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Tag Archives: drawdown
One thing that has always bugged me about retirement calculations is the lack of detail in most of the retirement data and recommendations. Take for example, the 4% safe withdrawal rate that I’ve discussed here many times in the past. The 4% rule says that 4% is the maximum amount you can withdraw from your portfolio (based on a 60% stock, 40% bond), inflation adjusted, and be relatively assured that you won’t outlive your assets. Great, but what about the trade-offs? What about different allocations to stocks and bonds? How much risk should you expect? Hmmm, no real answers to … Continue reading
Here I go again. Bond bashing time. I think many income investors worried about risk mistakenly focus too much on the lower volatility of bonds as a risk measure. Volatility is only one measure of risk. On other measures of risk bonds perform just as poorly as stocks but with lower returns than stocks. Lets look at some of these other measures of risk and what they tell us about bonds. One of my favorite measures of risk is drawdown, i.e. the maximum peak to trough loss for an investment. It is a measure of the first rule in risk … Continue reading