UnThreaded | Threaded | Whole Thread (318) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Hi gang... wow!!! Date: 9/17/2013 4:28 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
A 50/50 asset allocation has 50% in the S&P500 and 50% in US Treasuries. That's your "reserves" right there, that 50% in treasuries
OK, what's the worst drawdown on that blend from '73 to present?

I thought I posted that. Well, anyway, here it is:
100/0 MaxDD is -46%
60/40 MaxDD is -30%
50/50 MaxDD is -25%


IUL account: $586,000
Why do you ignore the actual run numbers?
IUL = $769,585

What you posted isn't a "run". It's a projection based on getting a constant specific fixed return each and every year. That isn't a run -- that's the output of a math formula. "Xt^n + Y(t^n - 1)/(t-1)"

What my spreadsheet does is compute the returns according to the STATED RULES of how an IUL works. The company doesn't credit the account with ~8.8% every year. They credit the account with the index return of the S&P500 (excluding dividends), constrained by the floor and cap.

-------------
It occurs to me that we are talking about two different things.
You said, "an illustration designed for growth performance over 40 years, using an assumed average rate that hit in 95% of all rolling 25 year periods."

But what the spreadsheet shows is two alternative accounts that are based on the same index (the S&P500), using the actual historical price data, when invested two different ways.
Alt 1: Rules: Buy and hold S&P500, reinvesting dividends.
Alt 2: Rules: Annual growth same as the price-only return of the S&P index, subject to 0% floor and 12% (or 18%) cap.

Then I compare Alt1 to Alt2.

What you've just done is introduce Alt3: Annual growth just like a savings account, using a fixed invariant annual growth rate.

What the spreadhseet does is answer the question: given the historical data, what is the result when two different methods are used.

What your illustration does is answer the question: Show the compound growth at a certain growth rate.
It's rather meaningless to compare Alt1 to Alt3. They have nothing in common.

And then you complain that Alt2 (which is the actual events from real history) doesn't match the output of your formula. Well, duh! Since when does the real world mimic a formula?

I really don't understand what your complaint it. Is or is not the Alt2 in the spredsheet exactly what the company would have down with an IUL account? Let's get that straight, first.

If it is not, then it needs to be corrected, because it is *supposed* to work the same way the IUL would work. That was the whole point of the exercise.

OTOH, if it is, then your complaint is that history didn't do what you wished it had.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (318) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement