Hello,
old post but interesting thematic of price versus performance index.
The SMI is a price index while the S&P500 is a performance index which includes the dividends. Wrong the S&P500 is a price index too but probably the dividend policy is different in the tech companies oriented in growth than in cash flow.
You have to make a plot of the total return (TR).
The plot is valid since January 2003 and we see that the SMI TR (SMIC) is quite equivalent to the S&P500 (SPX). With one difference the S&P500 is expressed in a monetary unit which dropped 30% in value since January 2003.
As other people said, this is very wrong, as it does not include dividends.
You can use this page to calculate the return.
So in our case, $100 invested in 1970 becomes $12â700 in 2018. Thatâs a 10.6% annual return, measured in USD.
Now, if we invested 100 CHF in 1970, today we would have 12â700/4.3 = 2â950 CHF. Thatâs an annual return of 7.3%, measured in CHF.
To me thatâs still a nice return (although still nominal, not counting inflation). I think in a very long term, inflation and exchange rates should cancel each other out.
I think the main way to reduce risk is to find some fun stuff to do which can be monetarized.
Noone says you just have to stop to work forever⊠(except some early retirement police as MMM would put it). Just earn some 10-20k on the side, by being a guide for hiking, do some woodwork, giving classes⊠Whatever. Easy enough to do, no need for a lot of capital and still fun and a way to meet people.
Iâve done the math for the hiking guide thing and it would roughly amount to a 15-30% occupation once the business is working and you have a set of recurring clients doing advertising for you (which takes time and dedication). What I mean by that is you guys should absolutely not pursue that option and Iâm not at all having it in my visor right now. Trust me, the competition is fierce, youâd never make it.
I was just throwing in some stuff :
I guess mostly it is about resilience and early reaction. The 4% rule is based on the fact that someone will spend the same amount of money forever and not earn a single buck on the side :
You can reduce your budget for a short time to smooth ot a crash.
Acually a lot of studies shows that you need less money once you are working, since a/ you have more time to do stuff yourself b/ you have some expenses incurred by your job (transportation, fancy suit etc.)
You can restart temporarily to work. The hiking guide was just thrown in. As a waiter you can make about 25 CHF/h (brutto, no tips). That is something between 40 and 50k per y. Better you do a fun job pretty early on, to keep a positive savings rate (portfolio + fun job means your nest egg is still rising).
You are not supposed to wait until the money is away before correcting the course, and then it should be not too difficult. (The Ben guy from Canada on youtube showed a video that with a variable retirement budget, 5-7% is actually pretty good).
My approach : get to the 4% rule, take a sabbatical or quit (most of us guys are highly employable) and then lets see where it takes us from thereâŠ
I agree about the side job, thatâs why I am writing software on the side, for now without luck
I think it would be nice to have some kind of list of possible side jobs here in Switzerland. I think there arenât many possibilities to be honest. I am not even mother tongue english so I canât even teach it.
Yes, it is an interesting thought experiment and illustrates how small differences compound over long durations. When I first saw it on his blog I thought it would be quite an achievement to strictly stick to such a precise SWR over 50 years. Probably only realistic if bank transfers are automated from e.g. IB to a CH current account, where youâre limiting yourself to only spend from the current account?
I wanted to look into flexible spending models since some time, but never got round to it. It is one thing to say that weâll spend a bit less if stocks are low, but thereâs probably a flip-side of the coin where we start seeing ourselves as investment heroes and slip towards higher spending.
I suspect without constraining spending somewhow and be a bit clever about it, such charts become about as good as a Covid-19 prediction model where talking about predictions changes the predictions⊠Still useful to discuss underlying mechanics, but not strong predictors of the future.
The actual asset allocation of the portfolio probably also plays such a sensitive role and, the past not being a representation of the future, itâs impossible to assess what changes could come up in the next 30-60 years that could make an allocation better than another.
What I donât like with the 4% SWR is its non-flexibility. Iâd rather withdraw less (I like the 3% @Barto uses) and reassess after some time (10+ years) to see if it would make sense to reset my sequence by readjusting the withdrawals to 3% of my current assets. I donât want to go broke but wouldnât see a purpose to dying with trillions in the bank either. Doing so could tell me if itâs time to cut my spendings (until a further reassessment) or if I could allocate more to leisures/giving (either to family or charities)/sharing.
I agree. Match a very safe withdrawal rate (VSWR?) with a reasonably frugal lifestyle, which then can develop to higher spending if things go well. It should just be somewhat constrained, waiting 10 years in a bull market would take some discipline.
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