Author Topic: Ttl Market vs Mixed Portfolio on FireCalc....AMIWRONG?  (Read 1492 times)

Abe Froman

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Ttl Market vs Mixed Portfolio on FireCalc....AMIWRONG?
« on: May 22, 2018, 07:30:13 AM »
Massaging the sausage and filling the casings was fun. And sometime it still is.
But as I yearn to spend more time with the little Fromans, I will often times run a number of calculators to see if I can pull the cord - or at least have some peace in my head that the option to do so - is there.

The two I touch a lot are FireCalc (https://www.firecalc.com) and cFirecalc (http://www.cfiresim.com/).

I have a --- meh ---- (80% confidence) level idea of my monthly outgo.
And I play with these calculators to see how *close* I am.

I have (foolishly?) always taken the default Total Market investment approach of XX% Equities and YY% Bonds. This is something that on cFireCalc you cannot change, meaning you are limited to changing percentages in equities, bonds and cash.

WHEREAS I recently found in FireCalc that I can choose a Mixed Portfolio and set percentages. So.,.... having listened some to Paul Merriman and his  Ultimate Buy and Hold Approach (https://paulmerriman.com/the-ultimate-buy-and-hold-strategy/) ... I tossed in his suggested spread.

WOW.... can I get out NOW?
Am I doing this wrong or can I really pull that cord?

Here is what I found....

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Query #1
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Investment of $1M.
Spending = $40K and Years = 45.
In the "Your Retirement" tab - the selection is "Total Market" with a 75% Equity and 25% Bond split. RESULT ===> 79.4% success rate.
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Query #2
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Investment of $1M.
Spending = $40K and Years = 45.
In the "Your Retirement" tab - the selection is "Mixed Portfolio" with the following diversification percentages... (10, 14, 14, 14, 14, 14, 14, 6). RESULT ===> 100% success rate.
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Too good to be true?
I played with Spending - hiking it up 25% to $50K and success rate was at 91%... .good enough for me.


So here ae my closing questions....
1. Am I using this right =- and are the results valid?
2. Is there another calculator similar to FireSim that allows me to put in a mixed poerfolio spread and test FireSim?

wageslave23

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Re: Ttl Market vs Mixed Portfolio on FireCalc....AMIWRONG?
« Reply #1 on: May 22, 2018, 07:46:27 AM »
There's no point in being too exact about it.  After all, the calculators are only telling you whats happened in the past.  If you think the next 45 yrs will be similar to the last 100, then you should be in good shape.  If you have flexibility and can cut expenses or go back to work if you need to, then why not.

Monkey Uncle

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Re: Ttl Market vs Mixed Portfolio on FireCalc....AMIWRONG?
« Reply #2 on: May 22, 2018, 06:23:59 PM »
The mixed portfolio uses data since 1927, whereas the total market portfolio uses data since 1871.  IIRC, there was a bad bear market in the early 1900s that generates several of the failure years in many of these backcast simulations.  That might have something to do with the difference you're seeing. 

Also, the mixed portfolio that you used was 94% equity vs. 75% in the total market default.  Higher equity weighting generally leads to a higher SWR in historical simulations for very long retirements (I would consider 45 years to be pretty long compared to the 30 years used in the Trinity study).

Your mixed portfolio emphasizes small caps much more heavily than the total market portfolio.  Perhaps that had something to do with it as well.

I'd be a little leery about reading too much into the increase in the success rate.  This is all based on the assumption that the future will be similar to (or at least no worse than) the past.  The more you micro-slice the portfolio to increase the SWR, the closer you drift toward data mining (i.e, fitting the portfolio to specific idiosyncracies of the past that are not likely to be repeated).