Early Retirement - Perpetual Portfolio Investment Strategies
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- Опубліковано 4 чер 2021
- People often dream of early retirement but if you are going to make this dream a reality then you need to understand the investment strategies that could allow this to happen. If you want to retire early then you'll probably also want to understand how you can build a portfolio that will allow you to retire with as little capital as possible but where the money never runs out.
In "Early Retirement - Perpetual Portfolio Investment Strategies" I will show you how you can do this and why choosing high dividend stocks might not be the best way for you to approach this.
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Recommended PensionCraft UA-cam Playlists
- There are many different types of investment strategies. In this playlist we look at a number of these so that you decide what is right for you. • Investment Strategies
- Bewildered by investment? Start with this playlist • Investing for Beginners
- Building blocks for your portfolio • Portfolio Building Blocks
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whats your views on crypto , Ramin ?
dot onepercenter
How about using covered calls to increase the synthetic dividend yield? It could produce additional somewhere between 5 to 10% equivalent annual yield. It is a synthetic hybrid of capital gain and dividend. We can join forces to help the retirees get more incomes in terms of the percentage of the notional value of the portfolio. For instance, your gold portion of the portfolio doesn't generate income by default. Conservative covered call on gold would produce about 6% income annually. A simple and easy to use strategy for retirement income.
Great video as always, Ramin.
Thank you Tony! Ramin
Excellent - as always!
Thanks again @Women’s Finance Coach
Ha!!! If I I am correct my suggestion(s) In the past of the Golden Butterfly Portfolio caught your attention - in any case I am so pleased that you decided to include it in your video - maybe a live face chat in the future should be in order for me
Vanguard had their managed payout fund that was supposed to do this for you but was ended last year.
Thank you for another great insightful video for investing
My pleasure @Gerardo
Great vid- thank you
Glad you enjoyed it! Thanks Ramin
I like this vid. Good insight..
thank you for your ongoing support @GerrysPlace
Very good discussion. Well done.
Thank you
Another great video
Thank You! Ramin
looking backwards at historical returns for various asset classes is interesting, but a highly simplistic way to model a future income stream. it's as much an art as a science, and if one thinks they can't consume their own capital as part of the big picture strategy, well, that's ridiculous.
Learned a lot again, Thank You!
Glad it was helpful @Roeland Veenendaal
I've been watching the investment video genres of youtube now for about a year, and I just now discovered this one. Wow! What a treasure trove of useful sane information this fine fellow so articulately explains. I'm Subscribed! There's alot to unpack here though😅
Thank you :) @bonanzatime
Thanks for this !
My pleasure! Ramin
As a 20 year-old who has had an interest in finance for four years and uses UA-cam frequently, this is one of the best, most straightforward and informative videos I have seen on the topic and extremely relevant to the individual.
Ramin is an exceptional lecturer.
Well done for finding this channel, it’s a gem!
I used the Portfolio maker and called it M&M Portfolio. 40% SVC, 25% LT, 10% REIT, 20 GOLD, 5% EMERERING Market. Ulcer index: 3.9. PWR: 6.1%, SWR: 7.1%, SDS: 7.3%, 10YR Medium return: 8%, all at 30 years.
Excellent input.
I get lower returns because of taxes, but taxes submitted are proportionate to nominal value. This complicates a lot!
im guessing something like the butterfly portfolio is something that you migrate to at the point of retirement (starting withdraw), and not before? atm I'm in pure growth etfs
Still need to come close to the initial numbers.
Liked and subscribed.
You my friend have nailed, with clarity, what should be the obvious to anyone headed toward retirement. Live within your means and preserve your capital. I have been doing what you prescribe for the last 30 years. See my previous post for details.
That tool is just what I need, I do like this video stream too, so we’ll done for producing it. I am still looking for “having my cake and eating it”. No I am not a Boris brexiteer.
Brilliant
Thanks for the video Ramin. Portfolio Charts looks like an excellent resource. Thanks for pointing it out.
I'm glad you liked it Sam and thank you for supporting us, Ramin
Suggest retirement portfolio be designed to generate more dividends than current cost of living amounts.
EG, if median annual cost of living is 23000 pounds sterling, then design portfolio to do 50000* pounds sterling.
Go ahead and use the 23000 pounds sterling annually, and recycle the difference to buy more portfolio stock(s).
This should more than offset inflation, which the Fed targets ~ 2-3% under normal circumstances, and allow for greater inflation adjusted future distributions.
*50000 is just a guess for illustration purposes, end users will have to iterate their own specific value to match their comfort zone(s).
