Wednesday, November 16, 2022 8:24:25 PM
Yearly (since 1872) AIM (Classic) versus 50/50 yearly rebalanced TSM/TBM comparison
I assumed a 3.33% 30 year SWR, return of your inflation adjusted money via 30 yearly instalments, and recorded the final terminal portfolio value measured as a multiple of the inflation adjusted start date portfolio value.
Notable is that AIM was better in the worst case, still had 69% of the inflation adjusted start date amount available at the end of 30 years, compared to 51% for the more common 50/50 yearly rebalanced stock/bond approach.
Similar average outcomes, for which median is IMO a more preferable comparative figure, with both tending to end with around 1.5 times the inflation adjusted start date portfolio value.
AIM was more consistent, had a lower standard deviation in values.
The maximum (best) case outcomes were also similar.
What struck me the most was how over the more recent cases AIM whilst still having done OK, hasn't been as rewarding as 50/50 constant weighted (since the 1970's 30 year start dates). But that's subjective to your interpretation of "risk". Living another 30 years is a lowish probability for some, and leaving a larger inheritance is perhaps less important than the risk of a lower/bad case outcome, for which AIM, at least historically, was safer.
Why the difference? Because when I look at 1985 for example as a start year, that pretty much just sold shares, averaged 76% overall cash (having started at 50%) and ended with 83% cash weighting.
Clive.
I assumed a 3.33% 30 year SWR, return of your inflation adjusted money via 30 yearly instalments, and recorded the final terminal portfolio value measured as a multiple of the inflation adjusted start date portfolio value.
Notable is that AIM was better in the worst case, still had 69% of the inflation adjusted start date amount available at the end of 30 years, compared to 51% for the more common 50/50 yearly rebalanced stock/bond approach.
Similar average outcomes, for which median is IMO a more preferable comparative figure, with both tending to end with around 1.5 times the inflation adjusted start date portfolio value.
AIM was more consistent, had a lower standard deviation in values.
The maximum (best) case outcomes were also similar.
What struck me the most was how over the more recent cases AIM whilst still having done OK, hasn't been as rewarding as 50/50 constant weighted (since the 1970's 30 year start dates). But that's subjective to your interpretation of "risk". Living another 30 years is a lowish probability for some, and leaving a larger inheritance is perhaps less important than the risk of a lower/bad case outcome, for which AIM, at least historically, was safer.
Why the difference? Because when I look at 1985 for example as a start year, that pretty much just sold shares, averaged 76% overall cash (having started at 50%) and ended with 83% cash weighting.
Clive.
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