Well that wasn't what I expected from the title! Ha, ha... When it comes to generating retirement income, I've come to view "picking" a retirement year as a form of Russian roulette. As Micheal Kitces has demonstrated so clearly, there is a huge variation in sustainable withdrawal rates depending upon the year each individual investor retires. Sometimes a large variation shows up from just one year to the next. What was it, 1980 or so when a brand new retiree, as we know now, could have spent at an inflation adjusted rate of 9% or more without having to worry about running out of money? The trouble with that risk is that it can only be determined in retrospect, after many years — or a couple of decades — into retirement. But while a sustainable withdrawal rate is indeed addressed as one of seven major issues retirees must contend with, the article has a much broader focus. As always, Jonathan, your perspective on these issues is helpful and clarifying.
Ha, ha! I absolutely love it! Serves me right, doesn't it, proving my point at my own expense. Okay, so this is the best I can do: The house search continued well into 1994. So if it's possible that the Courant only published your articles occasionally that early, then that's one explanation. I still remember the round oak dining table where I would read the real estate section over Sunday breakfast, and my mind associates your column with that experience. Another possible scenario is that I happened upon your writing in the way I described, but it was during another extended house search in 1998, and it was with articles published only occasionally. (It's possible, because back then the Courant was a truly outstanding local publication, so thoughtful editing would not be out of place there.) Either way, I'm fairly certain — and now we know how much that's worth! — that I had become familiar with your work well before moving into my house in late 1998. I actually still have your 2006 email kindly demystifying in a few short sentences the primary tax benefit of tax deferral, so at least there's some objective documentation of your help with that. The appreciation still applies!
Well, 85% is almost 100% in my book. ;-) At the risk of overstaying my welcome, I'd just like to note here that my interest in personal finance was sparked to a large extent by your outstanding columns, Jonathan. How lucky is was for me that as I searched endlessly — and in vain — for my first house in 1993 using the Hartford Courant's Sunday real estate section, the paper was also publishing your weekly column, Getting Going, in the same section. It was there that I stumbled upon your advice, purely by chance. Then that spark of interest was fanned into a flame by your clear and easily digestible 2003 book, You've Lost It, Now What? That work led, in turn, to the Vanguard Diehards forum, the precursor to the Bogleheads forum. And that opened up a whole new world. You've also been extremely gracious in replying to several specific questions I've posed directly to you over the years, typically with lightening speed. For example, it was one of your email responses that finally pounded into my thick skull the true nature of the tax break offered in tax-deferred accounts. Until reading your clear and concise illustration, I just couldn't wrap my head around it. So it is no exaggeration to say that the level of success I feel I've achieved in my personal finances is clearly attributable, directly or indirectly, to you. My sincere thanks for all you've done to help me and thousands of small investors like me attain some semblance of financial security.
I'll cut you all the slack in the world! Seriously, I didn't undertake this documentation to prove you wrong, nit pick or criticize. It's just one more example of how amazingly malleable our memories are, and how flawed our perceptions can become over time. It's tough, this being human thing! (I'm just relieved that having my head examined might not be warranted just yet... )
Oh my, is there a space limitation on these comments?! Just searching the folder holding whatever articles I happened to save with the key words "foreign bonds" turned up at least 19 columns in which you made various forms of recommendations to hold foreign bonds. Many were explicit — complete with an accompanying illustrative graphic identifying specific funds to consider. Others were more incidental, including foreign bonds in lists of recommended assets. But even many of those were explicit enough to include an example percentage allocation to foreign bonds. A few went into much more detail on the diversification benefits of foreign bonds. I should also note here that it took me a few years to fully realize how amazingly succinct your writing is: you don't include any 'throw-away" lines. Indeed, there aren't even any throw-away words. In an 11/26/2003 article, Why Investors Should Put up to 30% Of Their Portfolio in Foreign Funds, you wrote, "And yet the case for investing abroad is stronger than ever, thanks to a burgeoning array of foreign funds that promises to reduce a portfolio's risk and possibly boost its return. Indeed, I believe investors should earmark as much as 30% of their stock portfolio and 15% of their bond-market money for foreign funds." To reinforce that recommendation, you offered this specific: "Meanwhile, for bond exposure, you might try Baltimore's T. Rowe Price Associates. Among its offerings are an emerging-market debt fund that levies 1.1% a year and an international-bond fund that charges 0.92%." A year later, you reiterated that recommendation in a 12/1/2004 article, The Right (and Wrong) Way To Protect Yourself Against The Falling Dollar: "I typically suggest that investors stash up to 30% of their stocks and up to 15% of their bonds in foreign funds. Which funds should you buy? There are five major categories to consider." Then you elaborated in the last few paragraphs, and inserted a chart with three foreign bond fund suggestions.