I am planning for early retirement, just in case I do it. I like too much my job to retire early! Thanks for your video.
you are quite fortunate to want to KEEP working. You have a blessed life. Enjoy!
I think you make a valuable point. The working population divides into those for whom work is a necessary drudgery and those that enjoy satisfaction in addition to the wages. The latter are fortunate and it may be useful if videos helped people find work that suites them. It may be in their financial and mental interest to earn a modest wage for rather longer.
40% US small value, 20% long term treasuries, 20% gold, 20% UK total market works a bit better than the 45/45/10 suggested at the end.
One year with bad weather (which is almost a certain scenario) and your corn growing plan is shot.
EXCELLENT video !!! Great thoughts and insights. I had also heard of the Golden Butterfly ...it was good to hear you validate the portfolio one more time. This is my goal going forward .... I am also looking and the Dragon Portfolio...with Long Volitility and Commodity trends...right now that is for LARGE portfolio's under their management...but Mike Green now has an ETF of Long Volitility I have yet to take a hard look at...you might find this very interesting as well
You need to be on radio 4
Thanks Rob, I hope Radio 4 agrees with you 8-)
I have a cunning idea. Feed the maize cobs to the Golden Goose. Hmm, perhaps I need to rewatch this ;-)
8-)
Buy a good cross section of an economy and you should do well over the long term. The market wil be high in 10 to 20 years, and significantly higher in 30. It's almost impossible for a company with no debt to go bankrupt. the U.S. is about 50% of the global market place, Pay yourself first. It's time in the market, not timing the market. last year I invested 100 grand in the S&P 500/ an allocation fund (with the help of my Financial Advisor Rita Lynn Evans of course) and made 370k, but guess what? I put it back and traded with her again and now I’m rounding up close to a million.
Are you just a shill for your 'financial advisor'? 370% interest in a year sounds like pot luck or bs.
@@michaeldevlin6147 More strange is how many pressed like on this
@@michaeldevlin6147these are automatically generated bot comments and the likes are also from bots. These are on almost every financial advice videos.
Often times there are even full on fake convesations with many bots "disucssing" in the comment chain. You can easily identify these, because they name the financial advisor or someone in the comments asks simething like "who advised you?" And then the bot answering with the full name. It‘s super obvious, if you see it a couple times.
The advisors pay bot companies to post these to get there name out there.
But the high dividend route you mentioned also has capital appreciation as well as dividend Income, you omitted this fact so it’s return is higher than the 2.8% you quoted.
Yes but not always There are some dividend payers that depreciate capital to maintain the dividend yield. But that is not common. Even say, you get both appreciation of capital AND a dividend in a normal situation; you still have to do the math to see what the overall return is vs other investment options.
@Pension•Craft shut up bot
Hey, just wanted to say your scooby doo vids helped double my savings in less than 2 years. Thanks, please keep up the good work...
Hi @Novembre Pleut I'm pleased to hear that! Thank Ramin
Hello i like your video. I am using different approach which is 80% in total stock market through Vanguard and 20% International bonds what is your thoughts about that?
Awesome concept: perpetual portfolio. Love the golden goose metaphor!! New to your channel! Liked and subscribed!! 😎
A crop of corn 🌽 is a better metaphor for a perpetual portfolio than a goose 🦆 that lays golden 🥚 because you can't eat much of a goose without it dying. Few people understand this
@@Pensioncraft very true!! Thank you for the crop metaphor!! It is very illustrative of the concept!! 😎
I keep collecting the golden eggs and hatching them to give me more golden egg laying geese!
Let me explain. I only buy under valued blue chip dividend paying stocks. When they become overvalued, I attach a stop-loss sell order that I will adjust as needed. If it sells, I move on to another that meets my criteria.
I have now started to buy ETFs such as JEPQ and other high yielding investments with the proceeds of my earlier strategy. I still keep a 25 to 50% balance of individual stocks.
Never pull out your principal from your brokerage account unless you absolutely have no other choice! Keep investing.
Great video, one additional consideration would be sequencing risk. The worst annualised period my not be the worst period for your strategy. If your investments lose value right at the start and you also draw down some of your pot. It may have shrunk so much it isn't large enough to benefit from a subsequent upturn in investment performance.
How about China banks which are going at over 8% dividend yield?
In reality you will never retired forever if you can make a lot of money through investment. I wanted to retire early when I was young. I retired 6 years ago when I was 49. After a short period of time I felt boring and wasting my time. I started investing in property and stocks. I am more energetic than before. I am heavily invested in what I like to do. I finally realized I can take more risk as I get older. That is opposite to what most of people think.
