Does the FIRE 4% rule work in neutral sideways markets?

Prism

Malthusian said:

DiggerUK said:

Malthusian said:

DiggerUK said:

It doesn't really matter if they can, or can't, figure out when they can retire. You can only save what you can save, nobody can manufacture resources out of thin 

Very few people are in the fortunate position they can afford everything they want in retirement while sacrificing some of their retirement fund on the altar of zero-yield shiny metal.

People who invest in assets with a positive expectation of real return will be able to afford a higher standard of living in retirement than people who invest the same amount in zero-yield shiny metal. That is not crystal-ball gazing, those are the economic laws of physics.

Your truism that gold is a shiny metal is noted. However it is not a zero yield.

Unless you can produce video evidence of a 100g lump of gold producing another 5g of gold, yes it is.

Businesses by contrast can add value to their inputs through the effort of their employees, sell that value for more than their costs and distribute the profit either via interest or dividends.

To add two more, firstly (and best) they can reinvest those profits internally to grow the business which should increase future profits or they can buy back their own shares as a way of paying back their investors. Both of these have a direct effect of increasing the value of the company per share. 

DiggerUK

Malthusian said:

DiggerUK said:

Malthusian said:

DiggerUK said:

It doesn't really matter if they can, or can't, figure out when they can retire. You can only save what you can save, nobody can manufacture resources out of thin 

Very few people are in the fortunate position they can afford everything they want in retirement while sacrificing some of their retirement fund on the altar of zero-yield shiny metal.

People who invest in assets with a positive expectation of real return will be able to afford a higher standard of living in retirement than people who invest the same amount in zero-yield shiny metal. That is not crystal-ball gazing, those are the economic laws of physics.

Your truism that gold is a shiny metal is noted. However it is not a zero yield.

Unless you can produce video evidence of a 100g lump of gold producing another 5g of gold, yes it is.

Businesses by contrast can add value to their inputs through the effort of their employees, sell that value for more than their costs and distribute the profit either via interest or dividends.

Our average costs are under £650 per ounce, it has been over £1k for the last twelve months and is sitting at a little under £1,400 as I post. Shiny yellow stuff has zero dividends, but is not a zero yield.
Also, the last time I checked, two out of three companies have suspended, postponed or simply cancelled dividends. 

Stop being so grouchy because my call on gold hasn't led to Digger Mansions being banged up in a debtors prison,  or consigned to the poor house. A call I have only been making on MSE for eleven years now..._

bowlhead99

DiggerUK said:
Shiny yellow stuff has zero dividends, but is not a zero yield.

Yield means it produces something. For example if you own a field it might yield a good crop, or a bond or company share may produce an interest or dividend payment. Likewise one could yield in battle or in an argument or discussion, and 'give up' or concede one's property, objective, time on the floor etc, like the land gives off its crops or the company or borrower gives its dividend or its interest payment.

In the case of a yield from land, the field itself may become more valuable over time due to supply and demand factors for agricultural space or alternative uses like property development, but that element of the potential return you can get by owning the land for a while is quite separate from its 'yield' (the yield being what it could give off, like crops growing out of it or an income stream from renting out the space).   Similarly an ounce of gold might become more desirable or less desirable at different points in time due to supply and demand factors, which may change the value of the ounce in pounds or dollars - but that is not a yield: the gold is not giving you anything or producing anything, the £650 or £1000 to £1400 (or back the other direction) is simply a change in value.

Prism

DiggerUK said:

Also, the last time I checked, two out of three companies have suspended, postponed or simply cancelled dividends. 

Stop being so grouchy because my call on gold hasn't led to Digger Mansions being banged up in a debtors prison,  or consigned to the poor house. A call I have only been making on MSE for eleven years now..._

That cash from the dividend hasn't just disappeared. Its still within the company (making it slightly more valuable than had it paid it out), which is an entirely sensible precaution in these times. How much of that cash will remain after this will be interesting however.

I don't think anyone wishes you ill with your gold investment. Well done. I think it is fair to say though you are probably one of the riskiest investors on this forum but you don't seem to believe that you are.

DiggerUK

If you get more back than what you put in it's known as 'being up on the deal'  If our 650 becomes 1,000, or 1,400 that's up, and our gold yields us a return, it's just not a dividend. Gold not paying a dividend is just a straw man argument.