Prefer bonds? "The purest play on a dollar decline would be a foreign-bond fund," says Jeremy DeGroot, research director at Litman/Gregory Asset Management in Orinda, Calif. He notes that the yields on high-quality U.S. and foreign bonds are similar. "Even if the dollar doesn't decline, there's not a big opportunity cost to owning a foreign-bond fund," Mr. DeGroot argues.
And if the dollar does spiral lower, holding a foreign-bond fund could salvage your portfolio's performance. "It's a nice piece of insurance," Mr. DeGroot says.
Unfortunately, while foreign bonds and small-cap stocks are great ways to diversify, there aren't great low-cost investment choices for ordinary investors. Among foreign small-cap funds, Mr. Lam suggests Fidelity International Small Cap and Third Avenue International Value. Meanwhile, for international-bond exposure, he likes American Century International Bond, Loomis Sayles Global Bond and T. Rowe Price International Bond.
The latest example in my records is from a 3/9/2008 article, The Joy of Building Your Own Portfolio.
"Finally, for your 40% in bonds, you could have a mix of 14% high-quality U.S. bonds, 14% inflation-indexed Treasurys, 4% foreign bonds, 4% emerging-markets debt and 4% junk bonds."
And there were plenty of other examples between 2003 and 2008. Now, to be fair, I don't think I came across an explicit disclosure that you personally owned foreign bonds. But that was clearly the impression I got. If you were to check your records, is it possible you might have actually owned foreign bonds in the 2003 - 2004 time frame?
Oh no! Back down the rabbit hole... Actually, Jonathan you were fairly persistent in beating the foreign bond drum for a bit. In your last few years at the WSJ, I had taken to saving digital copies of your columns, and five minutes of browsing my records turned up maybe half a dozen recommendations of varying strengths. I could probably double that number with some more browsing. Would providing dates and quotes help? I'm certainly not trying to attack your credibility or embarrass you. This could actually be a very illuminating moment! Before I had learned more, I had modeled my own portfolio after yours, in 2004/2005. So there's really nowhere else I would have gotten the notion to include unhedged foreign bonds. As I learned more, I noticed striking similarities between your recommendations and model portfolios from both Malkiel and Swensen — minus the foreign bonds. So that made it easier to stick with the basic outlines of a passive portfolio that is rightfully traced back to you. Then again, I have been talking to myself more than usual lately. ;-)
Thanks for your reply! Yes, my portfolio has lots of moving parts, but also yes, they're all index funds (or fixed income for which there are no index funds). So essentially, the best benchmark is simply the asset allocation. That benchmark I track closely. So I can capture what the markets deliver — just as long as I don't start messing around. For comparison to an "untilted" portfolio, I typically look at the Vanguard lifecycle or target retirement fund with a comparable overall equity allocation. One of those funds is a real world proxy for a three fund passive portfolio without risk factor or other tilts. I also wanted to follow up to acknowledge that I, too, had done my share of tweaking before building up immunity from the temptation. The last substantive change I made was 12.5 years ago to split my real estate allocation 50-50 into US and foreign funds when Vanguard came out with its ex-US real estate fund. At the same time, I dropped the unhedged international bond fund position Jonathan's columns had persuaded me to consider (a long time ago), and that allowed me to hold my foreign exposure steady. The ex-US real estate fund has been a performance drag, and the unhedged foreign bond fund served no meaningful purpose given the token stake in it I held. For better or worse, that's where things ended up. Now I'm committed to holding on for the duration. My first real girlfriend, many years later, theorized that we tend to marry whoever we're with when we're ready for the commitment of marriage. I'm not sure how accurate that is, having never married, but I suppose the personal finance corollary would be that we end up with the portfolio we happen to be holding when we're finally ready to become truly passive investors. At least that's the way it worked with me.
"Looking back over almost four decades of investing, what I see is far too much tinkering. At various times, I’ve owned funds devoted to precious metals, global real estate, commodities, emerging market bonds and more. I know this tinkering devoured precious time—and I strongly suspect it hurt my investment results."
