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I have been struggling for some time to come up with a better terminology for the two types of factors that I see as affecting long-term stock returns. My usual practice has been to refer to the factors focused on in the conventional methodology SWR studies as "volatility" and to refer to the factor not given adequate consideration as "valuation." I have never been happy with these terms. I have been tempted at times to use the terms used by William Bernstein in Chapter Two of “The Four Pillars of Investing”; he uses "risk" for the factors focused on in the conventional methodology studies, and "return" for the factor that I have been stressing. I was recently reading through some old posts in an effort to gain a better understanding of the definitional issues, and I have come up with a new terminology which I think may clarify the distinction that I have been trying to put forward.

My new terminology is to refer to the factors focused on in the conventional methodology studies as "Imposed Risk" or "Unavoidable Risk" and the factor not given proper consideration in the conventional methodology studies as "Voluntary Risk" or "Elective Risk." There is a sense in which the latter types of risks do not constitute true risks at all. Bernstein says on Page 12 of “Four Pillars” that “where there is return, there also lurks risk.” I believe that that is almost correct, but not quite. There is an important sense in which stock investors can tap into higher long-term returns by incurring Voluntary Risk or Elective Risk without incurring any additional real risk. Much of the risk you take on when you purchase stocks at times of low valuation levels can be said to be Risk without Risk.

SWR analysis is a risk-assessment tool. The purpose is to use historical data to assess what sort of risk you are taking on in investing in stocks to finance your retirement. The conventional methodology aims to do this by determining the worst return scenario that has turned up in the historical record and declaring that a withdrawal strategy that survived that scenario is safe presuming that the future is no worse than the past.

The core flaw is that the conventional methodology fails to make a distinction between two types of risk with very different characteristics. There are many factors that cause stock investing to be risky. Demographics changes cause risk. The rise of the country you are investing in as a world power, or its fall from that position, causes risk. Productivity changes cause risk. Risk results from the fact that the future is unknown, and there are many aspects of the future that are unknown. So there are many things causing stock investing to be risky.

The problem with assessing the risks you face as a stock investor is that there are so many different aspects of the risk question that it is impossible to sort through them all. You might feel confident that demographics issues are going to be worse in the next 30 years than they have generally been in the past. But you might feel that productivity issues are going to be better, and that the latter effect will more than cancel out the former. So many factors come into play that it is impossible to analyze them all separately in a satisfactory way.

SWR analysis comes to the rescue. SWR analysis combines all of the various risk factors into a single number. It doesn't make a claim that demographics will be worse or that productivity will be better or anything else. It identifies what is the worst COMBINED effect that we have ever seen in this country, and declares a withdrawal strategy that works under those conditions "safe."

I view this as generally being a good way to proceed. SWR analysis reduces all of the many risk factors down to a single number and thereby helps the investor develop his own personal withdrawal rate (PWR) in an informed manner. Each investor makes adjustments for his own optimism or pessimism by making adjustments to a SWR number that reflects one optimistic assumption ( a future not worse than the past) and one pessimistic assumption (a worst-case scenario popping up in one's retirement).

My objection to the conventional methodology is that it treats the valuation factor in the same manner as all the other factors. It is one more risk factor thrown into the mix; no separate adjustment is made for changes in valuation. Why is it that I believe that doing that is an analytically invalid procedure for a tool aiming to inform investors as to the level of risk they are taking on by using stocks to finance their retirements?

It is because the nature of the risk taken on by investing at high valuation levels is of a fundamentally different nature than the risk taken on by leaving your retirement subject to ever-changing productivity and demographic rates. The core difference is that the risk taken on by investing at a specified valuation level is known at the time the stocks are purchased. All of the other risk factors are Imposed Risks. The valuation factor is Elective Risk. Each investor has a choice as to whether to take on the risks involved in investing at high valuation levels or to not do so.

