budnipper1
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Budnipper1's Account Talk
- Thread starter budnipper1
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Idaho Dave
Member
Sorry about Fred. I thought he was the best out there, just couldn't get enough people to listen.
budnipper1
Active member
Thanks for the kind words of sympathy.
You're probably right but I thought he should have hung in there a little longer. Anyway, no sense crying over spilt milk any longer.
Now I don't know who to support, but I definitely know who I don't want to be President. I think we all should just consider how each individual candidate would be able to handle emergency situations such as a future direct threat to our national security. I know all presidents have advisors on hand who are supposed to be qualified to deal with those events, but the final, ultimate decisions are still the President's responsibility. Ask yourself this question...do we really want Hillary Clinton to be making those decisions? I don't!
Idaho Dave
Member
Or we could have Barry Obama who'd bomb our allies.
budnipper1
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budnipper1
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budnipper1
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budnipper1
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budnipper1
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budnipper1
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budnipper1
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budnipper1
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budnipper1
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http://www.nytimes.com/2008/04/20/business/yourmoney/20stra.html?8mon&emc=yma1
April 20, 2008
The Odds for a Retirement Nest Egg, Recalculated
By MARK HULBERT
CONVENTIONAL wisdom recommends that investors start with a high allocation of stock in their portfolios when they are young and reduce it as they approach retirement.
That makes intuitive sense: In your 20s, you may be inclined to take bigger risks; in your 60s, you may feel a greater need to protect the wealth you have been able to amass.
But a recent study of real-world portfolio returns, which fluctuate significantly from month to month and year to year, has found that there is no particular advantage in this approach. You would do just as well, with no greater odds of doing poorly, by simply picking an allocation of stocks and bonds that you can live with for a long while and sticking with it.
That is the implication of “Hitting or Missing the Retirement Target: Comparing Contribution and Asset Allocation Schemes of Simulated Portfolios,” by Harold J. Schleef, an economics professor at Lewis & Clark College, and Robert M. Eisinger, an associate professor of political science at that institution. It was published last year in the Financial Services Review, an academic journal.
The professors performed elaborate computer simulations for hypothetical individuals investing for retirement. Each earner is 35 years old and trying to amass $1 million (in 2006 dollars) by age 65, in 30 years’ time. They differ in how they divide their portfolios between stocks and bonds.
They also differ in how the stock and bond markets perform during their decades of investing. For each year and individual, the professors picked randomly from the 80 years from 1926 to 2006. That means, for example, that the period over which an investor is trying to amass wealth could turn out to be like the 30 years beginning in 1929, a period when the market barely beat inflation — or like the 30 years beginning in 1974, a span when stocks provided stellar returns.
By running their simulations thousands of times, and by assuming the future will be like the past, the professors calculated the odds that any given strategy would succeed. Consider, for example, an investor whose portfolio at age 35 has 78 percent allocated to stocks and 22 percent to bonds, and that the equity portion declines gradually so that, at age 65, it is just 40 percent.
Such a scheme is typical of what many financial planners recommend, and is similar to what has been adopted by the so-called life-cycle funds, or target date maturity funds, that mutual fund families in recent years have created. Assume further that this investor contributes $11,000 each year to this portfolio. This would be enough to enable it to reach $1 million by the time he is 65 — provided the stock and bond markets each year perform exactly in line with their long-term averages.
Yearly returns aren’t the same as the long-term averages, though. Based on actual market returns, what are the odds that this investor will succeed? The professors calculate them to be quite low — only 29 percent. Furthermore, the odds aren’t that high that this investor will even get close: the probability of his portfolio being worth at least $750,000, or 75 percent of his goal, is just 62 percent.
Why such low odds of success? Because of market volatility; the order in which good and bad years occur makes a big difference.
These findings are sobering enough, but consider what the professors found upon studying another lifetime asset allocation scheme that was just the reverse. It calls for the equity portion at age 35 to be just 40 percent, and for it to grow to 78 percent over the next 30 years.
