All stock 30 year SWR has higher variance/volatility in outcomes that other more balanced asset allocations. Following bad cases typically exceptionally good cases arise, those more extreme exceptions uplift the average, but where most wont achieve that distorted average. All stock Japan 1990 (lost decades (plural)), Iceland .... and numerous other examples indicate how bad all-stock/domestic can be. In contrast a balanced asset allocation (such as for a Japanese investor thirds domestic stocks/US stocks/Gold) yielded more/better results, less variance, a higher SWR (better lowest max withdrawal rate across multiple 30 year sets), similar average rewards when the exceptional all-stock cases are excluded.When do they make the move to 75/25 or 60/40?Huh? I didn't suggest anyone work more years or get out of stocks. All I was suggesting is that retired people might not want to be 100% stocks to ensure their comfort in their remaining years because "having the most amount of money statistically possible" is not the only goal at that point, safety is another high priority. 75/25, 60/40, etc.How do you "win the game" with 25x expenses?After you've "won the game," preserving your money to ensure that you're comfortable for the remainder of your life, might be important to you than winning slightly more.
You need 33-40x expenses to retire from the stock market because we can not predict every future expense. I have to question the 30 year TIPS ladder that fails upon divorce - which is a 30% outcome age 50+.
What you are suggesting is that everyone take 5+ additional years and devote it to working into their remaining healthy years.
You can do whatever you want once you have won the game - including a TIPS ladder and including 100% equities. We have quite a few here in the 100x club purely from owning stocks. They won the game by owning stocks and yes they can choose to secure that portfolio with fixed income. But they did it by owning stocks in their portfolio.
Those with no need to invest seem to have taken stock risk along the way. I would suggest never playing the game is more appropriate for those fearful of stocks and with the capacity to win the game without stocks.
Why did you play the game at all?
If you can answer that question, the answer is why most other people should continue to take stock risk.
Do you think 25x 75/25 is safer than 30x 100/0?
Here is a thread that actually compares such risks: (ANSWER: take 30x 100/0 over 25x 75/25 and take 25x 60/40 over 30x 100/0 if you care about risk but not about returns) viewtopic.php?t=419511
My point is that you haven't actually evaluated risk with such blanket statements. The additional run-up for stock heavy portfolios typically more than compensates for the downside risk to produce a safer portfolio with a high amount of equities. It is not about having the most money but about actually making risk vs reward trade-offs. We do a disservice by framing the argument as performance chasing while not evaluating risk and returns.
Many posts show no idea how to evaluate risk. People tend to think in terms of one variable and they get support here for the behavioral mistake of anchoring.
Show me that we need 75/25 or 60/40 to reduce risk when we consider
1) portfolio size
2) AA
3) comparing action A vs B
What I will tell you is that people like to make comparisons that do not stand up to reality
1) knowing how to time the market perfectly (framing returns from a peak with no loss of returns by investing conservatively up to a market peak)
2) anchoring to amount lost at one moment in time when we care about the portfolios performance over the entire retirement sequence
3) one-sided reasoning: counting maximum numbers of years bonds beat stocks without comparing maximum years stocks beat bonds.
4) etc
If we actually evaluated risk we would be more supportive of stock-heavy portfolios and we would learn to be less concerned with volatility. We would help reduce behavioral errors by understanding risks. I would agree 100/0 may not be the answer for everyone but it certainly might be for those that want to work well past 25x expenses. They are not taking wild risks even at 100/0 AA when we consider social security and future capacity to earn. When you evaluate risks things like job loss, health issue, etc these do not move the needle towards holding more fixed income.
Being in a room with 8 other six foot tall individuals, average height six feet, and a tenth individual enters the room of seven feet height, and 90% of the people in the room are below average height.
Statistics: Posted by seajay — Tue Jul 02, 2024 1:59 am — Replies 118 — Views 12620