The supposed aim of 'FIRE 4%' and its clones are to preserve as much value as possible in to retirement, it can't stop the value of assets heading towards zero, merely slow it down. We accept we'll have an empty chest one day as easily as we know we'll die.

We saw no risk attached to our decision to go all  gold in our retirement chest. It wasn't a gamble, we both knew it's role from an historical and economic position. So after eleven years of the same arguments, guess what.

As to the 'Fire 4%' and its army of clones I say this. Follow whatever plan you want, then go back and factor in 5% of your portfolios being in gold a year or more ago. Even YTD is fabulous. Now go back and do the same with 10%, and then go back......

I remain flabbergasted by talking heads who have such an aversion to gold in portfolios, but spend inordinate time making six plans before breakfast..._

Prism

DiggerUK said:

If you get more back than what you put in it's known as 'being up on the deal'  If our 650 becomes 1,000, or 1,400 that's up, and our gold yields us a return, it's just not a dividend. Gold not paying a dividend is just a straw man argument.

The supposed aim of 'FIRE 4%' and its clones are to preserve as much value as possible in to retirement, it can't stop the value of assets heading towards zero, merely slow it down. We accept we'll have an empty chest one day as easily as we know we'll die

The core aim of the 4% rule is to ensure that you preserve enough value through retirement and goes hand in hand with a balanced portfolio. It might well end with with assets close to zero but in the majority of cases it should multiply assets - an increase not a decrease.

.

We saw no risk attached to our decision to go all  gold in our retirement chest. It wasn't a gamble, we both knew it's role from an historical and economic position. So after eleven years of the same arguments, guess what.

As to the 'Fire 4%' and its army of clones I say this. Follow whatever plan you want, then go back and factor in 5% of your portfolios being in gold a year or more ago. Even YTD is fabulous. Now go back and do the same with 10%, and then go back......

I remain flabbergasted by talking heads who have such an aversion to gold in portfolios, but spend inordinate time making six plans before breakfast..._

I don't hear many people arguing that a bit of gold in a portfolio isn't a decent diversifier. Many of the big wealth preservation trusts have around 10% gold in them. But lets not pretend than gold hasn't historically dragged back the performance. Had I invested everything I had in gold a year ago I would be better off than I am now. The same for 2 years ago. Had it been 3 I would be slightly worse off. I would have been disappointed if I had done it 5 years ago, and the 10 year performance is pretty terrible. The future? I haven't got a clue but I wouldn't want to bet all of it on any individual class of investment.

michaels

Can you not rent out physical gold to shorters thus gaining a yield

Malthusian

michaels said:

Can you not rent out physical gold to shorters thus gaining a yield

Yes, but that's a loan security, and it has a yield like all loan securities. Nothing to do with gold.

In exchange for the yield you run the risk that the shorter won't be able to return your gold on the agreed date (having immediately sold it when you lent it to them, on the assumption it would be cheaper to buy back later).

ColdIron

DiggerUK said:

Malthusian said:

DiggerUK said:

Malthusian said:

DiggerUK said:

It doesn't really matter if they can, or can't, figure out when they can retire. You can only save what you can save, nobody can manufacture resources out of thin 

Very few people are in the fortunate position they can afford everything they want in retirement while sacrificing some of their retirement fund on the altar of zero-yield shiny metal.

People who invest in assets with a positive expectation of real return will be able to afford a higher standard of living in retirement than people who invest the same amount in zero-yield shiny metal. That is not crystal-ball gazing, those are the economic laws of physics.

Your truism that gold is a shiny metal is noted. However it is not a zero yield.

Unless you can produce video evidence of a 100g lump of gold producing another 5g of gold, yes it is.

Businesses by contrast can add value to their inputs through the effort of their employees, sell that value for more than their costs and distribute the profit either via interest or dividends.

Shiny yellow stuff has zero dividends, but is not a zero yield.

Have you considered reinvesting the 'yield' in more gold?
I am positive on gold and a very long term holder but I don't kid myself that it yields anything

2unlimited91

To come back to the topic: the only 4% rule that really works is to buy an index-linked annuity. (You will have to wait until you're about 70 or so before you can get as much as 4%, or more for a joint annuity.)

Making your money last until you die, but at the same time not pointlessly leaving money over that you would have rather spent, is not some insoluble conundrum. It is a problem with a known solution: annuities. And yet there seems to be very little love for annuities.