This is the thing that most bugs me about the conventional methodology. I love the idea of packaging all the various risk factors in a single number so that I can make informed investment decisions. But it does not seem right to me to treat the elective risk component in the same manner as all of the unavoidable risk components. I can take an educated guess as to what is going to happen with demographics or productivity and so on, but that's all that I really am doing when I state an opinion as to the effect that these factors will have on my retirement plan. This is not so of the valuation factor. I can state with mathematical certainty that investing at times of lower valuation will bring me better investing results and know that there has never been a time in history when this was not so (all other factors being held equal).

I do not want my SWR tool treating valuation in the same way that it treats all the other risk factors. I want to use the tool to make decisions as to how much of my portfolio to allocate to stocks, and in order to use it for that purpose, I need it to differentiate between the Imposed Risk factors and the Elective Risk factor. There is a sense in which Elective Risk is not risk at all. At a minimum, it is a different sort of risk than Imposed Risk. To do the job we are asking it to do, the SWR tool needs to separate out the Elective Risk factor and show clearly the effects of the Imposed Risk factors. Since the effects of the two types of risks are mixed together in the historical data, the Elective Risk component must be treated separately for the SWR analysis to provide an informed answer to the most important question being explored--What amount of Imposed Risk am I taking on with this investment choice?

Say that you are buying a $1 lottery ticket, and the odds of winning a $50 prize are 1 in 100. You are taking on a risk, and the statement of odds tells you the extent of the risk you are taking. Knowing the odds tells you what you are getting into, somewhat akin to the way that SWR analysis aims to tell you the risk you take on with stock investing. The worst-case scenario with the lottery ticket purchase is a loss of $1; the best case is a profit of $49; and there is a 99 percent chance of the worst case coming up and a 1 percent chance of the best-case scenario coming up.

Now say that it is not always easy for you to get to the store and purchase a ticket. There is a guy at work who is willing to buy a ticket for you, but he charges you $1.20 for each ticket you purchase to compensate himself for the trouble he incurs doing so. If you buy the ticket from him, should you be recalculating the odds of a successful outcome? There's a sense in which you should and there is a sense in which you shouldn't. The extra 20 cents you pay definitely affects your return, so you definitely need to take it into account in making decisions about whether to purchase lottery tickets and how many to purchase. But it is not the same sort of expense as the one you incur when you pay the $1.00 purchase price for a ticket.

The extra 20 cents is properly classified as a convenience expense; you are incurring it to avoid having to take a drive to the store that sells the ticket. That expense is not a necessary component of a purchase of a lottery ticket, and it confuses your analysis of the risk involved in purchasing lottery tickets to treat it in the same manner as the purchase price amount.

I think that something similar is true in regard to stock purchases. There are some risks that are unavoidable, that simply must be incurred in all stock purchases. These are Imposed Risks. The level of risk incurred through these items is reasonably well conveyed by the conventional SWR analysis, in my view. But the extra expense that is incurred for purchasing shares at times of high valuation is not well conveyed. When you mix that factor in with all the others, you convey the impression that valuation is just one of many risk factors when it is really a special one, one that the investor can eliminate by electing to purchase shares at strategically advantageous times.

The other side of the story is that purchasing at low valuation levels allows the investor to minimize the price he pays for obtaining access to a given long-term return expectation. It's like having a friend offer to sell you his lottery ticket at a reduced price because he changed his mind about the wisdom of his purchase. In those circumstances, you are getting a discount on the normal purchase price. The discount aspect of the question needs to be taken into account in your decision as to whether to make the particular purchase. But it is not quite right to say that the discount you are offered changes the risk involved in the purchase of a lottery ticket. It changes the risk for that particular purchase. But if you start thinking that all lottery tickets can be purchased for 80 cents, you are going to develop an ill-informed understanding of the true risks involved in purchasing lottery tickets.

What I don't like about the conventional methodology is that it misleads people about the risks they are taking on when using stocks to finance their retirements. By putting forward the same number at all valuation levels, it suggests that valuation doesn't affect the result any more than any other factor. Many investors have come to believe that this is more or less true, that a purchase made at a high valuation level works out over time because stocks are always the best investment class in the long term. The reality is that it never works out to pay more for a specified level of long-term expected return than you can afford to pay. When you pay a higher price for a specified amount of return, you incur a permanent cost.

