SwAT2 Returns Graphs

Here are graphs of SwAT2 annualized, real, total returns.

SwAT2

SwAT2 is optimized for periods of high valuations. It maximizes the 30-year Safe Withdrawal Rate by shifting allocations with P/E10. It is subject to Benjamin Graham’s constraint. Both stock and TIPS allocations are restricted to 25% to 75%.

The P/E10 thresholds are 11 and 21. The allocations are 75%-40%-25%, respectively.

SwAT2 is NOT optimized for total return alone. It is optimized for safety when there are annual withdrawals.

For more details, refer to Current Research B.

Graphs

Here are the Year 10, 20 and 30 annualized, real, total returns of SwAT2 compared with that of a portfolio with a 50%-50% fixed allocation. The non-stock component is 2% TIPS.

Observations

Superficially, there is very little difference between SwAT2 and the fixed allocation. For the retiree at times of high valuations, it is the difference between financial success and a busted retirement.

Have fun.

John Walter Russell
July 30, 2009