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URL:  https://boards.fool.com/greetings-galagan-you-wrote-your-linked-post-18987244.aspx

Subject:  Re: The hocus plan: 4% from 100% FI? Date:  5/1/2003  1:31 PM
Author:  BenSolar Number:  104956 of 881729

Greetings, Galagan :-)

You wrote:
Your linked post refers a strategy of switching from 50% stocks to 0% stocks when PE-10 (a P/E measure based on 10 years of earnings data rather than just trailing 12 months) is above 18.

Where did 18 come from? Is it the value that best fits the historical data? Or is there some other basis for picking it?


You are referring to this post, I think:
http://boards.fool.com/Message.asp?mid=18200598

In hindsight, I didn't write very clearly. PE-10 of 18 was the first data point that I checked, and I chose that one because it subjectively seemed 'close to average valuations' of 15.5. If you look at the post further you'll see I examine switching at PE-10 of 14 through 21. All had an equivalent or higher SWR as the static allocation.

Here's that data again:

PE HSWR
14 3.44
15 3.42
16 3.36
17 3.50
18 3.40
19 3.32
20 3.37
21 3.38

The static and 'optimal' allocation for a 50 year withdrawal was
64/36 S&P/FI and that produced a SWR of 3.31%

Ben
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