Author Topic: What does the 4% rules looks like in France?  (Read 2478 times)

molton38

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What does the 4% rules looks like in France?
« on: July 24, 2017, 01:51:18 PM »
Hi,

I'm French currently leaving in the US and I'm seeking for data of what will be the SAFEMAX (SWR) for someone that would leave in France and that rather than investing in US stocks/bonds would invest in French or European stocks/bounds.

Thanks,
Molton

PapaBear

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Re: What does the 4% rules looks like in France?
« Reply #1 on: July 24, 2017, 05:02:42 PM »
If you switch the withdrawal rate calculator at PortfolioCharts (https://portfoliocharts.com/portfolio/withdrawal-rates/) to Germany, you will get a somewhat close approximation to France (at least it is Eurozone and the economic dynamics are somewhat similar.

You can change the country by clicking on "United States" and picking the appropriate country in the drop down menu. You cannot select a portfolio with French stocks only, but maybe you can replicate your portfolio by using the percentages for European stocks and US stocks. However, please note that the bond allocation will then be German bonds, not sure how similar these were behaving to French bonds in the past.

Additionally, this article explains the underlying rationale and a few findings of the country-specific withdrawal rates: https://portfoliocharts.com/2017/06/09/your-home-country-is-inseparable-from-your-withdrawal-rate/
« Last Edit: July 24, 2017, 05:04:15 PM by PapaBear »

SwordGuy

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Re: What does the 4% rules looks like in France?
« Reply #2 on: July 24, 2017, 05:16:15 PM »
My understanding is that French businesses have not done as well as German businesses.   I wouldn't base French business results based on German results!  Ditto for French vs. US businesses.

Why limit yourself to only French businesses?   Why not invest where the money is being made?

 

maizefolk

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Re: What does the 4% rules looks like in France?
« Reply #3 on: July 24, 2017, 06:14:04 PM »
From 1900-2000, french stocks returned a CAGR of 3.8%/year after inflation and french bonds returned a CAGR of -1%/year.

If you start in 1950 (getting rid of the effect of WWII) those numbers rise to 8.3% and 4.4% respectively.

To put that in perspective, the numbers for germany are 3.6% and -2.2%/year for stocks and bonds respectively (1900-2000) and 9.1% and 3.7% (1950-2000).

The US (which is where most of the 4% rule math comes from) had 6.7% and 1.6% stocks/bonds (1900-2000) and 8.5% and 1.8% stocks/bonds (1950-2000).

So french markets have have performed about the same as everyone else's once you exclude the effect of the loss of life, destruction of infrastructure, and collapse of government that was the result of world war II.

All numbers taken from Dimson, Marsh, and Staunton's "Triumph of the Optimists"

molton38

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Re: What does the 4% rules looks like in France?
« Reply #4 on: July 24, 2017, 09:54:27 PM »
Thanks everyone for your answers.
I've found this document that seems to show WAY lower results for France. What's the catch?


maizefolk

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Re: What does the 4% rules looks like in France?
« Reply #5 on: July 24, 2017, 10:01:37 PM »
That's the effect of world war II and the collapse of the french government after the nazi invasion. If they excluded years before 1950 it'd look much more normal.

Note that the absolute worst year to FIRE in France was 1943. From 1940-1949, french equities returned -7.6%/year and french bonds returned -21.7%/year (essentially prewar bonds became worthless).  That's a bad enough set of returns to make essentially every FIRE date from 1920 to 1945 a failure, and since that is 16 of the 86 total 30 year intervals in the dataset used in the study...
« Last Edit: July 24, 2017, 10:21:24 PM by maizeman »

Paul der Krake

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Re: What does the 4% rules looks like in France?
« Reply #6 on: July 24, 2017, 10:16:07 PM »
A large chunk of stock market returns comes from a handful of highly performing stock. Companies like Microsoft, Exxon, etc. The US excels at attracting and retaining the world's best talent. Nobody does it better.

France has fewer of these companies. They also have deeper structural and mindset issues that are detrimental to business. There's less innovation there. No, I don't have any data to formally back these assertions.

Part of my retirement plan involves spending a significant time in France, but it will be funded almost exclusively by US income.

lost_in_the_endless_aisle

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Re: What does the 4% rules looks like in France?
« Reply #7 on: July 24, 2017, 10:33:38 PM »
That's the effect of world war II and the collapse of the french government after the nazi invasion. If they excluded years before 1950 it'd look much more normal.

Note that the absolute worst year to FIRE in France was 1943. From 1940-1949, french equities returned -7.6%/year and french bonds returned -21.7%/year (essentially prewar bonds became worthless).  That's a bad enough set of returns to make essentially every FIRE date from 1920 to 1945 a failure, and since that is 16 of the 86 total 30 year intervals in the dataset used in the study...
Isn't it also misleading to start the analysis in 1950 in the midst of the Marshall Plan and general post-war recovery in Western Europe? What are the relative performances if we start in 1960 or 1970 instead?

maizefolk

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Re: What does the 4% rules looks like in France?
« Reply #8 on: July 24, 2017, 10:41:43 PM »
That's the effect of world war II and the collapse of the french government after the nazi invasion. If they excluded years before 1950 it'd look much more normal.

Note that the absolute worst year to FIRE in France was 1943. From 1940-1949, french equities returned -7.6%/year and french bonds returned -21.7%/year (essentially prewar bonds became worthless).  That's a bad enough set of returns to make essentially every FIRE date from 1920 to 1945 a failure, and since that is 16 of the 86 total 30 year intervals in the dataset used in the study...
Isn't it also misleading to start the analysis in 1950 in the midst of the Marshall Plan and general post-war recovery in Western Europe? What are the relative performances if we start in 1960 or 1970 instead?

France    1960-2000: 6.4% CAGR stock returns, 4.9% CAGR bond returns
Germany 1960-2000: 5.6% CAGR stock returns, 3.7% CAGR bond returns
USA        1960-2000: 6.8% CAGR stock returns, 2.8% CAGR bond returns

France    1970-2000: 8.3% CAGR stock returns, 6.1% CAGR bond returns
Germany 1970-2000: 6.1% CAGR stock returns, 3.9% CAGR bond returns
USA        1970-2000: 7.2% CAGR stock returns, 4.1% CAGR bond returns

(The 1980s were a very good decade for France, which starts to skew the numbers as we get down to shorter total historical time periods. The 21st century has been very good for Germany, but the book I'm using doesn't have data past 2000.)

lost_in_the_endless_aisle

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Re: What does the 4% rules looks like in France?
« Reply #9 on: July 24, 2017, 10:44:07 PM »
Ah neat, looks like Europeans mostly have to avoid world wars and they are fine with 4% SWR. I'm looking at you, Germany!

molton38

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Re: What does the 4% rules looks like in France?
« Reply #10 on: July 26, 2017, 12:16:59 AM »
Thanks again everyone for chiming in! I felt much more informed thanks to everyone's input :-)