This is actually a sensible approach. The main risk to your retirement portfolio is the sequence of returns risk. That is why it is common to gradually reduce the share of riskier assets (equity) in your portfolio the closer you are to your retirement. However, once you are retired, and assuming the risk of sequence of returns didn't materialise in the first few years (when it is especially damaging), you can start increasing the overall risk of your portfolio again.
That doesn't make sense. You will never retire forever if you can make a lot of money thru investing. Surely if you make a lot of money thru investing you could retire early and be financially secure all thru your retirement
The main thing in all financial considerations is how much money you really need. I invested heavily in BTC around 2013, shifted a big portion of my gains in a decent DGI portfolio (mainly Dividend aristocrats) as well as in small caps. Last year I left the hamster wheel @56. Without revealing the amount of my assets: Even if the crypto market and all equity markets crash at the same time: I can live with very little money (mortgage of my house is already paid off, I have no debt). I also still have an asset which I can activate any time: Human capital. I could go to work or start something on the tube etc. To make a long story short: Volatily does not scare me at all. The time I can enjoy with my loved ones however is precious and cannot be measured with any graphs or funny metrics. Greets from Germany.
@@fw5134 I sold BTC @ 55k lol. You must have saw the upward wedge forming as well? I’m getting ready to buy back in before too long. Waiting for the run though.
idea of retirement applies only to factory workers, not wealthy persons who continue to manage and grow their wealth. buffet is not retired. my friend is in your position and owns 100 properties and is always growing his wealth and enjoys it (1st gen immigrant from Vietnam and originally China). hard work
Excellent and clear ...as always. Thanks .
Glad you liked it @Patrick Flynn
Ramin, if developed world gets inflation then EM equities rise due high exposure to commodities, Is that the case for a broad EM market like VWO?
Top tier content as always Ramin. I bet you don’t even realise how much value you’ve added to so many investors, it’s amazing to have such quality content available on UA-cam, as always thank you so much 👏
Thank you @Chris Green that's made my day! Ramin
@@Pensioncraft your reply has made my day too! Have a lovely day Ramin
Thanks @@chrisgreen3756 you too!
I’m going for 50/50, Fundsmith/Smithson. What do you think? 🤔
I want to serve throughout my life.. I do not want to fully retire, but partially. But I do want to have multiple sources of income and live a rich and happy life...
You do an amazing job of explaining a complicated process. Thank you!
Thanks
Just for laughs id love to see something like tqqq or upro backtested..
Very thoughtful video, as always. In all the research I've done, the strategy I found with the fewest flaws, is backed up statistically at least a reasonable period (35 years) and allows you to retire early because you don't have to save crazy amounts is the three asset class portfolio for income and growth - water, Nasdaq and large cap value (this is from a stockmarketmap research paper). You can take up to 10% a year - but you do need some degree of flexibility as it has a rule which says that if your portfolio falls to less than 90% of the starting amount, you take only 50% income until it recovers above 90%. Personally I think this is a fair trade-off (most people have a cash buffer anyway for emergencies, and it's unlikely that other emergencies would coincide with rare large drawdown periods) which would give more people the option of retiring early.
water???
@@mmabagainyes, if you can't find butterflies or golden goose, just buy water 😅 I've got no idea what they mean either 😂
@@mmabagain You need something to drink in retirement.
While I understand why someone would design for the worst case, this is one 30 year period of many. The optimal strategy for the worst 30 year period is likely suboptimal in dozens of others. It could be expensive insurance. Also, many people will have flexibility in their withdrawal rate. It's difficult to account for everything, but good tips on tools and ways to analyze it!
US : 6.1% : SCV60/IT20/REIT10/GLD10
Considering 80% risky assets, your return sucks and will not be sustainable, sry
My strategy: Take highly researched, high risk high reward positions in individual stocks and commodities in order to accumulate a large nest egg over a number of years (say 10). Then turn a significant portion of that portfolio over to SPIA annuity. Conservative investing never worked for me. I found myself exposed to moderate risk and small reward. Also seems nearly impossible to do technical analysis on those type of investments. (Mutual funds, etc).
This is US based? what about people in UK?
