5 Comments

1. Thanks for the highlight Chris!

   1. You’re welcome. Thank you for the fun and thought provoking content!

2. About Karsten Jeske article Who’s Afraid of a Bear Market? The analysis puts investment at the start of S&P bear market time period. The recovery period from peak to peak was scary. This of course the result of huge drop of S&P that would normally recover at a much slower rate. The problem with analysis the S&P also has huge growth rate outside of bear market. That is my beef with traditional investment advice. They scare one to eliminate lessening of market downturns, yet never balance that out with huge market gains. Look at the history of S&P and know that even with such downturns the gains and accumulated wealth is wholly superior. Basically, during the accumulation phase of 20 years or so, if one just put money in the low cost market index you would accumulate more and gain more momentum to financially be more stable as compared to low volatility investments. Sure, during the need of portfolio failure for monthly income needs complicates investments, nonetheless the stock market gains are so much superior that maybe a better strategy for withdrawal should be exploited. This article really hit home with me the need to ensure the investor has an alternate plan for income as compared to living off investments during these drawdowns. Also, the futility and damage when employing cash like investments. The turbo charging of your portfolio if ever you could minimise spending down during bear markets to the point of maybe investing. I would like to see an analysis of variable withdrawals to 100% stock portfolio.

   1. Forrest,

      Have you read through ERN’s “Safe Withdrawal Rate” series? If not, it is worth your while. https://earlyretirementnow.com/safe-withdrawal-rate-series/

      Best,
      Chris

3. That is a great write up. Read 30% so far. Good to have better understanding of future possibilities. However, as you addressed the future is unknown. These simulations just can go so far. IMHO, risk will always be present and we would be best served with most probable best direction that will always change as we experience the here and now. Retirees need financial risk to more than overcome inflation. Most of our assets should be placed in the zone of good return. Just a half percent improvement will make for impressive asset growth as compared to all weather portfolios. We need to temper drawdowns concern with the typical large gains. Financial people will state stocks have a typical 2% gain over bonds. That is a hugel historical gain that probably will never be overcomed with portfolio diversity.

   So much change in our economy and financial markets, going back more than 15 years is not valuable for comparisons or to glean any lesson. I think the better solution for security may lay out side of minimal risk investments. Personal finance, plan of action, possible income stream, honing skills and personal talent. Think of life term decisions of when to downsize high cost over size home, remodel diy projects for resale value, better location for recreation and cost of living, remodel for old age needs, decreasing basic cost of living, scouting out low cost enjoyable activities, improve homestead talents for cooking, shopping, preserving food, automotive repair. I think of your friend that just bought a “cabin” in mountains of GA. I to like the smaller rustic cabin for our northern time. I do like to change up lifestyle. One of my older brothers took up hydroponic gardening, another makes a side income on A.C. work after taking classes at community school. Think of AirBNB, Uber and host of part time gigs that could be employed if needed. Back home some of our neighbors worked into the guide business for fishing as tourist had limited time and like the idea of a packaged deal. My cousin liked to build decks and enjoyed income from his unique and low volume business. I’m thinking FIRE community better have a plan of action other than 25x in the bank. My guess a plan of action may produce more security than 3% safe withdrawals. Turbulence is always present. How about charting the most probable course for finances and harden your living expenses, desire/needs if needed. You don’t get paid well in investments if attempting to minimise risk as opposed to the 100% security in hardening you personal finance decisions. As you post every plan has to be personalised to our particular circumstances.

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