I prefer an SWR tool that makes that clear, that separates out the factor that is under the control of the investor from the factors that are not under the control of the investor. I think that it is misleading to treat the starting-point valuation as just one of many risk factors when in reality this is a very special risk factor, a risk factor under the control of the person making the investment. Conventional methodology studies provide valuable insights. But such studies always give the wrong answer to the ultimate question being examined--What is safe?

So I view the conventional methodology as an analytically invalid means of exploring the question of what is safe. I believe that there should be an adjustment for the risk factor that is incurred at the election of the investor. I believe that the question that investors really want an answer to is, What risks am I taking on that are outside of my control? It is not possible to provide a good answer to that question without treating the Elective Risk factor differently than the Imposed Risk factors.

Risk without Risk is special. It is the proverbial free lunch, money for nothing (except for the emotional strain associated with buying stocks when all of your friends are selling them instead). I hope that we will be exploring the implications of the Risk without Risk concept in much more depth in the months and years to come.
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He's baaaaaaaccckkkk..............
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What I don't like about the conventional methodology is that it misleads people about the risks they are taking on when using stocks to finance their retirements. By putting forward the same number at all valuation levels, it suggests that valuation doesn't affect the result any more than any other factor.

Of course valuation affects the result, if by "the result" you mean the expected remaining portfolio balance at the end of 30 years. However, it may not affect the result, if "the result" means the answer to the yes/no question "will I have a positive balance at the end of 30 years?" The SWR study already encapsulates 100 years of valuation history by looking only at the worst case over that time period.

Recall that intercst analyzed the valuation question in more detail some years ago (at your request) by computing the SWR assuming that the investor changes asset classes as a function of valuation; see 4) Changing Asset Allocations in response to valuation (i.e. "market timing") at "http://www.retireearlyhomepage.com/re60.html".

sydsydsyd
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My new terminology is to refer to the factors focused on in the conventional methodology studies as "Imposed Risk" or "Unavoidable Risk" and the factor not given proper consideration in the conventional methodology studies as "Voluntary Risk" or "Elective Risk."
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Hey Rob, did you see the Seinfeld episode where George is working for the Yankees and he has to give a presentation on "Risk Management" but he doesn't want to read the big book, so he gets the book on tape? As he's listening to the tape he finds the voice sounds exactly like him and he can't take it, "in order to understand risk, one must first define risk". You should check out "The BuildMWell Method" board. They look for stocks trading at their 30 year low compound annual growth rates and sell them when they get to their 30 high CAGR's. To me it seems like a very intuitive approach. You buy at generally low valuations and sell at points which are generally clearcut. I don't know if you only buy indexes or mutual funds, but to me it sounds like something which you may like. They just bought Nokia at $17 trading at a 15 P/E and yielding 1.8%. Check it out, lots of smart folks over there.

2828
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Very cogent analysis! Thanks for sharing. You've very articulately stated the misgiving/hunch I've always had that the "one size fits all" SWR isn't completely accurate. But being somewhat math-challenged, I don't understand how to change the SWR calcs to reflect your two risks. Is your hypothesis just this: "If I retire when the market valuation (S&P500 p/e ratio?) is below x, then my SWR can be y%; if the valuation is above x, then my SWR should be z%" ?
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I guess intercst already addressed this question...but he used:
"The P/E ratios for the S&P500 used in the spreadsheet are based on Shiller's "10-Year Average Earnings" for the S&P500."

I'd be more interested in a p/e ration based on trailing twelve months earnings...why use a 10-year average for earnings?
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Thats a l.......o.......n.........g..........post
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http://www.decisionpoint.com/tac/Swenlin.html

I thought someone may find these charts interesting. They are graphs of P/E ratio's of the S&P 500 over the years and where todays PE's fall on the undervalued/overvalued spectrum. It's monday people.