I can't tell you how gratifying it is to read these words, Jonathan. First, as a voracious reader of your columns for the past 30 years, it confirms my own observations. So it turns out I'm not crazy after all for puzzling over your pointed dismissal of some assets that, as I recall, you formerly owned or recommended — albeit maybe 30 years ago. Second and more importantly, it confirms your intellectual honesty. Starting with your advice, and continuing with the wisdom imparted among Bogleheads over the past couple decades, I've gotten really, really good at not tinkering with my portfolio — probably better than many of the professional and academic authors I read. The portfolio is not exactly slice-and-dice, but it's got a lot of moving parts that could easily temp me to tinker. But I'm no longer tempted. Unfortunately, when I compare my carefully tracked performance against appropriate external benchmarks, I'm not outperforming them, and sometimes underperform them by a little bit. Such is the risk of tilting in various directions. I strongly suspect that Jonathan's performance has similarly exceeded my own, in spite of all the tinkering. Embracing a passive investing approach, however, leads to a peaceful acceptance of whatever the market delivers. At least I can be certain that I'm not making any glaring, fatal investing errors. Thanks for all your wise words over the years, and for making this important acknowledgement.
Comments
Well that wasn't what I expected from the title! Ha, ha... When it comes to generating retirement income, I've come to view "picking" a retirement year as a form of Russian roulette. As Micheal Kitces has demonstrated so clearly, there is a huge variation in sustainable withdrawal rates depending upon the year each individual investor retires. Sometimes a large variation shows up from just one year to the next. What was it, 1980 or so when a brand new retiree, as we know now, could have spent at an inflation adjusted rate of 9% or more without having to worry about running out of money? The trouble with that risk is that it can only be determined in retrospect, after many years — or a couple of decades — into retirement. But while a sustainable withdrawal rate is indeed addressed as one of seven major issues retirees must contend with, the article has a much broader focus. As always, Jonathan, your perspective on these issues is helpful and clarifying.
Post: Retirement Roulette
Link to comment from November 25, 2023
Ha, ha! I absolutely love it! Serves me right, doesn't it, proving my point at my own expense. Okay, so this is the best I can do: The house search continued well into 1994. So if it's possible that the Courant only published your articles occasionally that early, then that's one explanation. I still remember the round oak dining table where I would read the real estate section over Sunday breakfast, and my mind associates your column with that experience. Another possible scenario is that I happened upon your writing in the way I described, but it was during another extended house search in 1998, and it was with articles published only occasionally. (It's possible, because back then the Courant was a truly outstanding local publication, so thoughtful editing would not be out of place there.) Either way, I'm fairly certain — and now we know how much that's worth! — that I had become familiar with your work well before moving into my house in late 1998. I actually still have your 2006 email kindly demystifying in a few short sentences the primary tax benefit of tax deferral, so at least there's some objective documentation of your help with that. The appreciation still applies!
Post: Don’t Mess Around
Link to comment from August 14, 2023
Well, 85% is almost 100% in my book. ;-) At the risk of overstaying my welcome, I'd just like to note here that my interest in personal finance was sparked to a large extent by your outstanding columns, Jonathan. How lucky is was for me that as I searched endlessly — and in vain — for my first house in 1993 using the Hartford Courant's Sunday real estate section, the paper was also publishing your weekly column, Getting Going, in the same section. It was there that I stumbled upon your advice, purely by chance. Then that spark of interest was fanned into a flame by your clear and easily digestible 2003 book, You've Lost It, Now What? That work led, in turn, to the Vanguard Diehards forum, the precursor to the Bogleheads forum. And that opened up a whole new world. You've also been extremely gracious in replying to several specific questions I've posed directly to you over the years, typically with lightening speed. For example, it was one of your email responses that finally pounded into my thick skull the true nature of the tax break offered in tax-deferred accounts. Until reading your clear and concise illustration, I just couldn't wrap my head around it. So it is no exaggeration to say that the level of success I feel I've achieved in my personal finances is clearly attributable, directly or indirectly, to you. My sincere thanks for all you've done to help me and thousands of small investors like me attain some semblance of financial security.