Hi Ramin, it's probably worth mentioning that historical performance is not a guarantee for future performance. Both the price development of gold in the early 1970s, as well was that of long term bonds over the last 30 years are not representative for future gains tbh... so I would strongly caution against planning an early retirement with a 5% SWR based on the Golden Butterfly Portfolio! I am planning with a 3% SWR myself, holding neither gold nor bonds atm. Best, Daniel
I have the same concerns. I wonder if, with the advent of crypto, memes, etc, gold will relatively lose favor, even as an inverse to stocks/bonds? With a longer time horizon equities seem the clear winner. For retirees reliant on regular portfolio draws, not so simple. Maybe holding 3-5 years living expenses in short-term treasuries or money market?
Best investment channel on UA-cam, bar none! Brilliant video!
Thank you Don! Ramin
So as a UK investor, I am best to try and select funds via an ISA? Anyone else doing that?
I am looking at the iShares MSCI USA small cap ETF
If your saving for retirement income then a pension is best, as you get back some money from the government via tax back. If you are 20% tax payer for example, you pay in £160 into employer pension scheme or sipp etc and you will get £40 tax back. from government. Search bogleheads UK and you will find some low cost fund suggestions and simple portfolio suggestions for UK investors. It's up to you how you position your portfolio, 100% equities or include bonds. Remember keep costs low & be well diversified across regions and sectors and asset classes. Keep platform charges low & fund charges low, rebalance once a year or you could use Vanguard lifestrategy or target date retirement funds which are automatically rebalanced for you. How much in equities and bonds depends on your ability to withstand risk and time frame. More time means you have time for your portfolio to recover provided you don't panic and sell. Buy low sell high. Index funds or etfs track indexes and are usually low cost and well diversified, such as ftse all world index, UK ftse all share index, msci World index etc Vanguards platform sipp or isa is a good place to start out especially if paying in monthly, pound cost averaging
@@fredatlas4396 if your trying to retire early I'd just go through an S&S isa so you don't have to wait till 55 or whatever age it is to access your funds.
Pure investment then go for Stocks and Shares ISA and then move the money to Innovative Finance ISA to invest in lucarative real estate, take back profits tax free.
If for retirement, use SIPP you put less and government gives minimum 20% to 45% based on tax band you are in (free money), start taking it at 55 years
If you are a limited company director, then use SSAS to create your own Pension and invest in commercial real estate, Stocks and Shares ISA etc.
Some wonder why people go for a Annuity, its easier, its not easy for most to choose a portfolio & keep checking it.
And what gives you confidence that backtesting 100 years guarantees the success of the strategy for the future? Assumption that the market relationships on the long term won't change? That the finance industry will be forever the best market to invest? What should I create as a verification routine for this retirement strategy after implementing it?
I think the best thing I do have going for me is a damn good 401k balance and pension.
Thank you Ramin, for another good one.
Why is Gold on here ? I never invest in commodities. Also bond gives you diluted returns over the long run. Market gives you 2 times returns or more.
Hi Jason that's because in some periods in the past e.g. the high inflation 1970s/early 80s gold had a huge rally. So it looks like a good inflation hedge at a time when equities and Treasuries were giving awful returns. I think that had more to do with the end of Bretton Woods. That's the limitation of backtests I guess. Thanks, Ramin.
I can see how you calculate a PWR by looking at past periods but looking forward it's guesswork. If there was a market crash in year 1 of your withdrawals then guessing a too high withdrawal rate would ruin you
Nah that was sound advice. The period in the 70s-80s rates were at 20%+, basically worst case scenario, as stated in the video. If anything, to plan based on that period was too pessimistic.
You could hold a load of money in cash, say as a tax free lump sum withdrawal at the beginning. And put it in a safe savings account, hopefully if interest rates go up, put in cash isa. Then if markets tank to much, live off the cash until your portfolio recovers enough to resume withdrawals. Of course you need enough money in your portfolio to begin with, we can dream
@Tone Loc I didn't mean all your portfolio say you had £800000 then you take £200000 tax free lump sum, you save on tax payments. That could last say 9yrs. The £600000 remains invested. Then when portfolio goes down significantly you live off cash, and no tax to pay,until your portfolio recovers. This would help enormously to stop running out of money. Why is this a bad strategy. The Harry Browne permanent portfolio works in similar way by having 25% of your portfolio in cash or short term bonds which are similar to cash
So what you're saying is all I need is between 566,000 and 1,000,000 dollars?
Just an amazing channel with tons of great info. I would love to hear your thoughts on investing in gold, good bad or indifferent?
