Replies to post #45756 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

SWR

Kitces observed that the success/failure of 4% 30 year SWR had a high correlation to the first 15 years sequence of returns. If you achieve a 2%+ annualized reward in those first 15 years then the probability of success was far greater than if the first 15 years returns were poor.

the 15-year real (inflation-adjusted) return of the portfolio actually has a whopping 0.91 correlation to the safe withdrawal rate

AIM of S&P500 real prices historically averaged close to 50% cash being indicated (50% stock). When the stock is small cap value and 'cash' is a 50/50 blend of bonds and gold, then as per PV data (clicking the Rolling returns tab) even relatively short periods (5+ years) tended to have positive rewards in the worst case since 1972.

Selecting the drawdowns and other tabs for that 50/25/25 SCV/10yrT/gold asset allocation indicates pretty good results. When instead we manage the stock exposure via AIM, increasing/decreasing stock exposure in reflection of AIM's guidance, then generally the risk/rewards are further improved.

Noteworthy is that over some poor stock performance periods bonds served well at hedging/reducing the downside. However over other periods gold served much better at such hedging. Gold equally has its bad periods, that tend to be hedged by stocks. After gold has done well, stocks poorly, so AIM will tend to indicate increasing stock exposure, that in turn reduces 'cash' (both cash and gold) exposure. When stocks have done well so AIM will tend to increase cash (bond/gold) exposure.

All the best for 2022. Let's hope it turns out better than the last couple of Covid years.

Clive.