2828
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I understand the apprehension of buying the S&P 500 at this point, but doesn't anyone buy individual stocks that may be undervalued at the time? There is always an individual stock that is undervalued at any given time, why force yourself into a huge index when it is "overvalued" historically. Also the S&P 500 has been overvalued for a while, what to say this can't go on for 10 more years.Are you going to stay out of the stock market for 10 years because an index is overvalued and you don't want to buy individual stocks because it's too risky?

2828
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YKW writes,

I have been struggling for some time to come up with a better terminology.....

<< twenty paragraphs of the usual >>

...concept in much more depth in the months and years to come.


I'm retired and my time is very valuable to me. Can anyone tell me if that long post is worth reading?

intercst
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mdwitte asks,

I guess intercst already addressed this question...but he used:
"The P/E ratios for the S&P500 used in the spreadsheet are based on Shiller's "10-Year Average Earnings" for the S&P500."

I'd be more interested in a p/e ration based on trailing twelve months earnings...why use a 10-year average for earnings?



I calculated it both ways two years ago during the YKW-inspired SWR circle-jerk. See the last two charts on this page.

http://www.retireearlyhomepage.com/pestudy1.html

It doesn't make much difference which P/E measure you use.

intercst
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I'm retired and my time is very valuable to me. Can anyone tell me if that long post is worth reading?

intercst


I saw the letters SWR and almost hit the ignore thread button. I'm glad I didn't because I got a good laugh out of your post. And NO I didn't read it. It was too long and I absolutely don't care about SWR's. But, I think Rob has a right to write long diatribes on it if he wants to. Thank God no one is forcing me to read it though. It boggles my mind that he finds it so interesting. - Art
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mdwitte:

The data-based SWR concept is something that I came up with in the mid-90s as part of my effort to develop my personal Retire Early plan. At the time, I did not know that I was going to become a freelance writer focused on the subject of financial independence, so I did not engage in any formal statistical analyses; I just did the work I needed to have confidence in my own plan and left it at that. For the past two years, a poster named JWR1945 has put a lot of work into testing the statistical validity of the concept, and he has found that it checks out. The bulk of his research is posted at the SWR Research Group board at NoFeeBoards.com.

I have linked below three posts from that board.

The first link is to a table comparing the PE10 figure that applies at the start of a historical sequence and the historical data base rate (the figure which the conventional methodology studies refer to as the SWR) that is determined only 30 years later. I see in the chart a significant correlation between the valuation level that applies at the start of a retirement and the HDBR that applies for that retirement. This suggests that the SWR goes up when valuation levels go down and that the SWR goes down when valuation levels go up.

http://www.nofeeboards.com/boards/viewtopic.php?t=2245

Here's the table:

(HDBR50 is the number that applies for a 50 percent stock allocation and HDBR80 is the number that applies for an 80 percent stock allocation):

HDBR50 and HDBR80 Ordered by PE10

Lowest Valuations
Code:

Year  PE10  HDBR50  HDBR80
1921    5.1   9.6   11.6
1922    6.2   8.4   10.3
1924    8.0   7.9    9.5
1923    8.1   7.6    9.0
1933    8.7   5.8    8.4
1980    8.8   9.2   10.3
1975    8.9   7.0    8.3
1978    9.2   7.9    9.1
1979    9.2   8.4    9.5
1932    9.3   6.0    8.1
1925    9.6   7.3    8.4
1942   10.1   6.1    9.1
1943   10.1   6.3    9.2
1949   10.2   7.8   11.1
1948   10.4   7.7   10.9
1950   10.7   7.3   10.2
1944   11.0   6.1    8.6
1976   11.1   6.5    7.2
1926   11.3   6.9    7.7
1935   11.4   5.3    7.4


Middle Valuations
Code:

