How Much Can Retirees Spend On March 11, 2020? It May Not Be What You Think

By Wade Pfau, Ph.D., CFA

Turbulent market volatility and declining interest rates are leaving many people wondering about the viability of their retirement plans. Given where markets are today, will you have enough to meet your retirement spending goals? Attention often turns to the 4% rule, which…

How Much Should We Depend On The Stock Market?

By Wade Pfau, Ph.D., CFA

Simple analyses, which look to historical returns as estimates for what retirees should expect in the future, tend to provide an incomplete picture that may overstate the potential for stocks relative to other strategies. We will investigate some of the adjustments that…

Unpacking Today’s Market Returns

By Bob French, CFA

Today, March 9th, 2020, was a bad day for the financial markets. There are four main elements to this story that I want to pick apart…

Inflation, Deflation, Confiscation & Devastation- The Four Horsemen Of Risk

By Wade Pfau, Ph.D., CFA

Noted financial advisor and historian William Bernstein makes a compelling case for stocks in his e-book Deep Risk: How History Informs Portfolio Design. In the introduction, Bernstein begins by offering an operational definition of risk. Risk is the size of real capital…

What To Make of Market Volatility

By Alex Murguia, PhD

In recent days, the significant market decline has resulted in renewed anxiety for many of you (I know this is blatantly obvious but stick with us). While it may be difficult to remain calm during a substantial market decline, it is important…

Lessons For The Next Crisis

By Alex Murguia, PhD

We wrote this in 2017 and it remains just as relevant today. In early October 2007, the S&P 500 Index hit what was its highest point before losing more than half its value over the next year and a half during the…

The Coronavirus and Your Investments

By Bob French, CFA

The Coronavirus is scary. When it’s possible to make reasonable comparisons with the Spanish Flu, that should make you sit up and take notice. Aside from the reasonable precautions that you should be taking, what should you be doing to protect your…

The Case for Stocks

By Wade Pfau, Ph.D., CFA

The case for using an aggressive investment portfolio with a high stock allocation to fund retirement expenses rests on the idea that it will probably work. Stocks are expected to outperform bonds, and if and when that happens, a retiree will be…

Modern Portfolio Theory – Part Two

By Wade Pfau, Ph.D., CFA

This article is part of a series; click here to read Part One. Efficient frontier diagrams do not actually show the asset allocations of portfolios on the efficient frontier, but this information is also available. Exhibit 1.3 provides an example of ten…

Modern Portfolio Theory

By Wade Pfau, Ph.D., CFA

Before shifting into further discussion about whether these historical numbers provide the most appropriate assumptions for future market performance, it is worth understanding how to choose an asset allocation and put together an investment portfolio while assuming that these historical numbers are…

Historical Market Returns – Part Two

By Wade Pfau, Ph.D., CFA

This article is part of a series; click here to read Part One. Moving to bonds, Morningstar data shows that since 1926, the average return from intermediate-term government bonds was 5.2 percent with a standard deviation of 5.6 percent. With the lower…

Historical Market Returns – Part One

By Wade Pfau, Ph.D., CFA

The primary subject of my book is comparing the risk premium with risk pooling as a source of funding for retirement goals. An important step is to first make clear what the risk premium is and how it relates to an investment…