Paul Speaks to Texas A&M Nursing Graduating Students

[@lslurpeek]

Paul this was an excellent presentation. I'm sharing it with a lot of people that need to hear and learn this stuff.

[@FlagstaffChief]

Thank you, Paul, for declaring a preference for Roth accounts over Traditional. It’s such a painless way to increase your eventual distributions by whatever tax rate the investor finds himself in each year after retirement. Also, there are no complicated decisions to make later about ‘Convert or Don’t Convert,’ or which pool of savings to withdraw from first. 1:10:04

[@70qq]

🤘

[@vin.handle]

In citing these figures on accumulation of your investment, I never hear anything about re-investing dividends and capital gain distributions. How do these affect the results?

[@muffemod]

If you have to ask you simply just don't know!

[@vin.handle]

@@muffemod I am asking because I don't know and the creators of these videos don't reveal to investors an obvious question. Are dividends re-invested and how does that change the long-term results of these investment strategies?

[@muffemod]

@@vin.handle oh Chocolateface, if you really understood the game, you'd know reinvesting dividends is like adding sprinkles to a sundae. Without it, you're just eating plain vanilla. Next time, ask yourself: do I want the sprinkles or just the cone? Get with the program, my guy!

[@vin.handle]

@@muffemod The question is to document how much re-investing dividends adds to total return of a portfolio over time. Talk about adding sprinkles to a sundae is irrelevant and laughable unless you can explain to investors the comparability of an investment portfolio and an ice cream sundae.

[@lslurpeek]

​@@vin.handleIt includes reinvesting dividends. He talks about it in his podcast

[@markmap4677]

Presentations like this which derive expected returns over a performance history whose dynamics, historical detail, and circumstances have been “unusual”, may need to realize that expected returns going forward may change, as circumstances have become more “normal”. For instance, Tables C1 and C9 depict returns of “bonds” over a period ( 1970 - 2011 ) whereby there was an anomalous spike in inflation ( known in academic circles as the ‘interest rate mountain” IRM ( AQR research )). Because of the impact of “dual oil shocks” , and the “mistakes” made by the Nixon and Carter administrations in the management of price inflation in the 1970s, the inflation rate rose to levels that were much higher than “should have” been. Undoubtedly, going forward, an inflation of this magnitude will not occur again, as modern administrations / Federal Reserve boards are much more “experienced” and are more adept in dealing with inflation - as witnessed by the most recent inflation event ( 2022 - 2023 ), an inflation that may have been much worse had the Federal reserve not acted promptly and decisively. Therefore, the bond returns depicted in the Tables reflect a higher average return produced over the IRM period than the returns produced over the more “normalized” period in the decades that preceded it. And it can be assumed that post 2011 ( the “end” of the IRM period ), the interest rate “term structure” has entered back into a more “normalized” range ( absent the recent inflation period ). Compound annual returns for “bonds” over the IRM period were 7+% ( this because the returns contribution to bonds’ return was much higher, as the average interest rate was higher, as rates slowly worked their way lower ), whereas returns over the suspected normalized 2012 - 2023 ( and beyond? ) period have been 1.5% ** ( with general rates residing within a "range" of between, say, 2.5 - 3.5% ). That’s quite a performance differential when considering incorporating bonds within a 30/40 year portfolio lifecycle “glide path” ( Target Date fund ), this having been a typical bond exposure averaging 40% ! In the book "Work, Retire, Repeat - The Uncertainty of Retirement in the New Economy", Teresa Ghilarducci cites that only 15% of U.S. retirement aged citizens have "enough" or "excess" savings / investments accumulated to live in "financial independence". This means that if portfolios that have produced “higher” returns over the past ( higher bond returns over the IRM period ) couldn’t help a portion of that “85%” cohort enter financial independence, how will portfolios producing a lower returns going forward help this situation ? There may have to be a rethink of portfolio design, perhaps with portfolios containing much higher allocations of equities ( S&P500, small cap value, etc. ) versus bonds over the glide path - this in order to match the returns of the 60/40 & Target Date returns of the past. ** Vanguard Total Bond Market Index Inv

[@paulmerriman2947]

Thanks for the thoughtful comments regarding bond returns over the last 54 years. I will make your comment the main topic of our newsletter in the coming weeks. There are a number of things that make the 1970-2023 period unique. The fact that it includes a 25 year run of over 17% for the S&P 500 makes it unique. As I have noted before, I am extremely lucky that I was born in 1943. That made me an active investor during the 25 year raging bull market.