Hi Jack. Yes, as AIM1979 said/linked.
Basically a means to have a steady/consistent inflation adjusted income. $100,000 portfolio with a 4% SWR applied has you take £4000 at the start as income, and then uplift that amount by inflation and drawn that inflation adjusted amount as the income in the second/subsequent years. Or $333/month inflation adjusted taken monthly.
Some might take income using dividends/interest, leaving conventional AIM (50/50 stock price only, cash without interest) to offset inflation. But then income is variable. Others might consider dividends/interest to be the inflation offset element, and spend price appreciation (AIM gains) as the 'income'.
Fundamentally gains can arise out of price appreciation, income (dividends/interest) and volatility capture (trading/rebalancing). Broadly they're all the same, price appreciation = diviends = interest = volatility capture = inflation (in a very broad/general sense). Some investors specifically target one over others, growth investors look to price appreciation, income investors look to dividend investors, Options traders look to capture volatility. AIM in effect diversifies across all of them. For income, SWR provides the most consistent, and its drawn out of total returns. Primary however is to keep SWR low, its generally better to set SWR to basic living expenses cover level and supplement that with income drawn in a discretionary manner on top of that. 2% SWR + look to draw a additional 2% out of real gains in a more sporadic/inconsistent manner is better than 4% SWR alone.
Clive.
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