Year  PE10  HDBR50  HDBR80
1947   11.4   6.8   9.4
1977   11.4   6.8   7.4
1951   11.8   7.1   9.4
1945   11.9   5.9   8.2
1954   12.0   6.9   9.0
1952   12.5   6.9   9.0
1934   13.0   4.8   6.3
1953   13.0   6.7   8.6
1927   13.1   6.6   7.3
1938   13.5   4.9   6.6
1974   13.5   5.6   5.9
1958   13.7   5.8   6.8
1941   13.9   5.0   7.0
1939   15.5   4.6   6.0
1946   15.6   5.2   6.7
1955   15.9   5.8   6.9
1940   16.3   4.6   6.1
1971   16.4   4.9   5.0
1931   16.7   5.1   5.6
1957   16.7   5.3   6.0


[/b]Highest Valuations[/b]
Code:

Year  PE10  HDBR50  HDBR80
1936   17.0   4.4   5.5
1970   17.0   4.8   4.9
1972   17.2   4.8   4.8
1959   17.9   5.0   5.4
1956   18.2   5.2   5.9
1960   18.3   5.0   5.3
1961   18.4   5.0   5.3
1973   18.7   4.7   4.5
1928   18.8   5.7   5.8
1963   19.2   4.9   5.1
1967   20.4   4.5   4.5
1962   21.1   4.7   4.8
1969   21.1   4.3   4.2
1968   21.6   4.3   4.2
1937   21.6   3.9   4.6
1964   21.6   4.6   4.6
1930   22.3   4.8   4.8
1965   23.2   4.3   4.2
1966   24.0   4.2   4.0
1929   27.0   4.6   4.3

PE10 is the valuation assessment tool recommended by Robert Shiller, author of “Irrational Exuberance.” He explains on Page 7 of that book that: “I use the ten-year average of real earnings for the denominator, along the lines proposed by Benjamin Graham and David Dodd in 1934. The ten-year average smooths out such events as the temporary burst of earnings during World War I, the temporary decline in earnings during World War II, or the frequent boosts and declines that we see due to the business cycle.”

The second link is to a post titled “What We Do” that provides a short summary of the SWR work that JWR1945 and I have been doing together.

http://www.nofeeboards.com/boards/viewtopic.php?t=1492

The third link is to a post called “Where We Are.” This one needs to be updated as we are now a bit beyond the level of understanding suggested in this post, but I still think you might find it a useful introduction to the concept we are exploring together.

http://www.nofeeboards.com/boards/viewtopic.php?t=1544

I encourage anyone with an interest in asking JWR1945 questions about his research to pay a visit to the SWR board. He has done an enormous amount of work for us, and I know that he would appreciate getting more feedback than he has obtained so far. I just sent him an e-mail letting him know about this thread. I do not know whether JWR1945 is still signed up over here or not. If he is, perhaps he will pay us a visit.

Thanks for your expression of interest in the ideas I put forward in the thread-starter.
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Hocus! You're back!
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It boggles my mind that he finds it so interesting. - Art

Not really. You know how little babies can play endlessly with their toes or anything else hanging close at hand?

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Thats a l.......o.......n.........g..........post

Flesch Reading Ease measurement of Rob's work = 56.2--an abject failure.

http://csep.psyc.memphis.edu/cohmetrix/readabilityresearch.htm
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wait for the readers digest version ....

0xF00L
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<Risk without Risk>


"It's all over now, you're under arrest Craw."

"That's Craw, not Craw!"


Dialogue between Maxwell Smart and an early KAOS nemisis of his, the fiendish Claw


B (one ridiculous premise deserves another one in reply)
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[i]
http://www.decisionpoint.com/tac/Swenlin.html

I thought someone may find these charts interesting. They are graphs of P/E ratio's of the S&P 500 over the years and where todays PE's fall on the undervalued/overvalued spectrum. It's monday people.
[/i]

These graphs show that over the 18 year period from 1982 to 2000, the valuation kept increasing and increasing relative to the historical mean, never once even trending signifcantly back down towards the historical mean.

And over the whole 22 year period portrayed, the valuation stayed way way above the historical mean. Once the valuation broke away from the historical mean it never went back down, and remains at least 50% higher, despite one of the most severe corrections in recent history.

