This is an analysis that gets you thinking but it'd be more complete if they also analyzed based on historical returns. If you assume a standard 30-year retirement timeline, there have been 125 possible 30-year periods since 1871. How many timelines out of 125 would 4% withdrawals (plus inflation adjustments) fail? You can be assured there have been many timelines of the past in which stocks seemed overvalued, but 4% prevailed. This type of analysis is highly useful to understand, to compare and contrast with "forward looking" analyses like the one from Morningstar.
I think the key issue most investors must overcome is their own behavior. That is, the temptation to tinker, trading in and out of positions and allocations based on changing attitudes and recent performance of various slices of their portfolio. Indexing is a good way to overcome this, but setting our asset allocation and sticking to it is equally as important. The indexer who constantly shifts their asset allocation based on recent performance or new research is no better off than the active investor who holds tight and does nothing.
First of all, thank you for this post. It's probably my favorite forum post to date. With that said, you "reluctantly agreed to" the bathroom renovation. Imagine the time before the renovation when you were blissfully unaware of the soaking tub's allure. Now have a conversation with this person in your mind, asking if $1K above the initial price is worth it. If you still feel strongly that the tub is worth it, then perhaps it is. I don't envy being in Jonathan's position, however. I imagine I'd have a very hard time seeing my wife's point of view in a similar situation!
Bitcoin - 0.85%
Ethereum - 0.35%
Cardano - 0.04%
Crypto - Total % of Investments - 1.24% I bought all of my crypto during the mania of 2021-2022. Crypto are my only FOMO investments. Otherwise, I am a vanilla total US stock, total US bond, and total international stock index investor. I chose these three cryptos because I wanted to stick with large market cap cryptos, so Bitcoin and Ethereum were logical choices. I chose Cardano because it was created by the co-founder of Ethereum. Why did I buy crypto at all? Because young people told me it was revolutionary. Why have I sold a small amount of Bitcoin and Ethereum over the past couple years? Because old people told me it has no use and can't be properly valued. I will probably hold on to my remaining stash. I like it because it feels kind of contrarian and doing something different feels good. It's a small allocation and small price to pay if I'm wrong.
I'm a three-fund portfolio disciple (total US stock, total international stock, total US bond index funds). But I have a friend who's worked in tech for the last decade and he's invested religiously in Microsoft and a couple other large tech companies. While I don't agree with his strategy, he's in a much better position than someone who doesn't invest at all. I also respect that he's continued to invest in these same companies through ups and downs, removing some of his "luck" through dollar cost averaging.
I agree and don't think this idea gets enough attention. The standard analysis is always chance of success based on a static withdrawal rate throughout retirement. I'm more interested in my chances of success assuming a higher initial withdrawal rate (i.e. 5%) in the first ten-ish years of retirement, as this could be when you are bridging the gap between retiring and collecting social security. Then, after you begin social security, the withdrawal rate could be adjusted downward to 3-4%. This is what I want analysis for. I suspect many have worked longer than they needed, targeting 4% as a must-have number to acquire before they retire. But could they have retired with an initial 5% withdrawal rate, if they were willing to adjust it downward later?
I also had a problem with binge drinking. I had to take responsibility and face the consequences of behavior I engaged in while drunk and this led me to never want to be drunk again. It's been a year and a half since I've been drunk. I never drink alone anymore. I only drink on rare celebratory occasions like holidays or reunions alongside family or friends, and I never drink more than two drinks. In advance of these occasions, I remind myself of my limit and take other "fun" beverages like seltzer, diet soda, etc. to mix in among my two alcoholic beverages. I also don't put myself in situations with people where there is an expectation of everyone drinking for sport, like taking shots, drinking games, etc. It requires a lot of forethought and as I age, I may eliminate drinking altogether.
Comments
Just curious. How much as a percentage of investible assets do you think folks should hold in Bitcoin?
Post: Go for the Gold?
Link to comment from May 10, 2025
This is an analysis that gets you thinking but it'd be more complete if they also analyzed based on historical returns. If you assume a standard 30-year retirement timeline, there have been 125 possible 30-year periods since 1871. How many timelines out of 125 would 4% withdrawals (plus inflation adjustments) fail? You can be assured there have been many timelines of the past in which stocks seemed overvalued, but 4% prevailed. This type of analysis is highly useful to understand, to compare and contrast with "forward looking" analyses like the one from Morningstar.