Hi @Paul H thank you! And thanks for supporting us on UA-cam. Gold does well when interest rates are low (it generates no income so becomes less attractive when government bonds are paying a decent income), the dollar is weak (it's priced in dollars) and long-term it tracks inflation. Only one of those three is in its favour at the moment. Short-term it's driven by fear, as it's seen as a hedge in times of crisis so at the moment that is probably giving it a bit of a push upwards. You can play around with adding and removing gold from your portfolio in PortfolioCharts e.g. take a look at the Golden Butterfly (I made a video about that model portfolio a while back). Thanks, Ramin.
You can also take into account dividend tax rate, which is higher than capital gain tax. So that makes an even more compelling case for growth portfolio vs dividend portfolio.
Hi Ramin, big fan of the channel although it's named 'Pension Craft' I'm in my early 30's and this channel has helped keep me grounded and more balanced over getting carried away with too many spec investments. Many thanks!
Thanks @jvhg pvvb that's good to hear. Thank you for watching! Ramin
Interesting but over my head a bit .
If someone in UK retires and draws down £600k on day one to get this as early as possible within the LTA because they have a (£22k x 20) £440k DB pension making total £1.05m approx. This DC draw down giving £150k tax free. Can they live on that £150k over 4-5 years and keep the £450k invested in a draw down fund to grow and then understanding that withdrawing from the remainder will be fully treated and taxed as income?
Hi @Selwyn Hammond there's a nice explanation of the options here www.vanguardinvestor.co.uk/investing-explained/flexible-income As they say "You can set up regular income payments from your drawdown account straightaway. Or you can leave your money to grow (although investments can go down in value as well as up). You can also take occasional one-off payments from your drawdown account if you want to. These will be taxable like a regular income." Thanks, Ramin
@@Pensioncraft Thanks Ramin, much obliged.
Tbf if u have a million quid then tbf ,I think you will manage ok
Well named! Could also have called it the-
Portfolio Investment Sempiternal Strategy
to really hammer it home
Please don't encourage me Mike M 8-) Thanks, Ramin.
Yeah... i don't do bonds. Too dangerous.
Boomers like me have final salary company pensions to pay the bills. Mine starts from age 60. Any private pensions pay for luxuries.
Lucky you
There's a lot of stocks paying great dividends but they are at all time highs.....I'm waiting for a big pull back.👀
Isnt the dividend strategy kind of lame as we know now that dividends arealways accompanied by capital depreciation? The only real advantage I see in a Dividend portfolio is the "I never have to look at it again" advantage which might bite one in the neck eventually
For a start, just buy some good utilities, like AQN, SO, or DUK. You'll get both. Reinvest your dividends while saving. Capital depreciation is due to a declining unprofitable company, not because they may or may not pay a dividend.
@@millerforester6237 I have to disapprove. Companies stock price always suffers a decline on ex-dividend day as far as I know. This is due to the fact that Dividends get paid out of the freecash flow to Equity and not of the earnings. Hence its the CFs the firm (and therefore the shareholders) own.
Picture this: If the shareprice wouldnt decline proportional to the dividend after ex dividend day, wouldnt that be an insane opportunity to profit every time a company pays dividends? Buy stock, claim dividend sell stock for same price. No Risk jsut profit. Thats just not happening.
Another great video, thank you! Would like to see something on Sequence Risk to follow this up if it's applicable, I'm wondering if you think people who plan to be flexible with their retirement age should delay retirement if markets take a tumble? Or does the Golden Butterfly already account for that possibility?
Sequence of returns risk for the golden butterfly is very low compared to other diversified portfolios on portfoliocharts.
Very informative content as always, thank you! The thought occurred to me that some people may not want to maintain the same invested capital amount for their entire retirement period. If you allowed it to deplete in a carefully planned way, wouldn't that enable retirement at a lower invested amount? It is also likely that most will want to spend a lot more during the earlier stages of your retirement (when in best health) and less in old age. I would be interested to know whether your answer to this question would stay the same if the withdrawal rate were to vary in the way I have suggested. Thanks!
Ideally you want to invest in a portfolio that will maintain your capital, even after it's adjusted for inflation. Here in the UK you can take up to 25% as a, tax free lump sum, so if you have enough money in your retirement fund you could do that. Then when markets go down significantly you live off the cash until your portfolio recovers. Or you use the Harry Browne permanent portfolio or golden butterfly portfolio for example
Can anyone help me answer this? Why do I want $30,000 per year when it will be worth less in 2061 than it is in 2021? Wouldn’t I want 30,000 the first year then 30,300 the second year 30,603 the third year etc?
The PWR is inflation adjusted so it accounts for the issue that you posed.
