitation is the use of only integer values for dollar amount withdrawals (annual or monthly; must be truncated, never rounded up), it is better to use the original principals of $100,000 or $1,000,000 for better accuracy (vs $10,000 default).
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Post by Mustang on Dec 3, 2023 22:29:54 GMT
Mustang , as PV doesn't allow selective withdrawals from components, incorporating small amounts of cash via CASHX (T-Bill returns) isn't meaningful. If cash/CASHX is used for asset allocation, that is a different thing. The best way is to use a small buffer account for cash outside of the PV parameters. This buffer account can be used to (i) fund initial year's monthly withdrawals, as the PV assumes annual withdrawals at the end of the year only, (ii) to move the annual withdrawals into this buffer account to fund monthly withdrawals for the following year. Lately, I prefer PV Year-to-Year runs vs Month-to-Month runs for reasons mentioned elsewhere. So, in your examples of $10K original principal, and initial 3.33% withdrawals w/COLA, one would setup a buffer account of $333+ if the withdrawals of $27.75/mo are to start right away. I don't think that this quite fits bucket methodology (Evensky/Benz). BTW, one PV limitation is the use of only integer values for dollar amount withdrawals (annual or monthly; must be truncated, never rounded up), it is better to use the original principals of $100,000 or $1,000,000 for better accuracy (vs $10,000 default). I normally use spreadsheets. But you gave me this nifty new toy to play with and it wouldn't let me use VMFXX. It suggested CASHX. It also defaults to $10,000.
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Post by yogibearbull on Dec 3, 2023 23:20:27 GMT
I looked at my post from this morning. I don't know why it got some posters riled up. I clearly wasn't referring to posters here who are smart and some are expert slicers-and-dicers.
I was referring to some of my acquaintances who are elderly (in 60s, 70s), were involuntarily retired or have inherited money or received insurance proceeds - all not by their choosing, but something that life forced on them. Some have only dealt with banks. They are in advisory no man's land (amounts too small for advisors to bother; besides, they may be exploited). I do help them according to their comfort levels. I have even gone with them to open their brokerage accounts. I have bought instruments in my account (that I didn't need) simply so that I can answer their questions about those instruments. I cannot just tell them to go look up SWRs, PWRs, SWRMs, or and just use PV - a complex software that requires patience and effort.
I won't hesitate to suggest to them hybrids (VWELX, FBALX, ABALX, VWINX), setup initial 4-5% withdrawals w/COLA. Taxes aren't huge issues to them.
Anyway, if this thread goes in the direction of rants, I won't be posting on it or opening it.
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