May 2008 Highlights

Scenario Surfer

The Scenario Surfer is now online. It has led to numerous insights of great practical value. It has validated Benjamin Graham�s recommendation to keep both stock and bond allocations between 25% and 75%. However, it also shows that a 100% stock allocation is appropriate when prices fall to exceptionally low levels.

Sometimes, the Scenario Surfer generates a run with a super bubble following the past bubble. Investors need to prepare for such a possibility.

Training on the Scenario Surfer adds about 1% to your Safe Withdrawal Rate (e.g., from 4% to 5%).

Dividend Strategies

Dividend strategies are in the forefront. I favor the dividend blend. Others may prefer a dividend yield or dividend growth approach by itself. Numerous articles add depth.

Old Fallacies

My research continues to show that rebalancing portfolios is a bad idea. The best approach is to adjust allocations according to valuations. This includes dividend stocks.

Rules of Thumb

I have provided meaningful Rules of Thumb for dividend growth and the dividend blend.

Gordon Model

I have shown that a simplistic application of the Gordon Model can be misleading. Dividend investors need to be very careful. The initial dividend yield must be satisfactory from the beginning. Simply adding the initial dividend yield and the dividend growth rate is not enough. Not for a time frame of a decade.

Valuation Informed Indexing

Most Scenario Surfer runs consist of a traditional form of Valuation Informed Indexing (VII or Lucky 7). It consistently beats fixed allocation alternatives. Newer Valuation Informed Indexing strategies include switching to a dividend approach when valuations are attractive. This extends the portfolio lifetime indefinitely.

Useful and Interesting Articles

Is $200000 Enough?
Saving For Retirement
Lessons from the Scenario Surfer
Approaching Retirement
Dividend Quality
The Dividend Advantage

Have fun.

John Walter Russell
May 1, 2008