@@madhavyu so then the actual amounts you will be getting will be increasing? The actual amount hitting your account in year two would be the 30,300 and the third year would be 30,603 etc. so every year more and more money hits your investment account? It wouldn’t be 30,000 every year: it would just be the amount that 30,000 represents today?
@@benjaminlopez9662 correct
That's right @@benjaminlopez9662. Each year you increase the withdrawn amount by the rate of inflation. The withdrawal rate is just for the first year and after that the withdrawal amount is driven by inflation. Thanks, Ramin.
What is the video where you said stocks are a bad hedge against inflation when inflation is high?
If you have to ask, then you just don't know!
@@muffemod he wouldnt be askin if he knew
@@muffemod k
Hi @iamactuallyover18 I did a video recently called High Inflation Investment Strategy and I talk about equity as an inflation hedge in one of the sections. The link for the video is here ua-cam.com/video/jKMZOojV0mE/v-deo.html
12:47 You lost me when you suddenly start talking about selling off part of the portfolio. How is this related to the 5.3%? And why would I want to invest in bonds right now June 2021? Would get less than 1%.
Hi Basic Poke you build up the portfolio until you retire then you withdraw from it by selling 5.3% in the first year. Then each year after that you increase your withdrawal amount by the rate of inflation. So say you have £1,000,000 in your portfolio the year you retire. You withdraw £53,000 in the first year. If inflation that year is 2% you withdraw 2% more the next year or £54.060. Say inflation then rises to 3% over the next year the withdrawal would be £55,682 the next year. You withdraw funds by selling a small proportion of the portfolio each year. Thanks, Ramin.
@@Pensioncraft What if I just build a portfolio that eventuallly gives me 5.3% dividend yield that also adjusts itself through inflation?
@@Pensioncraft Hey :) I would also like to know: 1) Does the 5,3% already include the dividend payments or is it without? 2) When do I withdraw the money? I think that depending on when you are withdrawing the money will have influence on the sustainability of your portfolio, because you are missing out on gains you need to cover the withdrawal rate. Like if i have my withdrawal after every dip, then my Portfolio has to recover with less money.
@@pitapanda9150 I don't think you don't take the dividends, you leave in Acc funds and take your income from total returns on your investments You don't have to take 5.3% I guess that would be a maximum drawdown amount, you could take just 4% and maybe 5% if your overall portfolio does really well in certain yrs. Then if it goes down a lot, say more than 20% for example try and live off 2.5% until your portfolio recovers. Just some ideas to think about, maybe you could watch Ben Felix video about income investing and why it's better to take income from capital gains. I'm no expert but you need to be careful with your pension fund, you don't want to run out of money prematurely. Passive index or etf funds look like best way to go, if your a US investor it looks like Vanguard has a lot of good funds to meat your needs. One US Vanguard fund that's quite conservative and has a very long term track record is the Vanguard Wellesley income fund it appears to have produced good returns and downside protection over longer term could make up part of your portfolio when you go into retirement. You could look at morningstar for more ideas on retirement strategies but don't be swayed into using high charging active funds. If you are saving for retirement and want an easy solution, and have over say 12 yrs or more, you could use Vanguard lifestrategy 80 % Equity or for US lifestrategy Growth fund and then when you get nearer to retirement move into less aggressive version of lifestrategy fund, depending on if you are planing to take annuity or do drawdown. Portfolio charts is a very interesting resource, you should look at. I'm not a financial advisor it's really up to you, depending on your investing goal and time frame. You need to decide a strategy and stick to it, buy and hold don't play around with your portfolio when markets go down, don't be swayed by the news
@@fredatlas4396 Thanks a lot for the detailed answer. I am right investing 50/50 in growth and dividend stocks. The monthly dividend payments are a good mental motivation to keep things going. I was just asking this questions in my post earlier, because he sold the strategy to well. For me it still feels like that there are a few things, which should be considered and added into the Simulation to find the minimum withdrawal rate.
Why would you use bonds at the current interest rates? Would this not create a damaging outlook? My personal investment strategy is property in prime locations in which the population is elderly and shares of companies the gurus are investing in. Over the last 12 months our stock returns are over 80%. No way I would buy bonds at the interest rates we are seeing. The bond interest rate is lower than inflation eeeekkkk.
The idea is to have a diversified and balanced portfolio. The bonds, are there to reduce Volatility and reduce the scale of drawdowns in market corrections or crashes. Don't forget if your portfolio as a whole goes down by for example 50% it will have to gain 100% just to break even, back to where you started. You should try rebalancing once a year, so you sell some of your investments that have done better and buy some that haven't done so well. Sell high, buy low. This helps to control your behavioural biases, it's about behavioural psychology we are our own worst enemies. We zig when we should zag & zag when we should zig, apparently.
