Investing - Theory, News & General • I love rebalancing instead of trying to predict the market

Perhaps this what-if approach for testing the logic is not going to get us there....

But there are multiple logical fallacies in the above stream....

Please just acknowledge you agree that Bengen did NOT base his research on a One-way-Rebalancing algorithm...

His research was based on two-way-rebalancing.... VERY DIFFERENT, Right?

So let me ask you this, would you trust your own retirement on Homer's un-tested algorithm, dependent on one-way-rebalancing....?

If your answer is yes, we have simply reached an impasse....

Which is fine, because as they say, personal finance is personal...

Falsely equating two things and rejecting two things because they are not exactly the same are the easiest way to reject information.

I have studied such withdrawal methods extensively and it makes no meaningful difference. Success rates will increase each time Homer sees stock gains and his failure rate is exceeding low by still working, also having social security, and already being above 25x expenses.

Once you hit around 15x stocks and 10x fixed income at 25x expenses you can put anything more into anything from 100% fixed income to 100% stocks without materially changing the risk. The portfolio already balances stock risk with the 10 years of fixed income and the portfolio already has enough potential growth with the 15 years of stocks to handle any bond risk materializing.

This is what you find when you study decumulation. I have studied one way rebalancing.

Here are a few of the spots where the above logic breaks down...

1) Deriving results from one algorithm (E.g. 4% SWR based on two-way rebalancing) and assuming it applies to a different algorithm (e.g.
one-way-rebalancing)

I didn't do this. I studies various withdrawal methods.

2) Ignoring that a significant part of "risk" in a retirement portfolio stems from insufficient growth. When you sell stocks and Never repurchase them, you have introduced longevity "risk".

I didn't do this. I included stock growth and what I am telling you is that stock risk vs bond risks are roughly balanced if you hold at least 10x in bonds and at least 15x in stocks.

3) Success rates do NOT increase each time Homer see stock gains. He is incurring opportunity cost each time he truncates stock returns by selling at +5%. Furthermore, by continuing to take that action going forward, he exacerbates the problem over time.....

Of course they do. A large portfolio is always safer. You can blame all the decumulation studies with equal starting balances for the lack of understanding of portfolio risk.

Now given that you have studied one-way-rebalancing, have you by chance run any back-tests....? That would be a very productive reference point for this thread...

I studied more than one way balancing. This is something you made up with zero context supporting it to reject what I was saying. I have an entire thread on withdrawal safety. What matters is portfolio size with AA being an order of magnitude less important.

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Statistics: Posted by CraigTester — Thu Sep 26, 2024 9:17 pm — Replies 203 — Views 13493