A.I.M. Users Bulletin Board

[ls7550]

Hi Tom

Hi Clive, I forgot to mention that in my version of the Talmud portfolio it's actually 30/30/30/10 with the last 10% being a cash reserve. We've been letting the dividends collect in the Cash column and have been able to rebalance using the reserve in most instances. That helps defeat the "All Ships Rising At Different Rates" problem that Rebalance can have.

Rebalance is less stressful when there's cash available. There may be no need to sell something just because there's a need to buy in another sleeve. It appears that this is going to work out well over the long haul.

When your home value is the initial "third in land" that avoids having to find/pay others rent (but yes has its property taxes, around 0.5%/year here). Not something that can be easily rebalanced though, so just leave that as-is. Leaving stocks and gold remainder liquid assets. Let stock dividends drop into cash and supplement that with a 1.1% SWR relative to total initial value (including home), 1.65% SWR relative to just the stock (price only) and gold initial two-thirds. If that covers your basic living expenses in general (supplemented with pensions) - great. If a sudden modest expense arises then credit card(s) can defer that cost if both stock and gold are down at the time. Otherwise selling some of whichever is the relatively higher value (stock or gold) might cover that one-off cost/expense.

Assuming imputed rent = 3.33% = 1.1% proportioned to a third of total assets, also dividends = 3.33% (1.1% of total wealth), and you're drawing a 1.1% SWR relative to total wealth ... combined 3.33%, sourced from imputed rent, dividends, SWR withdrawals. The return of your inflation money via 30 yearly instalments, and more often ending 30 years with your original inflation adjusted total wealth still available, maybe less (say 60%), maybe more (say 150%).

Often when drawing the SWR (from stock and/or gold) that will tend to come from just one of the stock or gold assets (the most-up at the time), so spending some is a form of partial rebalancing in itself. After a good/great year for one (or both) you might increase that trade value to draw a higher amount, dropping that into cash so that the cash lasts longer before you need to make another sell trade to replenish your cash account.

As that progresses with age, initially retiring at 65 and a objective of a to 95 age horizon, so you might draw more. Where even if all of the liquid wealth is progressively spent down to zero as you enter into your 90's, there's increased likelihood of ending up having to move into a care home, and where the house value sale proceeds might cover those costs. Leaves less for heirs/legacy, but more often by then heirs are more financially independent anyway, such that they're just more inclined to blow any lump sum inheritance.

The US likes the state to hold gold, in contrast in the UK the state promotes public holding of gold. Your primary home is tax exempt when sold, as are gold legal tender coins, there's no purchase tax on legal tender gold coins either. And counter-party risk is reduced to just the third in stocks - that can be liquidated in T+2 or T+3 time typically. There's also the 'what gold' off-radar benefit, in a world where increasingly states are looking to track all your wealth/transactions, as though it was their wealth and not yours (perhaps the proceeds from many years of time/effort). Taxes will often be fair, but at times can be punitive, confiscatory, that's just normal history repeating, periodically states need to partially-default (confiscate), which has always occurred at times throughout history, and no doubt will at times repeat in the future.

Clive