THE professors found that the odds of success were actually higher with this reverse scheme. In contrast to the 29 percent probability of hitting the $1 million target in the original scheme, this reverse scheme’s odds were 45 percent. The odds of hitting at least the $750,000 level also favored the reverse scheme: 70 percent, versus 62 percent for the original scheme.
The professors don’t recommend turning conventional wisdom on its head and increasing equity exposure as people age. Instead, they advise simply keeping asset allocations fixed — which would give you just as great a chance, if not greater, of hitting retirement targets as the conventional approach, while incurring no greater odds of falling short.
One big benefit of the fixed allocation approach, which the professors did not take into account in their calculations, is that it avoids the fees associated with schemes for automatically shifting asset allocations, like life-cycle funds. Some of Fidelity’s life-cycle funds, for example, have annual fees as high as 0.88 percent. Those fees can compound into a large sum over 30 years.
Professor Schleef said in an interview that he believes investors should set their equity exposure as high as comfort permits. He suggested averaging the declining exposures that conventional wisdom recommends over the decades leading up to retirement — that is, somewhere between the higher levels recommended for youth and the lower ones of the pre-retirement years.
Professor Schleef also stressed that he and his co-author are not recommending that equity exposures never decline. He pointed out that when the typical investor reaches 65, he is expected to live an additional 20 to 25 years. At some point during that period, he said, a declining equity exposure makes sense. When to start doing so, and by how much, is the focus of his current research.
Mark Hulbert is editor of The Hulbert Financial Digest, a service of MarketWatch. E-mail: strategy@nytimes.com.
April 20, 2008
The Odds for a Retirement Nest Egg, Recalculated
By MARK HULBERT
CONVENTIONAL wisdom recommends that investors start with a high allocation of stock in their portfolios when they are young and reduce it as they approach retirement.
That makes intuitive sense: In your 20s, you may be inclined to take bigger risks; in your 60s, you may feel a greater need to protect the wealth you have been able to amass.
But a recent study of real-world portfolio returns, which fluctuate significantly from month to month and year to year, has found that there is no particular advantage in this approach. You would do just as well, with no greater odds of doing poorly, by simply picking an allocation of stocks and bonds that you can live with for a long while and sticking with it.
That is the implication of “Hitting or Missing the Retirement Target: Comparing Contribution and Asset Allocation Schemes of Simulated Portfolios,” by Harold J. Schleef, an economics professor at Lewis & Clark College, and Robert M. Eisinger, an associate professor of political science at that institution. It was published last year in the Financial Services Review, an academic journal.
The professors performed elaborate computer simulations for hypothetical individuals investing for retirement. Each earner is 35 years old and trying to amass $1 million (in 2006 dollars) by age 65, in 30 years’ time. They differ in how they divide their portfolios between stocks and bonds.
They also differ in how the stock and bond markets perform during their decades of investing. For each year and individual, the professors picked randomly from the 80 years from 1926 to 2006. That means, for example, that the period over which an investor is trying to amass wealth could turn out to be like the 30 years beginning in 1929, a period when the market barely beat inflation — or like the 30 years beginning in 1974, a span when stocks provided stellar returns.
By running their simulations thousands of times, and by assuming the future will be like the past, the professors calculated the odds that any given strategy would succeed. Consider, for example, an investor whose portfolio at age 35 has 78 percent allocated to stocks and 22 percent to bonds, and that the equity portion declines gradually so that, at age 65, it is just 40 percent.
Such a scheme is typical of what many financial planners recommend, and is similar to what has been adopted by the so-called life-cycle funds, or target date maturity funds, that mutual fund families in recent years have created. Assume further that this investor contributes $11,000 each year to this portfolio. This would be enough to enable it to reach $1 million by the time he is 65 — provided the stock and bond markets each year perform exactly in line with their long-term averages.
