General Topics
Updated: June 22, 2006.
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Starting from January 16, 2006
Using P/E10
This tells you how to use P/E10 with my calculators.
I use P/E10 to vary allocations. This is known as Switching (allocations). I also use P/E10 extensively in data analysis.
Using P/E10
Historical Perspective: Dividends and Earnings
We have had great success with our dividend-based strategies.
Central to any dividend-based strategy is assessing the quality of dividends. Critical to assessing the quality of dividends is assessing the quality of earnings.
I have extracted some comments from The Intelligent Investor by Benjamin Graham. I have included a link to an earlier article as well.
Historical Perspective: Dividends and Earnings
Historical Perspective
The Story Behind the Numbers
Too often, I see numbers in isolation. Too often, someone identifies 4.0% as The Number without any explanation whatsoever. There needs to be more.
The original 4.0% was never The Number. It was only an illusion.
We have now pushed Safe Withdrawal Rates much higher.
The Story Behind the Numbers
Individuals Pick Winners
The myth about not being able to identify superior mutual fund managers ahead of time is only a myth. Individuals do it all the time.
Somebody has to get above average returns. Why not us?
Individuals Pick Winners
Dollar Cost Averaging Today
Not many subjects are more relevant to investors than dollar cost averaging. It is a time-tested, successful strategy.
But what about today? Will today's investor stick with it? Maybe not.
Rob Bennett was right in his latest Letter to the Editor. You have to make it through years 10 and 15 to reach year 30. There is reason for concern.
Dollar Cost Averaging Today
DCA Today: The Point of Frustration
Year 10 Choices
I contrast today’s actions, starting from today’s valuations, to those of the not-too-distant future, when valuations will be much more favorable.
Year 10 Choices
Year 10 Choices: Edited
What Do I Really Think About Dividends?
Dividends raise today’s Safe Withdrawal Rate to 5.4% (plus inflation) of the portfolio’s initial balance.
Dividends extend the portfolio lifetime indefinitely, well beyond 40 or 50 years.
What Do I Really Think About Dividends?
Allocate 25%
How much should you allocate to hobby stocks?
My answer: 25% of your stocks.
Allocate 25%
Allocate 25%: Addendum
Investment Traps
Here are four traps to avoid.
Investment Traps
Early Success with Latch and Hold
I recently built Latch and Hold Calculator LH02. It tells us what happens to Historical Surviving Withdrawal Rates if we extend the crossing of a valuation (P/E10) threshold by a fixed number of years.
Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.
Start with my initial survey.
Latched Threshold Survey
Early Success with Latch and Hold
Continued Success with Latch and Hold
This extends my early investigations of Latch and Hold.
Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.
This investigation shows that we can relax our requirements on the upper threshold.
Continued Success with Latch and Hold
Adding Constraints to Latch and Hold
Latch and Hold dramatically improves the upside of (stock allocation) switching when started in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.
Earlier investigations showed that we can relax our requirements on the upper threshold. This investigation moves toward Benjamin Graham’s constraint on both stock and bond allocations to 25% to 75%.
We lose very little when we make the minimum stock allocation equal to 25%.
Adding Constraints to Latch and Hold
The Lower Latch and Hold Threshold
Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.
This time I looked at the lower threshold.
The Lower Latch and Hold Threshold
Additional Constraints with Latch and Hold
Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the substantial advantage of switching over fixed allocations in times of high valuations.
Benjamin Graham recommended stock and bond allocations between 25% and 75%.
I have looked at new conditions with Benjamin Graham’s constraint in mind.
Additional Constraints with Latch and Hold
Idiot Switching
I read an article recently that showed that timing never works, regardless of the details. I marvel at how much cleverness it takes, possibly unknowingly, to force such a conclusion.
This got me to thinking about how our results could be distorted and whether our procedures would catch the errors.
I set about building a ridiculous algorithm. I call it Idiot Switching. I put it through its paces. This is what I found.
Idiot Switching
Edited: Idiot Switching
Typical Values of P/E10
My choice for the typical value of P/E10 is 14.
Here are the numbers.
Typical Values of P/E10
Earlier General Topics
General Topics prior to September 20, 2005
General Topics (starting from September 20, 2005)