Blog Archives

Early Retirement and Time Value of Money (Part 2)

This follow-up article keeps exploring Time Value of Money concepts in the context of early retirement. The intent is to find a flexible way to manage one’s portfolio savings and annual spending levels in combination with various types of irregular cash flows while waiting for stable fixed income (e.g. social security, pension) to settle in.

As we have seen in Part 1, a few spreadsheet formulas can go a long way. Such ‘annuitization’ approach involves some extra risks though and this follow-up article will discuss ways to mitigate such risks.

Posted in Investing, Retirement

Early Retirement and Time Value of Money (Part 1)

This article will explore Time Value of Money concepts in the context of early retirement. The intent is to find a flexible way to manage one’s portfolio savings and annual spending levels in combination with various types of irregular cash flows while waiting for stable fixed income (e.g. social security, pension) to settle in. As we will see, a few spreadsheet formulas can go a long way.

Posted in Investing, Retirement

Revisiting Risk and Reward (Part 3)

A previous blog article explored income-centric risk and reward definitions, which could be viewed as more suitable to retirement than the usual academic definitions. Corresponding quantitative analysis of some simple US portfolios was provided. A follow-up article explored the perspective of retirees located outside the US.

This article extends this investigation by exploring in more technical depth the tie-in between Safe Withdrawal Rates (SWR) and variable withdrawal methods, through the use of a clever metric named Withdrawal Efficiency Rate (WER). 

Posted in Asset allocation, Market history, Market statistics, Portfolios

Revisiting Risk and Reward (Part 2)

A previous blog article explored income-centric risk and reward definitions, more suitable to retirement than the usual academic definitions. Corresponding quantitative analysis of some simple US portfolios was provided.

This article extends this investigation by taking the perspective of investors located in various developed countries (a form of ‘out of sample’ testing).

Posted in Asset allocation, international stocks, Market history, Market statistics, Portfolios, Retirement

Revisiting Risk and Reward

Financial literature from academics has been strongly influenced by the ground-breaking work of Harry Markowitz and William Sharpe, and the concept of risk & reward for a multi-asset portfolio. Although brilliantly innovative, this work is often misused, equating risk with (portfolio) volatility and reward with (portfolio) returns, and applying such principles without acknowledging the fundamental differences between investors and speculators, or accumulators and retirees.

This article will explore risk and reward from a perspective more suitable to retirement, and perform corresponding quantitative analysis of some simple portfolios.

Posted in Asset allocation, Market history, Market statistics, Portfolios, Retirement, Value premium

CAPE and Safe Withdrawal Rates

Michael Kitces wrote an intriguing article in 2008, which notably quantified the (empirical) relationship between the Cyclically Adjusted PE ratio (aka CAPE) and safe withdrawal rates (SWR) of subsequent retirement cycles. This blog article extends this study, adding ten more years of data (i.e. up to 2017), and then ponders about the practical applicability of such findings.

Posted in Market history, Market statistics, Retirement

Telling Tales – 2017 update

This article provides updated Telltale charts, including 2017 returns. It focuses on the relative past performance of value and size factors compared to the total US market, as well as studying international and real estate funds. 
Using Telltale charts can be very informative, truly ‘telling the tale’ of what happened over time to portfolio trajectories, illustrating return to the mean properties, or lack thereof.

Posted in Asset allocation, international stocks, Market history, Market statistics, Portfolios, REITS, Value premium

Simba backtesting spreadsheet: miscellaneous topics

This blog article is the fourth of a series intended to document the inner workings of the Simba backtesting spreadsheet. […]
The intent of this fourth article is to address a few miscellaneous topics (e.g. end label on charts, compatibility issues, spreadsheet analytics).

Posted in Asset allocation, Market history, Market statistics, Portfolios

Simba backtesting spreadsheet: advanced topics

This blog article is the third of a series intended to document the inner workings of the Simba backtesting spreadsheet. […]
The intent of this third article is to elaborate on more advanced topics (e.g. unbalancing, safe withdrawal rate, etc). We’ll notably discover that a Safe Withdrawal Rate is just a simple harmonic mean.

Posted in Asset allocation, Market history, Market statistics, Portfolios

Simba backtesting spreadsheet: risk metrics, risk ratios

This blog article is the second of a series intended to document the inner workings of the Simba backtesting spreadsheet. […]
The intent of this second article is to elaborate on how risk metrics (e.g. volatility, drawdowns, etc) and risk ratios (e.g. Sharpe, Sortino, etc) are computed.

Posted in Asset allocation, Market history, Market statistics, Portfolios
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