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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 75801  
Subject: Re: 7702 Private Plans (indexed universal life) Date: 3/31/2013 11:23 PM
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Hey Dave,
I'm almost done. This is turning out to be a kinda fun investigation.

What does 'de-annualized' mean? How do you do that?
Convert an annual rate to the equivalent monthly rate. The inaccurate way is to divide by 12. (That's what credit cards and mortgages do.) It's close, but inaccurate. Since I've got a zillion spreadsheet that I used to backtest prospective strategies, I needed to be accurate, not merely "close".
This page shows the math: http://www.experiglot.com/2006/06/07/how-to-convert-from-an-...

My understanding is we are going from 1/1/75 through 21/31/2012, yes?
Yup. As soon as I figure out which month is "21". ;-)

You and CC have asked for slightly different things. Since I was clever enough to parameterize everything, it was easy to show several variations.

I intend to post the spreadsheet to Google Docs when I'm done. Then everybody who cares can d/l it and examine it and show me where I screwed up. And then run simulations with their own favorite parameters.

The naked S&P buy & hold takes the real annual P&L on the face price, and adds 2.75% for dividends (yet to be confirmed as average,) and takes a 1% fee haircut each anniversary.
Basically. Except I cut the yield to 2.25% in order to keep the chart from getting too big. And there is no haircut on the S&P. The E/R on VFINX is only 17 bps. The E/R on SPY is only 9 bps. There are other similar funds and ETFs and they all have very low E/R. We could simulate a higher E/R by adjusting the yield down -- but it doesn't make much difference; it doesn't change the relative results.

Taxes are a real-world consideration, but the effect is specific to each individual and circumstance. So you can't really account for taxes in a general purpose simulation.
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