Lifestyle, Investing and Gurus


Part of the reason I maintain my blog is to provide a look over my shoulder for anyone who is interested at how I navigate market cycles for clients, my thoughts on portfolio construction and how I analyze investment products as well as how my thoughts evolve on more lifestyle related topics like retirement and a few others. This is all in line with my belief in taking bits of process from various sources to create your own process. If you visit here regularly then maybe a couple of things resonate, likewise with any other places you go for content.

As a look over my shoulder and the evolution (development) of how I view things, I try to avoid unnecessarily declarative statements; EVERYONE SHOULD...but I make no claim of infallibility. Often there are overly declarative statements from aspiring (or maybe acclaimed) lifestyle and investing gurus (I see this primarily on Twitter) and also in the comments on some of my posts. Some will proclaim everyone should own index funds or everyone should own dividend growth stocks. I typically reply that I am glad they found what works for them but no, not everyone should do what they (the commenter I am replying to) think is best, their (investing) god is not the one true god.

I see this a lot with my burgeoning interest in nutrition. I've started following a few people on Twitter related to nutrition, and then depending on their Twitter stream, I'll stick with them or not, similar to people I follow for market related streams.

Over a year ago I started to blog a little bit about my decision to greatly reduce my carbohydrate intake and my having lost 25 pounds I didn't know I needed to lose. Many people refer to this as a LCHF diet; low carb/high fat. One of the nutrition people I follow, and this is a common belief, says that we have been lied to about fat being bad for us and many other nutritional issues. I long ago came to believe that everything we were taught about fat being bad for us actually pertains to sugar. I can't make the connection though to some sort of sinister plot to deceive us so much as we now have much better information. This one person has vast knowledge on what happens at the cellular level when you reduce carbs and do intermittent fasting (once a week I skip breakfast and have lunch a little late that day, it's low key but the benefits at the cellular level appear to be substantial) as well as working out which is why I follow him.

He says some other things in an overly declarative fashion that don't resonate with me, maybe he mis-Tweeted but he said that a vegan diet contributes to obesity, I could see it being difficult to be adequately nourished but obese from it doesn't seem right. Overall I am learning from this person and so will stick with him.

I stumbled across another Tweeter who I thought was a nutrition person but is more of a life coach. Every now and then he says something interesting, he Tweeted a couple of things about stoicism which interests me but I read most of his Tweets as someone getting in my face and screaming. The trade off in this instance probably leads to not following him.

So it is with investing content. Sifting through and taking in what is useful while jettisoning what is not. Here's a link to a Marketwatch article about the 4% rule for sustainable withdrawal rates in retirement. There is a great deal of content and discussion about the 4% rule related to it being too conservative, too aggressive, too complicated, are the assumptions underlying it still valid and so on.

My take on it has always been that it is a crucial building block of understanding for retirement planning and that once you full understand it you can then make an informed decision about how much to take out. While 4% is ideal based on testing, the odd are well in your favor at 5%, there is absolutely no guarantee at 5% but still good odds.

I do gravitate to 4% but a slightly different version of it. The "rule" is take 4% in your first year and then adjust up for inflation up in subsequent years. So if in year one, 4% works out to $30,000, in year two at 2% inflation you'd take out $30,600.

I think the inflation component makes it unnecessarily complicated. Ideally the portfolio is inflating in most years as asset prices increase. I'm more in the camp of whatever you got; 4%. A little more specifically, 1% every three months. The downside is some volatility in the amount you take out as the portfolio value ebbs and flows and that requires some flexibility.

Many years ago a reader observed that if you take 1% of the whatever the portfolio value is every three months, then you would never run out of money. Technically that is correct but not my primary reason for whatever you got; 4%. For someone who has been able to save most of what they need, say at least 80% of their number even if not 100%, the biggest risk might be some sort of one off, very expensive medical expense not covered by insurance. I view whatever you got; 4% as potentially creating more resilience in the face of that circumstance. If you had $800,000 and $300,000 would save your life would you spend the money and then figure out what to do after the fact? Answer that one however you want, but the ability to have that choice is threatened if you take that $30,000/yr a couple of times when the portfolio is down by a significant amount during a bear market like 2001/2002.

Does that resonate with you? Maybe yes maybe no, that is for you to filter, it is my belief in what to do, and even if you this is not for you maybe it offers something to think about which then hopefully makes you a little more informed. To the vegan comment above, I eat a big salad most days. I actually don't know whether the salad by itself is a vegan thing or not but taking in several sources of information, I want some balance in my diet such that I have a low carb intake, not a diet where I eat nothing but red meat.