tag:blogger.com,1999:blog-5465015914589377788.post4102667327213567287..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: When Can I Retire?Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5465015914589377788.post-16686746991062526392019-11-01T16:28:39.702-04:002019-11-01T16:28:39.702-04:00Here is Patrick's comment with a broken link r...Here is Patrick's comment with a broken link removed:<br /><br />Hi Michael,<br /><br />According to [a chart whose link no longer works], the correlation between AGG (iShares Bond ETF) and VV (Vanguard Large-cap US stocks ETF) is -0.34.<br /><br />This strains credibility, but if it's true, the Norstad paper gets a whole lot more interesting.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-28822647889131171392009-10-15T14:00:36.167-04:002009-10-15T14:00:36.167-04:00Patrick: I had the same confusion when I first loo...Patrick: I had the same confusion when I first looked at this web site. The correlation between AGG and VV is -0.34, but this is over only the last 3 months. Over the last 2 years this correlation is -0.06. To be interesting, we need correlations over a much longer period of time. If someone were able to predict the correlations for the next 3 months or 2 years, that would be powerful information.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-37717445180756352412009-10-15T13:38:39.367-04:002009-10-15T13:38:39.367-04:00This comment has been removed by a blog administrator.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-877420391204397322009-10-13T17:28:23.871-04:002009-10-13T17:28:23.871-04:00Gene: My simulations assume that the investor buy...Gene: My simulations assume that the investor buys and holds. So, that means matching the market without paying high MERs or underperforming due to panic selling, etc.<br /><br />Any simulation that shows it is possible for the majority of people to be able to retire into a middle class life for decades is suspect. There aren't enough workers to do all the work to give retirees the lifestyle they would want.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-40347410083566250982009-10-13T17:19:27.422-04:002009-10-13T17:19:27.422-04:00This post scratches the surface of retirement plan...This post scratches the surface of retirement planning, which we all know is more complex than could be covered in a single post.<br /><br />It's worrying to see that the retirement ages in the examples are quite late in life. Does it assume people are able to match the market? If so, the reality of people under performing the index makes an even less optimistic case.<br /><br />Of course there are countless other assumptions to fiddle with, but let's keep things relatively simple.genehttps://www.blogger.com/profile/05608927986297939720noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-56254912583178701482009-10-12T22:10:15.510-04:002009-10-12T22:10:15.510-04:00Patrick: The data I used for the simulation was f...Patrick: The data I used for the simulation was from a paper by John Norstad (see the post for a link). The long-term correlation between stocks and bonds is actually positive (but very small). Including bonds in a portfolio does reduce volatility significantly, but it also reduces the expected return. The important return is the compounded return, which is the expected return less a volatility penalty. Unfortunately, the volatility benefit of owning bonds is more than offset by the expected return penalty of owning those bonds.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-28341532422537117072009-10-12T21:17:38.685-04:002009-10-12T21:17:38.685-04:00Hi Michael. I would have agreed until a recent re...Hi Michael. I would have agreed until a <a href="http://michaeljamesmoney.blogspot.com/2009/08/why-does-diversification-work.html" rel="nofollow">recent re-post of yours</a> showed the tremendous value of reducing volatility. The usual rationale for bonds is that they are negatively correlated with stocks in the short term, which should have a powerful calming effect on volatility. Did your simulations here take that into account?Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.com