Sequence of Return Risk

cfw1994

jamesd said:

Hard but what people doing drawdown with rebalancing signed up for. Selling bonds for living money is relatively easy. Multi-asset funds can automate rebalancing and make it psychologically easier, all you do is ignore the market. I'm not a great fan of them but this feature is useful. Except, look at how counterproductive monthly rebalancing instead of annual can be.

I still tend to measure by how many years pay it's down, months being too small a unit to matter vs the capital amounts in drawdown. Civics or years of drawdown income work, though.

I have a pal who always considered salaries in terms of pints of Guinness.  Now lives in Sweden, where he must have had a big pay rise to move (alcohol isn’t cheap there!)
I recall reading about Mars bars being used to measure inflation....
https://www.sterlingsecure.co.uk/worldmaker/prosperity/pr_005_MarsInflationIndex.shtml 

On rebalancing....that article did kind of allude to 2008-9 being a reason rebalancing made sense....& that helped as much by luck of timing.  Some “let the winners run”.  I’m on the fence on this.  A dangerous place to sit, having just handed notice in to work!!

DT2001

Deleted_User said:

That’s a nice little article.  I like the “luck” conclusion.  And his point about bull in both stocks and bonds since the 80s is true.  And every time stocks dropped, bonds went up. The next little while could easily be different. Say the interest rates go up by 1%... 

I think I understand your view on bonds from a few threads and see the logic so are you saying there might be no ‘low or negative correlation’ between equities and bonds now so we need to consider how we diversify to reduce volatility?

The article jamesd linked to was interesting and the influence of timing.

[Deleted User]

DT2001 said:

Deleted_User said:

That’s a nice little article.  I like the “luck” conclusion.  And his point about bull in both stocks and bonds since the 80s is true.  And every time stocks dropped, bonds went up. The next little while could easily be different. Say the interest rates go up by 1%... 

I think I understand your view on bonds from a few threads and see the logic so are you saying there might be no ‘low or negative correlation’ between equities and bonds now so we need to consider how we diversify to reduce volatility?

The article jamesd linked to was interesting and the influence of timing.

Yes, that’s right.  In fact, over the last 30 years we’ve had positive correlation, which was fine as both bonds and stocks went up.  And over short term downturns bonds jumped just when we needed them to.   Very fortuitous.  Correlations change over time. And I can see scenarios involving both stocks and bonds losing value, eg if interest rates rise.

Notepad_Phil

Deleted_User said:

 Correlations change over time. And I can see scenarios involving both stocks and bonds losing value, eg if interest rates rise.

Personally I'd rather be holding stocks than bonds should/when interest rates rise - provided of course they don't rise too far, in which case I'd prefer to just be holding cash in a high interest savings account.

[Deleted User]

The problem with asset prices is that they are unpredictable. What’s “too far” for stocks? And who is to say they won’t continue rising? Nor do we KNOW what will happen to the interest rates. 

So... Stay diversified.

DairyQueen

Notepad_Phil said:

Personally I'd rather be holding stocks than bonds should/when interest rates rise - provided of course they don't rise too far, in which case I'd prefer to just be holding cash in a high interest savings account.

Do such beasts still roam the earth?