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Semelhante a Asset Allocation & Withdrawal Rates Milwaukee Bogleheads
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Asset Allocation & Withdrawal Rates Milwaukee Bogleheads
- 1. MUTUAL FUNDS: LUCK AND MAKING YOUR MONEY LAST AS LONG AS YOU DO Robert Schramm Milwaukee Bogleheads January 6, 2015 1 Ages: 40 to retired Graduate level expertise
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- 3. Elements of Risk (Role of LUCK) • Sequence of Returns • Inflation • Reverse Dollar Averaging 3
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- 5. Inflation 5
- 6. Reverse Dollar Cost Averaging • Cyclical trends can cause reverse dollar averaging • To minimize the effects of RDCA include cash or money market accounts o Do not withdraw from any fluctuating investment o Frequent rebalancing can cause significant damage: optimize rebalancing. 6
- 7. Reverse Dollar Cost Averaging 7
- 8. Minimize Effects of RDCA 1. Keep two years withdrawals in money market account. 2. Three years of withdrawals in a short term bond fund. RDCA = Reverse Dollar Cost Averaging 8
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- 10. Minimize Effects of RDCA 3. To rebalance from equities to fixed: top off money market, then short term bonds, then other bonds. 10
- 11. Minimize Effects of RDCA 4. If rebalancing from fixed income to equities, flow money from Long Term Bonds to Money Market, then Short term bonds, then equities. 11
- 12. Minimize Effects of RDCA 5. If there is cash inflow into the portfolio, (dividends, interest or other cash deposits): a. Add to the Money Market first b. Do not reinvest them until the money market fund and short term bonds are topped off and full. 12
- 13. Minimize Effects of RDCA 6. Do not rebalance the equity-fixed income holdings too often. a. If the withdrawal rate is 5% or less, it’s better to rebalance once every 4 years at the end of the US presidential election year. 13
- 14. Picking an Asset Mix 14
- 16. • Total Stocks 70% • TI 30% • Total Bond/IB 50% • TIPS 50% • STOCKS • Large Cap 40% • Small Cap 20% • REIT 10% • Devlp mkt 20% • Emerging mkt 10% • BONDS • Total Bond mkt 60% • TIPS 20% • HY 20% 16
- 17. Simple Optimization • If you do not need money from your portfolio: o 50% Equity, 50% fixed income • If you need small periodic income, 4% or less: o 40% equity, 60% fixed Income. • If you need larger periodic income, over 4%: o 35% equities, 65% fixed income 17
- 18. 3 Significant Financial Risk Factors for a Retiree • Longevity risk: Living “too long” • Market Risk: quantifies the probability of portfolio depletion. • Inflation risk: the ability to maintain purchasing power. 18
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- 21. Warning Signs of Diminishing Luck 1. Current market P/E > 12.5% 2. The 4th year Checkup 4>1 20 yr 3. Withdrawals exceed the Sustainable Withdrawal Rate. 15-20 yr 4. Final Warning: Withdrawals exceed 10% of portfolio value. 8-18 yr 21
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- 24. Boglehead WIKI References • http://www.bogleheads.org/wiki/Asset_allocation • http://www.bogleheads.org/wiki/Lazy_portfolios • http://www.bogleheads.org/wiki/Safe_withdrawal_r ates • http://www.bogleheads.org/wiki/Tools_and_calcula tors • http://www.bogleheads.org/wiki/Rebalancing 24
- 25. Helpful Books • http://www.retirementoptimizer.com/ Jim Otar’s site for his book and sample his retirement program • http://www.ifa.com/12steps/foreword/ Mark Hebner’s INDEX FUNDS on his website • http://doiop.com/Smartest Smartest Investment Book You’ll Ever Read by Daniel Solin • http://doiop.com/Ferri All About Asset Allocation by Richard Ferri 25
- 26. Milwaukee Bogleheads® • A DIY investment group, followers of John Bogle's Index investing strategies, the Milwaukee local chapter of Bogleheads. • This presentation was made January 6, 2015 by Bob Schramm of our chapter. 26
- 27. Disclaimer • All examples are for illustration purposes only and are not investment recommendations. • The views expressed in the presentation, are those of the presenter, commenters, guests and participants and may not reflect the views of the Bogleheads organization. • Use your discretion in using examples presented here for your own investment purposes. 27
Notas do Editor
- Sequence of returns affects your portfolio early. Inflation takes its biggest bite later in the distribution.
- http://www.businessinsider.com/illustration-of-bull-and-bear-markets-2014-12
- 60/40 generally advised. 55/45 MKE County Retirement. 50/50 at target retirement date to 30/70 in 5 years. 40/60 from Otar.
- 5 stock funds-Mark Hebner, 3 bond funds Ferri. 3 fund (4 with TIPS) Bogleheads, Intermediate instead of TBM Bogle for less treas-more corp.
- Early loss of principle discouraging. Small beginning amounts don’t create much money with high returns. Start with safer allocation.
- Is there any foreshadowing of trouble?
- What might affect the success of my portfolio?