A Grand Tour of the Portfolio Charts Renovation

Updates

If you’ve ever remodeled a home, you understand how even the smallest change can sometimes spiral into something much larger. One fixture you love clashes with something else, so you create a short shopping list. When you start pulling things out you realize that you should probably replace the wiring and plumbing. If you’re going that far, you might as well remodel the entire room. And before you know it you have a new kitchen.

Upgrades can be unpredictable like that.

I recently had a similar experience working on some new tools at Portfolio Charts. It began with redesigning the Toolkit to add some new charts and make it much simpler to enter data without so many steps. The result was so useful that I realized I could apply it to the site infrastructure to make my job way easier. If I was going that far, I might as well make some interface changes that I’ve been thinking about for a while now. And before I knew it I updated nearly every page on the site.

If you only have a few minutes, here are the major changes to be aware of:

All of the backtesting tools have a new interface with a more intuitive layout and built-in ETF-finding capabilities.

Some data has been tweaked, like the shift from total stock market to large cap blend funds in portfolio definitions and the elimination of expense ratios. So the resulting numbers may be slightly different than before.

Old bookmark links will no longer work, so you’ll need to save them again.

The Toolkit is massively easier to use. If you ever downloaded a free sample, you may receive an email with a new one to tinker with. And Toolkit owners should be on the lookout for an email with a free update.

If that sounds interesting, the full upgrade list is pretty extensive. Read on to learn more.

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Remember the Calamity of the Great Market Tsunamis

Beginner, Theory

To understand the difference between expecting the average and planning for a long, safe life, look no further than the beautiful ocean communities of Japan. Picture a small fishing village with the local economy built around the sea. A colorful pagoda stands in contrast to the green mountain backdrop with a snowy white peak. Kids play in the water, as a Zen Buddhist painter contemplates the waves.

The interesting thing about quality art is its sense of history, and there’s perhaps no greater theme in Japanese art culture than the topic of waves. For example, the title image is a famous woodblock print called The Great Wave off Kanagawa by the artist Hokusai in 1831. It depicts a fierce tsunami off the coast of Mt. Fuji, and is memorable not just for its beauty but also for its deep local meaning. As an island on the Ring of Fire, Japan knows a thing or two about the impact of tsunamis.

The typical day in coastal Japan is quite wonderful, with people congregating around the average sea level. But wander up the nearest mountain and you may find an old stone that looks like this.

Placed after a deadly tsunami killed untold numbers of people in 1933, this one reads:

“High dwellings are the peace and harmony of our descendants. Remember the calamity of the great tsunamis. Do not build any homes below this point.”

Even the seemingly most peaceful ocean can quickly turn deadly with a single earthquake. And to this day, many locals heed these old tsunami stones to stay safe from harm. Historical markers are the guideposts that help them see beyond the average times and survive the worst.

To fight through the hectic modern culture and apply some of that Zen mindset to investing, I think it’s helpful to similarly seek any financial tsunami stones on the market shoreline. They’re all around if you just know where to look. So grab a cup of tea, and let’s talk about the impact of rolling investing waves.

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What Global Withdrawal Rates Teach Us About Ideal Retirement Portfolios

Insights, Chart Talk, Featured, Retirement

Between my own independent research and the discussions of other investors I enjoy reading, it seems the topic of safe withdrawal rates has been bubbling to the top lately. One particular question recently captured my attention.

What portfolio has the best safe withdrawal rate in the worst case scenario around the world?

You see, the vast majority of withdrawal rate research focuses on the United States. However, most people consider the US to be an extremely positive outlier, which raises legitimate questions about the appropriateness of determining one’s retirement plan by myopically focusing on only the best case country. Start exploring this question in earnest, and it draws into question not only our biases about what “normal” returns look like but also our assumptions about proper portfolio construction.

While it may sound like a simple question, answering it with real numbers is no small task. The reason that most retirement studies focus on a small handful of countries and portfolio options is that understanding the big retirement picture takes a lot of data. And not just raw source data, but also a mountain of creative calculations to do the topic justice.

Well, it so happens that creative calculations are a strength of mine and I have a few tricks up my sleeve. So let’s roll up those sleeves and talk about truly global withdrawal rates that look well beyond US borders.

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How to Harness the Flowing Nature of Withdrawal Rate Math

Advanced, Retirement, Updates

Withdrawal rates have always been a passion of mine. Beyond a natural desire to judiciously plan and manage my own early retirement, I’ve also been fascinated with withdrawal rate mechanics from a purely intellectual perspective. Not only is it an interesting topic, but I also like how there’s still lots of room for new development.

So rather than simply defaulting to the same methodologies of the classic Bengen or Trinity papers, I’ve always strived to build upon their solid intellectual foundations while bringing my own unique perspective to the table. By tweaking the default assumptions like the retirement length, home country, or available fund options, I believe people can gain a greater appreciation for investing options far more interesting than the old 4% rule of thumb implies.

