Sequence of returns risk and the 4% rule

[ChapInTokyo]

Well, I'm definitely living in my sequence of returns risk phase now. 8 million yen down and counting... not from the peak, but from the total amount I invested.

What with being hit by a 300,000 yen repair bill on the car (unbudgeted for!), and the world's economy heading for negative growth due to the American tariffs, The idea we had of a Christmas holiday in Kyoto is definitely off the menu for the forseeable future.

So people, sequence of returns risk is real! Who knows when the market will recover from this covid level spanner in the works?

[RetireJapan]

Could be next week (a la March 2020). Could be in a few years' time.

It's all good. I prefer the few years time option as that gives us longer to accumulate cheaper assets

[ToushiTime]

Well, I'm definitely living in my sequence of returns risk phase now. 8 million yen down and counting... not from the peak, but from the total amount I invested.

What with being hit by a 300,000 yen repair bill on the car (unbudgeted for!), and the world's economy heading for negative growth due to the American tariffs, The idea we had of a Christmas holiday in Kyoto is definitely off the menu for the forseeable future.

So people, sequence of returns risk is real! Who knows when the market will recover from this covid level spanner in the works?

Ouch!

Some of my accounts are turning negative for the first time ever.
This is unchartered territory for me. I guess I will find out how well the conditioning from Bogleheads and the like has sunk in!

I think you have been investing for several years before you joined this forum, but I get the impression that you stepped up your investments more recently?

Either way, don’t panic-sell!!!


Ben Felix discusses Sequence of Returns risk here with regards to the recent update of the Cederburg “Beyong the Status Quo” paper on 100% equity portfolios.
(from 6:07 minutes in)
https://www.youtube.com/watch?v=QGzgsSXdPjo

And this is his more in-depth review of the update paper. It's one of the best reviews I have seen so far.
I think you brought it up a while back. I mentioned the original version too. The paper argues that 100% equities has a lower failure rate than mixed portfolios even during retirement. Ben Felix himself seems to agree with most of its arguments, with the caveat that you need balls of steel to go through with it.
https://youtu.be/-nPon8Ad_Ug?si=2bqL72q9Y4DyhVAT

[Tsumitate Wrestler]

Well, I'm definitely living in my sequence of returns risk phase now. 8 million yen down and counting... not from the peak, but from the total amount I invested.

What with being hit by a 300,000 yen repair bill on the car (unbudgeted for!), and the world's economy heading for negative growth due to the American tariffs, The idea we had of a Christmas holiday in Kyoto is definitely off the menu for the forseeable future.

So people, sequence of returns risk is real! Who knows when the market will recover from this covid level spanner in the works?

How do you budget out your emergency funds?

Do you have a separate house repair/car repair fund , separate from living expenses?

Maybe more of a cash buffer?

[captainspoke]

Rather than "I lost this much," or "I'm down this much", another way to look at it is when was your portfolio last at the present level? Was it six, nine, 12 months ago, or what?

For me, that was may 7-8 last year (the august dip is now a little above where I am now).

So another way to see it is that the market has been flat (or choppy, or moving sideways) for 11 months. Like, so what.

*

And IMO, what has just happened has nothing to do with sequence of returns. Yet. This downturn is only a couple months old--far from being even a year old, let alone a sequence of years.

Sequence of returns, everything I've read on it, is framed in years, not any two month period.

[RetireJapan]

Rather than "I lost this much," or "I'm down this much", another way to look at it is when was your portfolio last at the present level? Was it six, nine, 12 months ago, or what?

Good point. I only check my portfolio once a month, so it's probably down a bit more now, but April 1 was at the same level as Nov 1 2024 so just a few months back.

[goodandbadjapan]

Another thing to do is just look at the bottom of your portfolio (at least on SBI) where it tells you the total by which you are up and see just how much you are still up overall. I'm technically down about 13 million from where I was at the turn of the year but I'm still considerably up on what my invested money would have been if it was just sitting in a bank.

[ChapInTokyo]

Could be next week (a la March 2020). Could be in a few years' time.

It's all good. I prefer the few years time option as that gives us longer to accumulate cheaper assets

I think it depends on whether you're in your accumulation phase, or in your draw down phase. For me, I can do without the volatility, since I need to buy a flat or a house at some point before they start refusing to rent to me because of age.

[RetireJapan]

I think it depends on whether you're in your accumulation phase, or in your draw down phase. For me, I can do without the volatility, since I need to buy a flat or a house at some point before they start refusing to rent to me because of age.

Does that mean you are overexposed to equities? Ideally you would have a mix of assets so that a year or two (or five!) of volatility wouldn't negatively impact your retirement plans.

[ChapInTokyo]

Well, I'm definitely living in my sequence of returns risk phase now. 8 million yen down and counting... not from the peak, but from the total amount I invested.

What with being hit by a 300,000 yen repair bill on the car (unbudgeted for!), and the world's economy heading for negative growth due to the American tariffs, The idea we had of a Christmas holiday in Kyoto is definitely off the menu for the forseeable future.

So people, sequence of returns risk is real! Who knows when the market will recover from this covid level spanner in the works?

Ouch!

Some of my accounts are turning negative for the first time ever.
This is unchartered territory for me. I guess I will find out how well the conditioning from Bogleheads and the like has sunk in!

I think you have been investing for several years before you joined this forum, but I get the impression that you stepped up your investments more recently?

Either way, don’t panic-sell!!!


Ben Felix discusses Sequence of Returns risk here with regards to the recent update of the Cederburg “Beyong the Status Quo” paper on 100% equity portfolios.
(from 6:07 minutes in)
https://www.youtube.com/watch?v=QGzgsSXdPjo

And this is his more in-depth review of the update paper. It's one of the best reviews I have seen so far.
I think you brought it up a while back. I mentioned the original version too. The paper argues that 100% equities has a lower failure rate than mixed portfolios even during retirement. Ben Felix himself seems to agree with most of its arguments, with the caveat that you need balls of steel to go through with it.
https://youtu.be/-nPon8Ad_Ug?si=2bqL72q9Y4DyhVAT

Don't worry, I'm not exactly panicking. Just could do without the richest nation in the world tearing down the world economic order and taking us closer to recession.

As for my investments, I used to have it all on Firstrade but last year decided to bring a part of the portfolio over to Japan to take advantage of iDeCo, NISA and generally bring a Japanese yen bias to the whole thing.

I looked at the Ben Felix videos that you kindly posted. I decided though to keep on diversifying my portfolio, as Larry Swedroe advises in spite of the "Beyond the Status Quo" paper. I'm happy to have lower volatility on the way to my grave, rather than have a huge upside when I finally kick the bucket.
https://www.morningstar.com/stocks/shou ... 0-equities