Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Tuesday, May 4, 2010

BlackRock Diversified Portfolio - 3 Year Rolling Returns

In a previous post we looked at the Barclay's sector return/ periodic table of 20 year returns. We showed how to construct a portfolio corresponding to the diversified portfolio by using low cost ETFs.

Now let's take it a step further and take a look from the perspective of a new retiree. Let's assume that he or she has just reached the so-called "number." Assume that assets are invested in line with the diversified portfolio. The question is: what can be expected over the subsequent 3 years? Think about this. Everyone likes to think long-term, but the fact of the matter is that we live in a short-term world. Stocks take a big hit over the next 30 days, and it is only natural to begin to worry. So again, what can the retiree or any investor expect? Here is part of an Excel spread sheet I constructed using the BlackRock data to derive overlapping 3 year returns. The spread sheet shows the return on the portfolio for each of the 18 3 year periods.

The exercise showed that there were 3 years where the retiree's portfolio would have declined over the 3 years following retirement. The worst year was 1999. Retiring on 1/1/1999 would have given him or her 85 cents on the dollar by the end of 2001. I can send my spread sheet as an attachment to anyone interested.

When I get the energy, I plan to do the calculations throwing in a 4% inflation adjusted withdrawal rate and an inflation adjustment on the overall portfolio assets.

No comments:

Post a Comment