New Posts Starting May 17, 2007

Updated: August 15, 2007.

Price Drops

Today’s holder of the S&P500 index can expect his balance to fall to 60.5% of its current purchasing power within the next decade even with dividends reinvested. The likely range of outcomes is between 45.5% and 75.5%.

Price Drops

Price Peaks

Today’s holder of the S&P500 index can expect his balance to remain below 228.8% of its current purchasing power throughout the next decade even with dividends reinvested. The likely range of outcomes is below 153.5%. The most likely outcome is a loss throughout the entire decade.

Price Peaks

Subtle Observation about Dividend Capture

The probability distribution of the income stream from dividend capture is largely independent of price fluctuations.

Subtle Observation about Dividend Capture

Building On a 45-Year Retirement

Previously, I showed how to reach Year 45 with a traditional approach using my calculators. You could withdraw 4.5% of your original balance (plus inflation).

This time, I paid closer attention to the human element. I introduced Benjamin Graham’s constraint. I kept both stock and bond allocations between 25% and 75%. You can withdraw 4.2% (plus inflation).

Building On a 45-Year Retirement
Edited: Building On a 45-Year Retirement

Starting at 5%

In Today’s Alternatives, I recommended starting at a 5% withdrawal rate as a matter of caution. Here is how an early retiree might go about it.

Starting at 5%

Starting at 5% with Risk

This is a variant of Starting at 5%. I changed the tradeoff between risk and reward.

Starting at 5% with Risk

Rock Bottom Withdrawal Rate

What is the worst case continuing withdrawal rate? The rock bottom is 2.77% per year.

Rock Bottom Withdrawal Rate

Back of the Envelope: Dividend Blend

Not everyone is comfortable using a spreadsheet calculator. Here is how to calculate a withdrawal rate for a dividend blend portfolio by hand. It is not exact. It comes close.

Back of the Envelope: Dividend Blend

Dividend Blend Rule of Thumb

Here is a rule of thumb for the dividend blend.

Dividend Blend Rule of Thumb

Data Mining Bias

This extends my discussion of Evidence-Based Technical Analysis. I write this to improve the understanding of the role of theories for coping with data mining bias.

Data Mining Bias

Doctor’s Visit

I visited my doctor today and introduced him to my new wife. All is well.

Doctor’s Visit