Post: Don’t Mess Around
Link to comment from August 14, 2023
I'll cut you all the slack in the world! Seriously, I didn't undertake this documentation to prove you wrong, nit pick or criticize. It's just one more example of how amazingly malleable our memories are, and how flawed our perceptions can become over time. It's tough, this being human thing! (I'm just relieved that having my head examined might not be warranted just yet... )
Post: Don’t Mess Around
Link to comment from August 14, 2023
Oh my, is there a space limitation on these comments?! Just searching the folder holding whatever articles I happened to save with the key words "foreign bonds" turned up at least 19 columns in which you made various forms of recommendations to hold foreign bonds. Many were explicit — complete with an accompanying illustrative graphic identifying specific funds to consider. Others were more incidental, including foreign bonds in lists of recommended assets. But even many of those were explicit enough to include an example percentage allocation to foreign bonds. A few went into much more detail on the diversification benefits of foreign bonds. I should also note here that it took me a few years to fully realize how amazingly succinct your writing is: you don't include any 'throw-away" lines. Indeed, there aren't even any throw-away words. In an 11/26/2003 article, Why Investors Should Put up to 30% Of Their Portfolio in Foreign Funds, you wrote, "And yet the case for investing abroad is stronger than ever, thanks to a burgeoning array of foreign funds that promises to reduce a portfolio's risk and possibly boost its return. Indeed, I believe investors should earmark as much as 30% of their stock portfolio and 15% of their bond-market money for foreign funds." To reinforce that recommendation, you offered this specific: "Meanwhile, for bond exposure, you might try Baltimore's T. Rowe Price Associates. Among its offerings are an emerging-market debt fund that levies 1.1% a year and an international-bond fund that charges 0.92%." A year later, you reiterated that recommendation in a 12/1/2004 article, The Right (and Wrong) Way To Protect Yourself Against The Falling Dollar: "I typically suggest that investors stash up to 30% of their stocks and up to 15% of their bonds in foreign funds. Which funds should you buy? There are five major categories to consider." Then you elaborated in the last few paragraphs, and inserted a chart with three foreign bond fund suggestions.
The latest example in my records is from a 3/9/2008 article, The Joy of Building Your Own Portfolio. And there were plenty of other examples between 2003 and 2008. Now, to be fair, I don't think I came across an explicit disclosure that you personally owned foreign bonds. But that was clearly the impression I got. If you were to check your records, is it possible you might have actually owned foreign bonds in the 2003 - 2004 time frame?Post: Don’t Mess Around
Link to comment from August 14, 2023
Oh no! Back down the rabbit hole... Actually, Jonathan you were fairly persistent in beating the foreign bond drum for a bit. In your last few years at the WSJ, I had taken to saving digital copies of your columns, and five minutes of browsing my records turned up maybe half a dozen recommendations of varying strengths. I could probably double that number with some more browsing. Would providing dates and quotes help? I'm certainly not trying to attack your credibility or embarrass you. This could actually be a very illuminating moment! Before I had learned more, I had modeled my own portfolio after yours, in 2004/2005. So there's really nowhere else I would have gotten the notion to include unhedged foreign bonds. As I learned more, I noticed striking similarities between your recommendations and model portfolios from both Malkiel and Swensen — minus the foreign bonds. So that made it easier to stick with the basic outlines of a passive portfolio that is rightfully traced back to you. Then again, I have been talking to myself more than usual lately. ;-)
Post: Don’t Mess Around
Link to comment from August 14, 2023
Thanks for your reply! Yes, my portfolio has lots of moving parts, but also yes, they're all index funds (or fixed income for which there are no index funds). So essentially, the best benchmark is simply the asset allocation. That benchmark I track closely. So I can capture what the markets deliver — just as long as I don't start messing around. For comparison to an "untilted" portfolio, I typically look at the Vanguard lifecycle or target retirement fund with a comparable overall equity allocation. One of those funds is a real world proxy for a three fund passive portfolio without risk factor or other tilts. I also wanted to follow up to acknowledge that I, too, had done my share of tweaking before building up immunity from the temptation. The last substantive change I made was 12.5 years ago to split my real estate allocation 50-50 into US and foreign funds when Vanguard came out with its ex-US real estate fund. At the same time, I dropped the unhedged international bond fund position Jonathan's columns had persuaded me to consider (a long time ago), and that allowed me to hold my foreign exposure steady. The ex-US real estate fund has been a performance drag, and the unhedged foreign bond fund served no meaningful purpose given the token stake in it I held. For better or worse, that's where things ended up. Now I'm committed to holding on for the duration. My first real girlfriend, many years later, theorized that we tend to marry whoever we're with when we're ready for the commitment of marriage. I'm not sure how accurate that is, having never married, but I suppose the personal finance corollary would be that we end up with the portfolio we happen to be holding when we're finally ready to become truly passive investors. At least that's the way it worked with me.
Post: Don’t Mess Around
Link to comment from August 13, 2023
Post: Don’t Mess Around
Link to comment from August 12, 2023