Portfolio Charts

[Tyler9000]

@Dragline: Both great ideas. The fixed rate is simple enough and something I hadn't thought about. I'll have to experiment with that.

@Jacob: Your instinct for the portfolios is astute, as so far that seems to be the most popular page. I sorta like having a separate home page as a starting point (for stuff like disclaimers, etc), but I do like the idea of providing more content there to help people dive in. You have me thinking about a middle ground with some wordpress tools to add top portfolios and other pages to the front page that will automatically rotate to show different content. But your suggestion has the added benefit of being simple. I'll have to ponder that.

@BlueNote: Thanks!

[Chad]

Good to hear. Even if you don't plan to monetize the site, it's probably still nice to see people use it.

[bryan]

got around to checking it out and.. great! very pretty and somewhat informative for me. I will look into some of these.

thanks!

Are their portfolio indexes? Does Vanguard (or others) offer mutual funds which track each popular asset allocation (or said indexes)? Is this your business strategy to offer new indexes and mutual funds which track them; while also putting a lot of effort into giving users a pretty graphical experience that makes them happy (maybe play some behavioural psychology tricks on them so they don't hurt themselves too badly buying high, selling low)? Someone would acquire you, no problem!

[Tyler9000]

Glad you like it!

Offering my own index funds is definitely more work than I planned. Dealing with the SEC is not currently part of my retirement goals. . But you're not the first to ask for a list of index funds for each asset class. There are plenty available, and publishing a guide is quickly working its way up my list. If I can find some affiliate programs to make a few bucks off of the referrals, that would be nice.

[Tyler9000]

So I've added a new calculator to the site that many people here will find interesting. It's called the Withdrawal Rates calculator, and it finds the Safe Withdrawal Rate for any asset allocation based on their actual assets rather than the percentage of generic "stocks" and "bonds" like in most relevant research and standard advice. The results will probably surprise you.

For fellow very early retirees, I've also added a "Sustainable Withdrawal Rate" that would have maintained the original inflation adjusted principal rather than spend it down to nothing.

The best place to start is to read this. Enjoy!

[bryan]

Again, very cool!

Could you make the x/y axis constant across portfolios? Or put a black number overlay on the green WR bars? Hard to compare the charts of the pre-determined *-withdrawal-rates.jpg or if multiple windows of calculators are open.

edit:
another idea: add a sort of monte carlo option to the hurricane calculator, for folks who don't feel comfortable with the traditional (firecalc) way of backtesting. Personal Capital did it: https://blog.personalcapital.com/person ... odern-era/

also, seems it's on reddit: https://www.reddit.com/r/financialindep ... wal_rates/

edit2: i need to check out https://www.portfoliovisualizer.com/mon ... simulation and family... see: https://www.reddit.com/r/financialindep ... es/cuv0o8f

[Tyler9000]

Good idea on fixing the axis labels to compare charts side by side. I'll have to research that to find an appropriate bound. Thanks for the tip.

The monte carlo simulation idea is interesting. I've been intentionally taking the "simple" approach to tool development as I feel it's most useful for the widest number of people -- organically making it to Reddit and seeing a good conversation there is pretty awesome and helps validate I'm on the right track. The one on PortfolioVisualizer is pretty great with lots of features for power users (I especially like that you can change the sampling method) and I definitely recommend it. If I can find a way to squeeze that down to something more straightforward then it might make the cut.

[Dragline]

So what's your favorite on the SWR calculator?

33% Small cap value, 33% Long Term Treasury, 17% Gold and 17% Reit looks really good.

[black_son_of_gray]

@ Dragline: Nice! A slight tweak to your allocation: 33 % small cap value, 17% long term treasury, 16% commodities, 17% gold, 17% REIT
Maybe a little worse at 10 years (12 and 4.5% vs 11.4 and 4.8%), but that 40 year! (7 and 6.6% vs 6.5 and 6.0%)

[black_son_of_gray]

Or better yet: 50% small cap value, 12.5% LT treasury, 12.5% commodities, 12.5% gold, 12.5% REIT gives 12 and 5.4% @ year 10 and 7.3 and 7.0 @ year 40

[Tyler9000]

This may sound surprising, but I usually have more fun building the tools than I do tinkering with them. I've experimented with portfolio values a lot less than you'd probably think.

