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This article was posted on June 1, 1999.
Effective Diversification, D = 1/(SUM (V x R)^2) = 1/(0.01199) = 83.4 Non-market Risk = 1/(SQRT (D)) = 1/(SQRT 83.4) = 10.95% 100% Safe Withdrawal Rate = 3.54% 95% Safe Withdrawal Rate = 4.44% 90% Safe Withdrawal Rate = 4.82% Note (1): Safe withdrawal rates based on 40 year pay out period. Note (2): Formula for (V x R)^2 was modifed to reflect 50 stocks in the S&P 500 index fund. New formula is D = 50*(1/(((V/50))*R))^2 |
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Copyright © 1999 John P. Greaney, All rights reserved.