Personally, I think there is much to be said for buying when valuations are low, but it's not nearly as simple as the "Risk without Risk" folks seem to believe. If it were that easy, then all the valuation-based mutual funds and such would be beating the S&P by a huge margin. In fact some valuation-based funds beat it and others don't.

My belief is that paying attention to valuations while entering and/or exiting the market can be useful, giving a very slight performance advantage. The most common way I put this into practice is to use limit orders a few percent off the market rate when buying or selling, to take advantage of the market volatility. And I don't expect anything more than a fraction of a percent advantage relative to the person who didn't consider valuation. That small difference isn't going to make any impact on "correct" withdrawal rates.


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[i]
http://www.decisionpoint.com/tac/Swenlin.html

I thought someone may find these charts interesting. They are graphs of P/E ratio's of the S&P 500 over the years and where todays PE's fall on the undervalued/overvalued spectrum. It's monday people.
[/i]

Been hanging out somewhere else. The brackets give you away.

arrete - () [] - don't really care
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For the past two years, a poster named JWR1945 has put a lot of work into testing the statistical validity of the concept, and he has found that it checks out.

Jwr1945 has spent a lot of time figuring out the optimal past allocations with various switching strategies. What this tells us about optimal future switching thresholds and/or allocations is unclear. I am not sure what hocus is talking about here in terms of statistical validity. I am not sure he knows what the term means. JWR has been to careful to make such silly claims.

I do understand and agree with the "buy low sell high" idea and the overall market seems "high" by value criteria. Still, rather than naming this thread "risk without risk," I think "words without meaning" would have been a better choice. </grin>
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I'm no SWR expert, so I won't be arguing about that, but I do occasionally give editing advice to friends. Here's my editing suggestions:


I have been struggling for some time to come up with a better terminology for the two types of factors that I see as affecting long-term stock returns.

Not exactly the best first line, but okay I guess. The problem is, I can't tell anywhere in this post what these "two types of factors" are. Even the phrase "types of factors" is unnecessarily obscure. If it's important enough to be the first line, why isn't it explained or summarized, clearly and concisely, in the first paragraph? And why is the aim to come up with terminology for these obscure types of factors? How is this semantics game relevent to the reader? If this book were in a store, many potential readers would have probably set it back on the shelf before getting through the first paragraph. If it isn't getting somewhere fast, it isn't getting read at all.

My usual practice has been to refer to the factors focused on in the conventional methodology SWR studies as "volatility" and to refer to the factor not given adequate consideration as "valuation." I have never been happy with these terms. I have been tempted at times to use the terms used by William Bernstein in Chapter Two of “The Four Pillars of Investing”; he uses "risk" for the factors focused on in the conventional methodology studies, and "return" for the factor that I have been stressing. I was recently reading through some old posts in an effort to gain a better understanding of the definitional issues, and I have come up with a new terminology which I think may clarify the distinction that I have been trying to put forward.

Does this really belong in the first paragraph? If you don't like the operational definitions, why write them out then downplay their value? And why on earth put them in the first paragraph?

My new terminology is to refer to the factors focused on in the conventional methodology studies as "Imposed Risk" or "Unavoidable Risk" and the factor not given proper consideration in the conventional methodology studies as "Voluntary Risk" or "Elective Risk."

Are these supposed to be the two [or apparently four?] types of factors?

There is a sense in which the latter types of risks do not constitute true risks at all. Bernstein says on Page 12 of “Four Pillars” that “where there is return, there also lurks risk.” I believe that that is almost correct, but not quite.

You shouldn't quote the same source more than once in such a short span of text. It gives editors and readers the impression that you haven't done much research. If you are going to cite page numbers, you must also provide what edition you are pulling from. It also appears this is the only source you've quoted in the entire post. Is this supposed to be a book review of "Four Pillars"?

There is an important sense in which stock investors can tap into higher long-term returns by incurring Voluntary Risk or Elective Risk without incurring any additional real risk. Much of the risk you take on when you purchase stocks at times of low valuation levels can be said to be Risk without Risk.

I have no idea what you're trying to say here.