I do find this kinda interesting:


Basically, one may naturally believe that chasing maximum returns increases withdrawal rates but that's not necessarily true. Diversification and low volatility (of the overall portfolio) also play significant roles. FWIW, that's a big reason why I believe things like LTTs, gold, and REITs are so helpful. They help balance the stocks with other uncorrelated assets.

[Dragline]

Question for T9K: What is the "commodities" index or fund that is being tracked and how much of it is energy-related?

[Tyler9000]

Commodities
============================
COMM - Commodities/Natural Resources
Collaterallized Chase Index 1972-1990
DJ-AIJ plus T-Bills 1991-1996
DJ-AIG plus Yahoo's IPS 'category' returns 1997-2001 (prior to VIPSX)
DJ-AIJ plus VIPSX - 2001-2002
Pimco PCRIX 2003+


Here's the info for PCRIX:
http://finance.yahoo.com/q/hl?s=PCRIX+Holdings

These days, it's more real estate than energy.

[bryan]

for giggles, plugged in 5% and I'm just 1.5 years away from ERE (versus 3.5 using 3.5%). Probably in a year or two (before I'm 30) will do some additional analysis of scenarios to see where I'm at.. would be nice if to travel in the van through South America to see if living there "permanently" would be something that would suit me.

@Tyler9000, do you have the capability to backtest more dynamic portfolios? One that incorporates market timing (after x metric be sure you are using Ivy, after y metric be sure you are using PP)?

[Tyler9000]

Not yet, but that's an interesting idea. Encouraging people to switch portfolios regularly is against my nature and could start down a dangerous road, but accurately representing the systems specifically advocated by some portfolios (like the momentum methods of the Ivy portfolio or rebalancing bands of the PP) seems reasonable.

[Summer]

@Tyler9000, Can you post a link to the source of your expected returns data (or the realised returns if you used them) you used to make your site for us? Please.

[Tyler9000]

http://portfoliocharts.com/methodology/

Follow the link to Simba's spreadsheet -- It's an excellent tool in its own right. That has everything but the 10-year treasuries, which you can find here: http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html

All of the calculations start from that source data and work from there.

[Summer]

Simba's spreadsheet seems overwhelming but I can manage it. Thanks.

[Tyler9000]

JP had a good suggestion for the website to add some kinda intro page for beginners. It could cover investing basics like "what's an asset allocation?" and also offer specific fund examples that correspond to the individual asset classes when people find a portfolio they like. I've been playing with that idea and working on the best way to do it.

Recently, it's come to my attention that there's a subset of highly educated investors out there that also don't get it. I know of at least one very smart person who trades options for a living who apparently doesn't know what an asset allocation or SWR is and who is mostly oblivious to passive investing strategies. It's like our Wheaton scales are completely orthogonal.

I feel like this kind of person is probably pretty rare, but who knows. Perhaps I could provide info not only introducing passive investing concepts for beginners but also comparing and contrasting it to other methodologies. To do that, I'd need to raise my own understanding as well. Does anyone have any good recommendations for resources that discuss the merits and drawbacks of a variety of different investing strategies? I'm talking beyond portfolio construction -- things like options trading, day trading, dividend growth, managing rentals, hedge funds, etc. Something as simple as one good link I could toss in for educational purposes might do the trick.

[Tyler9000]

So what's your favorite on the SWR calculator?

BTW, I've been experimenting more lately and am currently digging a simple 5x20% portfolio with equal parts large cap blend, small cap value, long term treasuries, short term treasuries, and gold. Working on a write-up, in fact. Keep an eye out.