And this is entirely worthless as a prediction of future returns. You are using results spit out by an unknown generator of events and seem to be making the assumption the results are span the entire domain of the possible events. What would happen to the model if something that never happened before happened next year? Using 360 days of data the turkey was pretty sure thanksgiving was going to be just another day. As attracted as I am to the idea, I'm reminded of the errors that Taleb rails against and I think I see them here.
To achieve 200% of current savings, you could do many things:
1. Try to borrow 100% of your net worth (probably not likely) 2. Invest in derivatives such as S&P 500 futures that would replicate a 200% exposure. 3. Invest in a leveraged Exchange Traded Fund like SSO that replicates a 200% exposure.
A.) That's a terrible plot. You can't read a thing on it, and you can't zoom in.
B.) This doesn't take into account variable income, does it? The problem with this strategy is that you're running really high risk early on... which, if you don't go bankrupt or otherwise have to sell your assets before maturity, is a good idea.
Q - How many economists does it take to change a lightbulb?
A - None. Assume a new lightbulb.
The point being this is a useless simulation illustrating unrealistic concepts. Perhaps you should try something a bit more anchored in the real world, like this article:
That's a huge standard deviation in both cases. This is saying that one year in twenty (5%), you wound up with $250K or $300K. I don't know that most retirees would
Seems to me the mean is not a useful measurement to indicate safety. Given such a large standard deviation you'd want to see percentiles, maybe 5th, 25th, median and 75th. You'd also want to know worst-year case as well.
Finally, it's probably more useful to, to include post-retirement performance. For instance, I'd rather know what my inflation-indexed income would be from 65 to 80 at each percentile using various stategies
Unfortunately neither my Roth or 401k allow me to leverage - either through options or margin. I guess I'll have to stick with my plan of buying the riskiest equities possible.
Please elaborate what does "200 percent of current savings" mean? Does it involve negative gearing? Thanks.
ResponderEliminarAU
I'm confused about the 200% of current savings in stock? How do I double my current savings when starting leveraged lifecycle investing?
ResponderEliminarAnd this is entirely worthless as a prediction of future returns. You are using results spit out by an unknown generator of events and seem to be making the assumption the results are span the entire domain of the possible events. What would happen to the model if something that never happened before happened next year? Using 360 days of data the turkey was pretty sure thanksgiving was going to be just another day. As attracted as I am to the idea, I'm reminded of the errors that Taleb rails against and I think I see them here.
ResponderEliminarUntil we wrote this book, anyone would have told you that buying stock on margin
ResponderEliminarTo achieve 200% of current savings, you could do many things:
ResponderEliminar1. Try to borrow 100% of your net worth (probably not likely)
2. Invest in derivatives such as S&P 500 futures that would replicate a 200% exposure.
3. Invest in a leveraged Exchange Traded Fund like SSO that replicates a 200% exposure.
I am should there are other ways I don't know.
A.) That's a terrible plot. You can't read a thing on it, and you can't zoom in.
ResponderEliminarB.) This doesn't take into account variable income, does it? The problem with this strategy is that you're running really high risk early on... which, if you don't go bankrupt or otherwise have to sell your assets before maturity, is a good idea.
So what happens if you add uncertainty in income?
Q - How many economists does it take to change a lightbulb?
ResponderEliminarA - None. Assume a new lightbulb.
The point being this is a useless simulation illustrating unrealistic concepts. Perhaps you should try something a bit more anchored in the real world, like this article:
streetdirectory.com/travel_guide/144296/trading/the_stock_market_biggest_financial_scam.html
That's a huge standard deviation in both cases. This is saying that one year in twenty (5%), you wound up with $250K or $300K. I don't know that most retirees would
ResponderEliminarSeems to me the mean is not a useful measurement to indicate safety. Given such a large standard deviation you'd want to see percentiles, maybe 5th, 25th, median and 75th. You'd also want to know worst-year case as well.
Finally, it's probably more useful to, to include post-retirement performance. For instance, I'd rather know what my inflation-indexed income would be from 65 to 80 at each percentile using various stategies
Unfortunately neither my Roth or 401k allow me to leverage - either through options or margin. I guess I'll have to stick with my plan of buying the riskiest equities possible.
ResponderEliminar