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"In order to invest $100,000 (all at once, *or* over time) in the S&P B&H approach with a guarantee you’ll never have less than $100,000 liquid cash, you must *also* have a side reserve account of (rounding down from 53%) $50,000 to fill the bucket during the drawdowns. That means you must actually have $150,000 of cash, in order to invest $100,000 safely, in an S&P B&H strategy. The initial volatility cost (VC) is the opportunity costs (lost returns) on the $50,000, which are then subtracted from the long term gains on the $100,000."


hi Dave, if I'm following you, you are saying that a retirement account
that is not annuitized needs to have an extra 50% set aside to protect
the individual from any market drops. By this same reasoning, does every company that sells annuities have a 50% set-aside for every dollar
(present and future) that it is contractually obligated to pay out ?

In the fractional-reserve banking system that we live in, I seriously doubt that this is the case :-)

I know the "Masters of the Universe" on Wall street think that they can
hedge any future risk to their advantage, but time after time they are proven wrong ! ( read "Hedge Hogs", for a disgusting case study of a
hedge gone terribly wrong )
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