Asset Allocation and Safe Withdrawal Rates

[Tyler]

Is there a way to add risk measures or volatility measures to the portfolio types? For example, Sharpe ratios, or could you calculate a beta for each sector vs. another sector, or against the S&P 500?

Sometimes we see people who are at 33x or 50x (one guy here is at 80x) expenses, they would probably be much better off doing lower-risk investments with lower overall historic ROR. We also see people who are anxious to quit their jobs, who might be better off doing higher-risk for the first few years, and then going back to work if they hit a worst-case scenario.

The trouble I've had with things like Sharpe and Beta is finding a way to use them that is intuitive for the average investor who may not completely understand the terms and how to apply them.  But I like the idea, and perhaps can consider that a challenge.  I totally agree with your observation on risk and investor behavior. 

[oysters]

Pretty cool bunch of calculators Tyler!

As an Australian, I'm wondering if its possible to get some Australian historical data in there too for us to play with? There are quite a few Aussie MMM/FIRE people out there (I'm new to the concept and a long way from FIRE myself...). There is some talk in places that I've read that traditional SWR for the Aussie market may be lower than elsewhere (like US markets). But we have tax and franking dividend advantages here by using our home market, so its clearly worth having a proportion in there for us (not so for anyone outside Aus...our market is only a couple of % of Intl).

[Tyler]

That's a great idea, and I'd love to add some calculators for Australia (Canada and UK, too).  The only thing really holding me back is data availability. Good data with a bit of history for a wide variety of assets is a lot more difficult to find than you might think. If anyone knows where to find good data, please email or PM me.

[oysters]

Cool.

What data do you need exactly to input for an index? Is it just start and close for the day? So like, 3 columns, data, start, close?

[Tyler]

You'd need the total returns including both asset appreciation and dividends/interest, and ideally enough history to at least cover the early 70's.  Annual data is just fine -- no need to get into daily stuff. 

[Woody Viet]

I've always found Ken French's website an excellent source for data. Unfortunately even his stuff comes with limited timelines, but he does cover a nice range of countries. I have used it to backdate all of my models to the early sixties but after that the sample gets unreliable.

For bond data you might want to try the central banks, and even the OECD, World Bank and IMF websites might be useful.