@@fredatlas4396 in my opinion it is safer to have 18 months to 2 years living expenses in cash. Unlikely that stocks will remain down for longer than this period. I would draw down the cash If stocks fell 50%. Being a contrarian is helpful in this market. Sell houses now :-).
@@WISERandHAPPIER
I wouldn't try to tell you or anyone else how you should invest, I haven't quite lost the plot yet. But a 100% Equity portfolio could take up to 13 yrs to recover from a crash or big correction, a 50% drop would require a 100% gain just to get back to the starting point, break even. Perhaps you might like to look at portfoliocharts. com. Look for Accumulation , efficient diversification. I was quite surprised by the data actually. If you look for portfolio charts uk version you will find ways to implement various portfolios for UK investors as well
@@fredatlas4396 always best to understand the data. I am a firm believer that history does repeat itself. House prices and stock valuations will fall once interest rates rise again. I am exposed a little more than most because I only own a handful of stocks and property. Stocks include Alibaba, Bank OZK, Boeing, Shinoken, Armada Hoffler, Berkshire Hathaway and A2 Milk stocks. Always able to pick up work if I need to being only 41 or else live in a less expensive country.
@@WISERandHAPPIER - the 2000 Nasdaq crash took until 2009 to recover from as the 2000’s were a lost decade. You really need 4 years cash.
What do you think of QYLD as a retirment position
Can't access this ETF as a "small time" UK investor 🙄. It is available via IG and Stake, but only if you are considered to be an an accredited investor, ie- a trader😕😕.
Google the fund and set the timeframe to "max". You'll clearly see a downward slope.... You want to see the opposite.
@@djayjp but you don’t understand the fund, the goal is to create a large yield and a stable portfolio value using covered call sales.
@@harrychufan So a downward slope is "stable"? Okay buddy.... Try RYLD. Who knows if that will stay actually stable. Your underlying investment value needs to beat inflation each year don't forget (you would have to put back 2%+ each year that you get in dividends). I think JEPI is more balanced.
Another excellent video. Thank you!
Glad you enjoyed it @John Ennis
Extremely helpful explanation. My only variation is that I'm not wanting to leave a huge pot of money when I die so want to gradually reduce my capital as well as skimming off profits. I earned it so I want to spend it. Problem is, you never know the date you will die!
My wealth manager nearly fell off his chair when I said I will start taking out at a rate of 7% next year. I do have the safety net of a healthy work pension.
Why are concentrating so much on US investors? At the end you throw in the change to the Golden Butterfly portfolio to 45/45/10% for UK investors, as almost an afterthought.
Because he understands where the overwhelming majority of his audience lives?
To have a comfortable, secure-and fun-retirement, you need to build the financial cushion that will fund it all.
This guy is pure gold
Hello, hasn’t this portfolio been propped up with long term bonds? Yields have fallen dramatically since the early 1980s. Given rates are so low, and can only fall so much further should volatility hit equity markets, wouldn’t this portfolio be exposed the a very poor return-to-risk and diversification benefit going forward. Backtesting anything with long term bonds makes anything look better than it will realistically be going forward. Suggestions on replacements? Maybe more gold or changing it from long term bonds to more intermediate?
First 😍
I think you skimmed over inflation. It is an ugly wealth-destroyer. Sure the right stocks will grow during higher inflation, but beating the INFLATION MAN & the TAX MAN will become even more difficult over time. Virtually everyone could be wiped out as in Weimar Germany, or Venezuela. So you need portable and concealable assets that will outperform inflation and increasing taxation. For example, I read that if the President's $6 trillion stimulus bill were to pass, some 57% of the population will be on the govt dole. This will work until the burdened taxpayer runs out of money. Any suggestions?
In the USA you run into RMD's which isn't accounted for and make withdrawals at a higher rate than planned, basically the government wants you to die broke. Okay dying broke is a joke, but RMD's complicate your withdrawal strategy.
Big ups to everyone working effortlessly trying to earn a living while building wealth. I am 50 and my wife 44 we are both retired with the net worth of over $3million with no depts. Currently living smart and frugal with our money. Saving and investing lifestyle in the financial market made it possible for us this early even till now earn monthly through passive income.
Excellent video. Why not maintain a 3 year buffer (in bonds or a CD) to ride out bad market periods, thus deferring any withdrawals from your investments until the market recovers?