Yearly returns aren’t the same as the long-term averages, though. Based on actual market returns, what are the odds that this investor will succeed? The professors calculate them to be quite low — only 29 percent. Furthermore, the odds aren’t that high that this investor will even get close: the probability of his portfolio being worth at least $750,000, or 75 percent of his goal, is just 62 percent.
Why such low odds of success? Because of market volatility; the order in which good and bad years occur makes a big difference.
These findings are sobering enough, but consider what the professors found upon studying another lifetime asset allocation scheme that was just the reverse. It calls for the equity portion at age 35 to be just 40 percent, and for it to grow to 78 percent over the next 30 years.
THE professors found that the odds of success were actually higher with this reverse scheme. In contrast to the 29 percent probability of hitting the $1 million target in the original scheme, this reverse scheme’s odds were 45 percent. The odds of hitting at least the $750,000 level also favored the reverse scheme: 70 percent, versus 62 percent for the original scheme.
The professors don’t recommend turning conventional wisdom on its head and increasing equity exposure as people age. Instead, they advise simply keeping asset allocations fixed — which would give you just as great a chance, if not greater, of hitting retirement targets as the conventional approach, while incurring no greater odds of falling short.
One big benefit of the fixed allocation approach, which the professors did not take into account in their calculations, is that it avoids the fees associated with schemes for automatically shifting asset allocations, like life-cycle funds. Some of Fidelity’s life-cycle funds, for example, have annual fees as high as 0.88 percent. Those fees can compound into a large sum over 30 years.
Professor Schleef said in an interview that he believes investors should set their equity exposure as high as comfort permits. He suggested averaging the declining exposures that conventional wisdom recommends over the decades leading up to retirement — that is, somewhere between the higher levels recommended for youth and the lower ones of the pre-retirement years.
Professor Schleef also stressed that he and his co-author are not recommending that equity exposures never decline. He pointed out that when the typical investor reaches 65, he is expected to live an additional 20 to 25 years. At some point during that period, he said, a declining equity exposure makes sense. When to start doing so, and by how much, is the focus of his current research.
Mark Hulbert is editor of The Hulbert Financial Digest, a service of MarketWatch. E-mail: strategy@nytimes.com.
Very Interesting Article. I (being so close to retirement) do not have the
luxury of losing even the smallest amounts. Dips kill me at this stage of
the game, especially if your locked into fixed allocations.
(no time to recover).
Add the above with the need to make gains in order to reach your
retirement goals and Waaa -Laaa; Interfund Transfers become the most
important tool to meet those goals. Otherwise, sell the home and work
until you die. Pooh !
luxury of losing even the smallest amounts. Dips kill me at this stage of
the game, especially if your locked into fixed allocations.
(no time to recover).
Add the above with the need to make gains in order to reach your
retirement goals and Waaa -Laaa; Interfund Transfers become the most
important tool to meet those goals. Otherwise, sell the home and work
until you die. Pooh !
budnipper1
Active member
luv2read
Active member
Probably setting up that "CUSTOM USER ID" function that's supposed to be available June 30. Now why couldn't they do that after 12 NOON? Or on the weekend? Oh yeah, I forgot...1201 today IS June 30 to TSP. Duh.
Wonder if they're going to have "unscheduled maintenance" again on Monday 6/30 to put the 4 decimal places into effect? We know they don't have to take it down to do that...it was done this past Monday, and reversed without affecting members.
Wonder if they're going to have "unscheduled maintenance" again on Monday 6/30 to put the 4 decimal places into effect? We know they don't have to take it down to do that...it was done this past Monday, and reversed without affecting members.
budnipper1
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Last edited:
budnipper1
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budnipper1
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Common sense "Change" in gun-carry law. (not Obama related)
View attachment 5238
http://www.newschannel5.com/Global/story.asp?S=9524023
View attachment 5238
http://www.newschannel5.com/Global/story.asp?S=9524023
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