Post: Tweaking the 4% Rule
Link to comment from April 28, 2025
I think the key issue most investors must overcome is their own behavior. That is, the temptation to tinker, trading in and out of positions and allocations based on changing attitudes and recent performance of various slices of their portfolio. Indexing is a good way to overcome this, but setting our asset allocation and sticking to it is equally as important. The indexer who constantly shifts their asset allocation based on recent performance or new research is no better off than the active investor who holds tight and does nothing.
Post: Index Three Ways
Link to comment from March 22, 2025
First of all, thank you for this post. It's probably my favorite forum post to date. With that said, you "reluctantly agreed to" the bathroom renovation. Imagine the time before the renovation when you were blissfully unaware of the soaking tub's allure. Now have a conversation with this person in your mind, asking if $1K above the initial price is worth it. If you still feel strongly that the tub is worth it, then perhaps it is. I don't envy being in Jonathan's position, however. I imagine I'd have a very hard time seeing my wife's point of view in a similar situation!
Post: Replacing the Replacement
Link to comment from March 6, 2025
Great point. It can definitely be a useful illustration for risk management in other areas of life and I enjoyed the way you used it in your article.
Post: What Wisdom Can You Share?
Link to comment from February 21, 2025
I respect all religions and religious choices, but I've always found Pascal and his wager quite strange and flawed.
Post: What Wisdom Can You Share?
Link to comment from February 20, 2025
Bitcoin - 0.85% Ethereum - 0.35% Cardano - 0.04% Crypto - Total % of Investments - 1.24% I bought all of my crypto during the mania of 2021-2022. Crypto are my only FOMO investments. Otherwise, I am a vanilla total US stock, total US bond, and total international stock index investor. I chose these three cryptos because I wanted to stick with large market cap cryptos, so Bitcoin and Ethereum were logical choices. I chose Cardano because it was created by the co-founder of Ethereum. Why did I buy crypto at all? Because young people told me it was revolutionary. Why have I sold a small amount of Bitcoin and Ethereum over the past couple years? Because old people told me it has no use and can't be properly valued. I will probably hold on to my remaining stash. I like it because it feels kind of contrarian and doing something different feels good. It's a small allocation and small price to pay if I'm wrong.
Post: Any Crypto Investors?
Link to comment from February 20, 2025
I'm a three-fund portfolio disciple (total US stock, total international stock, total US bond index funds). But I have a friend who's worked in tech for the last decade and he's invested religiously in Microsoft and a couple other large tech companies. While I don't agree with his strategy, he's in a much better position than someone who doesn't invest at all. I also respect that he's continued to invest in these same companies through ups and downs, removing some of his "luck" through dollar cost averaging.
Post: The unskilled investor can be lucky – by RDQ
Link to comment from January 24, 2025
I agree and don't think this idea gets enough attention. The standard analysis is always chance of success based on a static withdrawal rate throughout retirement. I'm more interested in my chances of success assuming a higher initial withdrawal rate (i.e. 5%) in the first ten-ish years of retirement, as this could be when you are bridging the gap between retiring and collecting social security. Then, after you begin social security, the withdrawal rate could be adjusted downward to 3-4%. This is what I want analysis for. I suspect many have worked longer than they needed, targeting 4% as a must-have number to acquire before they retire. But could they have retired with an initial 5% withdrawal rate, if they were willing to adjust it downward later?
Post: Reality Check
Link to comment from January 19, 2025
I also had a problem with binge drinking. I had to take responsibility and face the consequences of behavior I engaged in while drunk and this led me to never want to be drunk again. It's been a year and a half since I've been drunk. I never drink alone anymore. I only drink on rare celebratory occasions like holidays or reunions alongside family or friends, and I never drink more than two drinks. In advance of these occasions, I remind myself of my limit and take other "fun" beverages like seltzer, diet soda, etc. to mix in among my two alcoholic beverages. I also don't put myself in situations with people where there is an expectation of everyone drinking for sport, like taking shots, drinking games, etc. It requires a lot of forethought and as I age, I may eliminate drinking altogether.
Post: Why I Don’t Drink
Link to comment from December 31, 2024