SWR analysis is a risk-assessment tool. The purpose is to use historical data to assess what sort of risk you are taking on in investing in stocks to finance your retirement. The conventional methodology aims to do this by determining the worst return scenario that has turned up in the historical record and declaring that a withdrawal strategy that survived that scenario is safe presuming that the future is no worse than the past.
The core flaw is that the conventional methodology fails to make a distinction between two types of risk with very different characteristics.


What two types of risks? What are they, how does one distinguish them, why is making this distinction important, and how does one apply the distinction to anything in the real world?

There are many factors that cause stock investing to be risky. Demographics changes cause risk. The rise of the country you are investing in as a world power, or its fall from that position, causes risk. Productivity changes cause risk. Risk results from the fact that the future is unknown, and there are many aspects of the future that are unknown. So there are many things causing stock investing to be risky.

This seems out of place here. Is the main thrust of this post supposed to be about the risks of the stock market? Semantics? Valuations? William Bernstein? What?

The problem with assessing the risks you face as a stock investor is that there are so many different aspects of the risk question that it is impossible to sort through them all.

If it's impossible to sort through them all, then why on earth even bring them up? Readers have little patience. Editors have less.

You might feel confident that demographics issues are going to be worse in the next 30 years than they have generally been in the past. But you might feel that productivity issues are going to be better, and that the latter effect will more than cancel out the former.

Or I might feel that I wish you'd get to the point. Any point.

So many factors come into play that it is impossible to analyze them all separately in a satisfactory way.

Then don't bring it up at all.

SWR analysis comes to the rescue. SWR analysis combines all of the various risk factors into a single number. It doesn't make a claim that demographics will be worse or that productivity will be better or anything else. It identifies what is the worst COMBINED effect that we have ever seen in this country, and declares a withdrawal strategy that works under those conditions "safe."

For starters, you haven't operationally defined "SWR analysis" so I don't know what this miracle method is. Secondly, earlier in the text you stated that "the conventional methodology" (whatever that is) is based on the worst scenarios seen in the past. Now you say "SWR analysis" is also based on the worse scenarios seen in the past. I don't get it.

I view this as generally being a good way to proceed. SWR analysis reduces all of the many risk factors down to a single number and thereby helps the investor develop his own personal withdrawal rate (PWR) in an informed manner. Each investor makes adjustments for his own optimism or pessimism by making adjustments to a SWR number that reflects one optimistic assumption ( a future not worse than the past) and one pessimistic assumption (a worst-case scenario popping up in one's retirement).

This is the clearest thing I've read so far. Why isn't this in the first paragraph, to let us know what the post is actually about?

[assume I've cut and pasted the next 12 paragraphs here]

The only point I can discern from these 12 paragraphs is that you don't like "conventional methodology" (whatever that is). Why should I, the reader, care? I don't like pickles. But I'm not going to start a post talking about frugal cooking then write 12 paragraphs about how much I dislike the "vinegarization of cucumbers". I'd at least have the decency to make it clear in the first paragraph what I'm going to be focusing on in the long, convoluted post.

Risk without Risk is special. It is the proverbial free lunch, money for nothing (except for the emotional strain associated with buying stocks when all of your friends are selling them instead). I hope that we will be exploring the implications of the Risk without Risk concept in much more depth in the months and years to come.

Before we spend "months and years" talking about "Risk without risk" could you tell me what the heck "risk without risk" means? I have no idea what the point of your post was. You are the writer. I am the reader. It is your responsibility to make your point clear and interesting to the majority of your readers. How many people here have read the original post and considered it interesting with a clear point? Certainly not the majority, I would bet on.

I know alot of this seems harsh, but most editors have even less patience than I do. If you ever hope to get an income stream from publishing, you must improve the clarity of your writing.
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I know alot of this seems harsh, but most editors have even less patience than I do. If you ever hope to get an income stream from publishing, you must improve the clarity of your writing.

Said before...said again...said yet again. We've parsed his writing until we're blue in the face. He spits in said face by not paying one iota of attention to what we say.

It's not what he says, but how he says it, that's so damb exasperating.
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