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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Strategy comparison S&P500 vs. IUL [rev 1] Date: 4/4/2013 5:21 PM
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Ray,

The IUL lines perhaps need to be explained better. The blue diamonds are all the individual 12-month rolling periods, of all 12 anniversaries. The purple line is the 12-month average of all 12 of them. You can see that the diamonds are scattered, which is because the performance is slightly different depending on the anniversary month.
Hmmm.... I suspect you might have overworked & overcomplicated yourself a bit.

On a simple annual point-to-point the opening day and anniversaries are the market data points. If the ultimate year's returns were 12%, then any principal balance in place from the initial anniversary gets a credit of the full 12%, and any subsequent mid-year contribution gets a pro-rated credit according to the portion of time in. So, if $1,000 got contributed 1 month after initiation, that money would be credited 11/12ths of 12%, or 11%. There are no rolling 'monthiversaries' in this design.

At the anniversary, all original principal, plus any accumulated growth to date, is considered principal going forward. The straight PTP IUL equity curve is more of an annualize upward zig-zag stair case, climbing to match the naked S&P to the cap, & sitting flat the entire year when the S&P drops.

What you've just built is a monthly dollar-cost-averaging feed-in, which is nice (it juices the overall growth a bit,) but its only available for lump sums parked in a "staging account" (which earns 8% while its waiting to feed into the IUL.)

Probably easier to back it off to just the simple annual point-to-point. Save your DCA code for later though... nice work ;~)

b) Neither (none) of the strategies reduce their balance in their final 10 spend-down years.
Yes they do. Compare Chart 1 with Chart 4. Every line (Chart 4) has a downward slope after Jan-2003, when compared with Chart 1. The orange line (10mSMA) ends at $850K in chart 1 and $600K in chart 4.


Ehhhh... what I want to solve for is the total income distribution over a 10 year drawdown in full. The naked position will do a straight liquidation, and the IUL will continue the 0/12 principal growth with a 5.3% interest loan distribution.

Don't worry about it... if you'll grant me the patience, I'll build this out as soon as I can... probably in a couple weeks. The data won't change, and we'll all be only slightly older ;~)

Dave Donhoff
Leverage Planner
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