That money is out of the stock market so you will miss out on any gains.
Yes but it is protected against losses and sequencing risk in retirement. For most the goal is of not running out of money not maximizing gains at least in retirement
How do you invest in Small Cap Value as a UK investor? I can't seem to find a platform with an ETF or Fund which does that??
Hargreaves-Landsdown ISA?
@@JohnBeeblebrox great answer thank you. Although I've got an ISA already so may be worth opening a SIPP given long term nature of the investment. 0.45% account fee plus 0.3% fund charge is quite high though
WSML by iShares.
@@jinngeechia9715 couldn't find that Fund on Hargreaves lansdown only available funds spdr etfs. Msci Europe small cap value, with fund charge of 0.3%, and spdr msci USA small cap value, again charge is 0.3%. And they appear to be in Euros & Dollars. Not sure how that would work out with potential currency fluctuations and high fund charges. We can't access funds available to US investors in the USA, unfortunately. Would Vanguard global high dividend etf work for the value part, it only has exposure to large and mid caps though, but has high exposure to value stocks. We can access an S&P total us market fund, but it will be subject to currency fluctuations, or use UK ftse all share fund, but not sure if that will produce high enough returns
Vanguard global small cap index fund
Here in Canada it’s a different story. We have a lot of solid dividend growing companies that most of them pay a dividend 4 - 6% and most of them keep increasing dividends. This is why lots of retirees set up a portfolio that consist of such companies and use just dividends for income.
I have final salary only what to take 10% of free tax allowance £ 9,000 £65700 tax free
Really clear and insightful video. For someone who is decades from retirement, could you explain how withdrawals on something like a Golden Butterfly Account would work? Would one sell off 5.3% of their portfolio each year, equally split amongst their five holdings (since the portfolio holds each fund equally)? Don't fully understand how withdrawals work.
Hi Cameron, you'd sell 5.3% in year one then increase that by the rate of inflation each year. So if you had £100,000 in your savings initially you would withdraw £5,300 in year one. You would sell roughly equal amounts of each fund such that the portfolio remained in balance i.e. 20% in each asset. Then if inflation was 2% over the next year you would take out £5,406 (2% more) the next year. Thanks, Ramin
I would say sell whichever component gained the most, such as gold in a high inflation environment. Typically equities and gold are poorly correlated.
@@Pensioncraft thanks for that I was pondering this myself. I realise you would probably rebalance once a year in the Accumulation faise but wasn't sure about drawdown. I had noticed some people were talking about drawing from the bond part of the portfolio first and then later from the equity portion, I think I saw somewhere on morningstar. But I think your answer seems more logical, especially with this golden butterfly portfolio
I am gonna retire at 65 or 70
I can always move back in with my parents and retire on their dime.
Future is not in backtest, so put some margin of safety
Good point @reno9920 Thanks, Ramin.
Bonds are not going to give same returns over the next 40 years as the last 40.
40 years, wow that’s a pretty impressive crystal ball you have there, any chance of next weeks lottery numbers please.
@@simony2801 bond returns over last 40 years have been based on falling interest rates 15 % to 0% that is impossible to happen again unless we go to negative 15 %
@@brettobrien5776 yes I know that, the point is 40years is a loooong time to make any sort of half decent prediction.
@@simony2801 it's not a prediction it's in the math's. That's how fixed income work's.
40 yrs is still a long time, interest rates could go up and down again in that time, bonds are a part of diversified portfolio to reduce Volatility and level of drawdiwns not to increase returns. Equities are there to produce the capital growth, essentially
Hi Ramin. I've learned a huge amount from your channel over the last few years but I think on this occasion you've over-simplified things a little too much. Retirement portfolio drawdown is far more tricky than you make it appear. For years the general consensus (mostly from the US) is that a withdrawal rate of 4% on a low-volatility portfolio was optimal. However, current returns on all the asset classes available to the average retail investor in both the US and Europe have caused this withdrawal figure to be revised downwards to 3%. This isn't even a perpetual withdrawal rate. You will eventually run out of money using these figures. Sequence of return risk (non-ergodic path-dependence) is of paramount importance, particularly concerning the portfolio returns in the first five years of retirement. A nod towards these sobering issues would've helped bring balance to your overview. I understand that you are not providing financial advice, but even for educational / entertainment purposes I think the examples you give only sketch out half the picture and the portfolio sizes you use are wildly optimistic and don't come close to expressing the risk involved in such strategies.
Have you looked at portfolio charts
@@fredatlas4396 I have. Whats your point?
Or just but bitcoin