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The wealth-building thread
- Thread starter JeffS7444
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This is not a big deal. All the other rating agencies did the same thing years ago. Moody's is now the same as everyone else.
This paper makes an interesting case for 100% stock indexes, regardless of age: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406
It basically takes a large number of past yearly market performances, randomizes them into lifetime-sized market performances and then runs a simulation with different asset allocations over it. The results go against the usual advice: "An optimal lifetime allocation of 33% domestic stocks, 67% international stocks, 0% bonds, and 0% bills vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests."
It doesn't get more simple than that; just DCA into FTSE All-World or MSCI ACWI and stay the course. Ignore bonds, bills, BTC, gold and everything else. As for risk-intolerance, that is on the individual. If you feel you have to sell, regarless of the statistical evidence, it's on you, you are timing the market and that will likely be a bad thing.
It basically takes a large number of past yearly market performances, randomizes them into lifetime-sized market performances and then runs a simulation with different asset allocations over it. The results go against the usual advice: "An optimal lifetime allocation of 33% domestic stocks, 67% international stocks, 0% bonds, and 0% bills vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests."
It doesn't get more simple than that; just DCA into FTSE All-World or MSCI ACWI and stay the course. Ignore bonds, bills, BTC, gold and everything else. As for risk-intolerance, that is on the individual. If you feel you have to sell, regarless of the statistical evidence, it's on you, you are timing the market and that will likely be a bad thing.
dtaylo1066
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Yes, over any 10-year period you win this way. The issue is when you are 68 years old, which I am, and in a period of great uncertainty. A bust year of -35% puts you in a hole that could take a long time to dig out of and, by then, you may be in a 6-foot deep hole.
Let’s be careful here - if you were withdrawing 4%/yr *(to live on) there have been a few starting years that would have you zeroing out before you die. Even worse if you have sudden unexpected expenses in a year when the market is way down. I’ve not read the paper yet, but all investors (who plan to live on their investments some day) should think about volatility drag. The first decade of retirement is critical to maintaining spending power. And plan for a reserve in case your foundation cracks or you need long-term-care and don’t have coverage.
Spending Like You'll Live Forever Elm Wealth
Elm: making sense of your wealth. Take the guesswork out of wealth management with our sensible-yet-sophisticated approach to investing.
elmwealth.com
Just so you know, I have zero affiliation with Elm (arguably they compete with another part of my firm), but I think Victor Haghani is a good go-to on the subject of wealth building. His book, The Missing Billionaires, is one of my top recommendations.
* There are different versions of this, but because of volatility drag, the recommended version is changing the spend as your savings grow and shrink (4%, or whatever, of current value).
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And if you lose 50% you have to make 100% return to break even. Having some bonds that give you 5% in 30% of your portfolio might ease the pain. This easily done in the US without tax consequences in an IRA.
That, specifically, is false.
dtaylo1066
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1999-2009 was -0.9% for S&P, so a slight loss. Got back to the Great Depression and you probably have a 10-year loss period. So I will correct myself to say in almost all instances.
2008 and 1979 were also bad period ends for the market, but the contention was that it would outperform 60-40, and there are several other periods where the balanced portfolio outperformed. Even 25 year.
And withdrawals change the calculus.
dtaylo1066
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Quite correct.
I retired in Sept. of 2021. The market rose a bit in Q4 of that year, but by Q1 of 2022 the downturn was in force. I had at that time a very conservative portfolio, a bit more so than 60/40. Of course the bond market had its worst 18-month stretch in history beginning that year, down double digits while the S&P 500 dropped 21% in 6 months. Welcome to year 1 or Retirment and seeing my portfolio drop more than 17%, while also taking a small withdrawal. Most fortunately, 2023 and 2024 were back-to-back stellar years for stocks. And bonds rebounded. For me it is all about risk tolerance, and also risk avoidance. I am happy to make 4-7% on my money. Greed can make one wealthy, but also make one lose the farm in a hurry.
Well there is also increase revenue as the US has the 5th lowest tax to GDP ratios of the 38 largest economies.The goal is to reduce the burden of $36 trillion in foreign-held U.S. Treasury debt. This can be achieved in two main ways: devaluing the currency and devaluing the Treasuries, or both. To devalue a bond portfolio, you increase its yields. To devalue a currency you create inflation (tariffs). But at least there's intention to repay the debt rather than default on it which is positive
Not really comparable.... need to look at GDP per capita first.
Only Ireland
Looks like Ireland is doing something right. Skyrocketing GDP per capita and low tax rates. That is pretty much the definition of prosperity.
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The housing market is SFL is now so bad that this condo sold for $1, not $1000:
My personal experience, there is a lot of high tech medical manufacturing there by foreign companies and other things as well as a huge tourist industryIreland is the entrance of overseas digital markets into EU ...
FYI, Cliff Asness had some words about these studies:
www.aqr.com
Why Not 100% Equities
Recently, a new paper has been making a big splash in our small pond of academic/quant investing. By “new,” I just mean “recently written,” as much of it ain’t new. In this piece, I offer a concise (relative to my norm) rebuttal, as this is well-trod ground.
www.aqr.com
Please don't quote Zucman, you're much smarter than that. Zucman calculates income as including unrealized gains in wealth, which is not a legal means of calculating income for taxation in the US. And I hope it never is. Wealth taxes are dumb, and that includes most US property taxes.One has to find a very pliant IRA trustee for that, but they exist. That was roughly how Mitt Romney ended up with a $25mm IRA.
Another other good trick is borrowing against your appreciated stock. You avoid the capital gains but have use of the money. As long as the stock goes up you are ok.
Certain start-up shares are also tax free if held for 5 yrs. I own some in a biotech startup.
Generally speaking, if you are a business owner, you have many tools to structure your income to optimize and defer taxation. Earned income (salary, bonus, option grants) not so much. But people oven over-estimate the degree to which this avoids taxation.
View attachment 452078
View attachment 452079
America's Progressive Tax and Transfer System: Federal, State, and Local Tax and Transfer Distributions
The overall U.S. tax and transfer system is overwhelmingly progressive, and understanding the extent—and source—of that progressivity is essential for lawmakers considering the trade-offs associated with each tax policy decision.taxfoundation.org
As for the existence of "tricks", I couldn't agree more. I hate tricks; they're unfair, and some are disgustingly written into the tax laws. Like "Carried Interest".
These tricks are why I am very much in favor of flat taxes. Enough with the tricks meted out to special interest groups, like private equity executives.
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Thought it would be more convincing if the point was made "against interest" as it were. But data is data, regardless of source. You just have to be more skeptical with some folks.
Funny aside re Zucman: A few years ago, he went on a bender on Twitter saying that the phrase "human capital" was awful and only horrible people used it. I went and found his econ presentations online and CTRL-F the term "human capital" is all over one of his introductory presentations! I tipped one of his detractors and he stealthily removed it. Must have taken hours. Hypocrisy is truly the most common vice.
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