That desire for deeper understanding is only matched by my persistence in seeking ways to improve my calculations, and one project I’ve been working on for a while now is the way I calculate safe and perpetual withdrawal rates. I just released an important new update to the Withdrawal Rates tool, and to best explain it I think it might help to step back and start from the beginning.

So if you’ve ever used Portfolio Charts to research your own retirement portfolio or just want to stay up to date with the latest in withdrawal rate calculation techniques, read on.

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The Rise of Financial Dopamine Culture

Psychology

Have you ever been so lost in a content feed that you feel temporarily satiated, profoundly bored, and strangely anxious all at the same time? Of course you have. No matter whether it’s your phone that you habitually check at every chance, the computer constantly streaming videos, music, and podcasts with no silent breaks, or the television screen you find yourself watching at the restaurant instead of the person in front of you, modern culture has programmed us all to crave constant input.

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The 2023 Data Puzzle Is Complete

Updates

Assembling thousands of investing datapoints is a lot like solving a puzzle, and there’s really nothing like the feeling of slotting the last piece into place. The tactile sensation of the perfect fit just can’t be beat. And after countless hours of work, you can finally stand back and see the full picture.

As I mentioned when I updated all of the site data in early January, the results were only preliminary as there are always a few data stragglers. Well, the official numbers are finally in. And beyond a few revised datapoints, I also took the opportunity to update the data methodology.

Here’s everything that changed.

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Track Portfolio Progress With the Rank Over Time Chart

Chart Talk

When choosing a guide to carry supplies for a winding journey ahead, it’s worth taking a moment to evaluate the right person for the job. Their relative rank over time is usually not so simple. The strongest option might be painfully slow in the flat roads, while the fastest man on earth might falter at the first sign of mountain steps.

When the road is a mystery and you have no idea what obstacles may lie ahead, the challenge multiplies. At some point you have to stop optimizing for strength or speed and start thinking about well-rounded consistency. A guide who can handle any conditions pretty well can easily beat out a team of specialists.

Even if you’re not the outdoor adventuring type, investors face this challenge all the time. Your chosen asset allocation is your guide who carries your life savings on your financial journey, and you have no idea where the future road may lead. Finding a balanced portfolio with a consistent track record can make the process a lot easier, as you can rest easy knowing you’re in good hands no matter what happens.

To help with that evaluation process, I’ve just launched a brand new chart designed to compare the relative returns of many different portfolios at any time in history. Think of it as browsing the performance of dozens of guides at once under any conditions you choose. I call it the Rank Over Time chart, and it’s a great way to find your financial partner for the unknown road ahead.

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The New 2023 Portfolio Data Is Here

Updates

No matter if it’s a fun new gadget or just some well-earned peace and quiet, I hope everyone received all they wanted for Christmas! And no, I haven’t forgotten about you. Now that we’re slowly easing back into normal routines, I have one more last-minute gift to round out the holiday.

The 2023 portfolio data has arrived!

Here’s a quick summary of everything you can expect to find.

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The Best Returns Quilt Covers All Portfolios

Chart Talk

People love a good list. From the most memorable events of the year to best phones on the market, there’s never a shortage of ranked lists to get your attention and perhaps point you in the right direction. So it’s no surprise that I’ve received several requests over the years for a particular chart that is popular in financial circles for evaluating investing options — a returns quilt chart that ranks many options at once.

That’s a great suggestion!

While it has taken a little time to settle on a design angle that I like, I’ve definitely been thinking about the concept. In honor of the end-of-year list season, this seems like a great time to roll out the final result. So if you want to learn about a fun new tool to help you visualize the annual performance of every portfolio at once, this is your lucky day.

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Why Dave Ramsey Is Dangerously Wrong About Withdrawal Rates

Retirement, Beginner

With a nationally syndicated radio show, best-selling books, and a popular financial advice service, Dave Ramsey is one of the most famous names in the personal finance space. He’s so trusted that he’s also a mainstay in many churches as a guest lecturer preaching his own inspiring message of financial freedom. I’ve long admired his ability to help people work their way out of debt, and he’s doubtlessly touched more lives and improved them for the better than I can ever dream of reaching.

So as a fan of Ramsey’s message of self empowerment and snowball approach to debt elimination, I found it particularly painful to watch a recent episode where he goes on an extended rant about safe withdrawal rates. Long story short, he’s not only dangerously wrong but also angrily dismissive of an entire field of research on the topic. The reaction among financial types on social media has been equally swift and negative, with both professional investors and educated amateurs alike taking their own shots back.

Personally, I find the bickering on both sides to be mostly unhelpful because it distracts from the core issue — the truth. So for the benefit of Dave’s audience who just wants to properly understand the topic, I wanted to do something a little more constructive.

If you’re a Dave Ramsey fan who would like to understand why his advice is not the right way to approach retirement and how you can create a much safer plan, this article is for you.

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